After singing the praises of the Disney Vacation Club and listing the wonderful exchanges I had with it, you’re probably wondering why I am no longer an owner. It’s a simple one-word answer: divorce. When my first husband and I divorced, we split our assets. The most straightforward way of doing that was to sell our real property and divide the proceeds. That included our Disney Vacation Club timeshare (sniff, sniff). I didn’t have the means to buy out my half of our ownership.
Unlike those resale offerings on RedWeek.com, our timeshare was not going to be offered up free, simply to get someone to take over the liability for maintenance fees. On the contrary, there is a thriving resale market for DVC memberships. In fact, we used a second-party timeshare realty agent both for our original purchase and for the ultimate sale of the membership.
The purpose of DVC’s Right of First Refusal (ROFR) is to control the value of its properties so that they remain compelling purchases. This is good for all owners, since it prevents distressed sales of DVC memberships.
Remember I told you about my first intro to the DVC? Well, I took the salespersons’ advice and went home to think about and research potential membership in the timeshare. And that’s when I found Florida’s Timeshare Store Inc. These guys have been involved in the DVC resale market pretty much as long as the DVC has existed. They know what membership points are worth at each resort, and they will help buyers and sellers both reach the best deal available to them. I know, that sounds like an endorsement and I don’t usually get into endorsing sales persons. But in this case, I truly did find them helpful.
Our original purchase was for a membership that included 210 DVC points (annually), back in 1996. The cost per point was just over $60, and we spent a total of $12,750 USD on the purchase. Sadly for us, the Canadian-to-U.S. dollar conversion at the time was unfavourable, to put it mildly. The current price in Canadian dollars was closer to $17,500. And then on top of that we had annual maintenance and property tax fees, which over time increased from about $500 per year in 1996 up to about $650 by the year 2000. In that year, we decided we would like to have a bit more flexibility, and so we took advantage of an offering from DVC to add on an additional 30 points per year at a price of $65 per point (total $1950 USD), just before DVC was about to implement a per-point price increase across the DVC system.
With 240 points annually, and the ability to accumulate points from one year earlier and one year later into a single year, we could potentially use up to 720 points in a year. This is how it was possible to take advantage of some of the extraordinary opportunities offered through the DVC trading system, which required higher point totals than what we had available from a single year’s allocation.
Maintenance and property taxes costs continued to increase, of course, and by our final full membership year, which was 2007, we were paying about $1000 per year for those expenses. Which may sound like a lot, but when you compare it to the value of the accommodations we were accessing through the DVC, it was actually quite modest.
So, how did we do with the sale of the timeshare property? When we contacted the Timeshare Store Inc. to sell our DVC membership of 240 points, they first asked to see our latest membership statement. After noticing that we technically had two separate contracts, one for 210 points and another for the additional 30 points, they suggested we post the two separately for sale since the smaller contract would likely attract a higher per-point selling price. I would not have known that without their advice. And it’s true: we sold the thirty-point membership almost immediately after it went up for sale, for $2550 USD, at a price of $85 per point. So that was a nice little bonus over our original purchase price of the add-on contract. Especially since the Canadian dollar was now pretty much at par with the U.S. dollar. No currency conversion losses: hooray!
As for the 210-point contract, that one took a bit longer to sell – about six months, in fact. The price for that one was $75 per point for a total sale of $15,750 USD. Our sale price for the two, combined, was $18,300 compared to our original combined purchase price of $14,700 USD. Had it not been for that darned currency discrepancy back in 1996, we would have shown a profit on the DVC ownership. Which in my books makes the DVC timeshare system a pretty good one.
A couple additional points to keep in mind before I leave this subject. First, the DVC ownership system is a time-based lease. The ownership we purchased had a lease term expiration in the year 2042, after its fifty-year term is over. Which means that by using the membership for a decade, as I did, I had actually used up 20% of the life the lease. If there is anything that should have caused the value of the ownership to decline, that would have been it. But it did not decrease, it actually increased over that time.
One way Disney ensures the value of your ownership is through DVC’s Right of First Refusal (ROFR). The purpose of DVC’s ROFR is to control the value of its properties so that they remain compelling purchases. When there is an accepted offer and a signed contract with a good-faith deposit in escrow with a licensed and bonded title company, it is sent to what is known as the DVC Review Board. DVC analyzes the terms of the contract and decides if they wish to “step in” as the buyer. A key factor for exercising the ROFR is if DVC feels the selling price is below the target price they have established. If DVC exercises their ROFR and steps in as the buyer, the contracted buyer’s deposit is refunded in full and DVC becomes the new buyer. The seller sees no difference. This is good for all owners, since it prevents distressed sales of DVC memberships. Disney can afford to buy back and hold such memberships until the economy improves.
Second, if you are purchasing a DVC membership but you are not an American, you will be subject to the FIRPTA (Foreign Investment in Real Property Tax Act). This essentially means the U.S. Internal Revenue Service (IRS) will withhold 10% of the sale price against taxes owed on the property. It will be up to you, as a foreign national, to jump through the many hoops required to file a tax return with the IRS so that you can reclaim those withheld proceedings, if you do not in fact owe the American government any taxes. This is a topic too complicated to even begin to explain, so I would recommend you do your own research or consult an accountant with expertise in the U.S. tax system.