Is Flipping Contracts a thing?

There are brokers who flip them. They rent out the points themselves through their company's rental section. They also make money when the buyer pays them the commission when they sell the contract. They just have a steady stream of them. I know of a couple who do it.
I'm curious how you came to learn about the brokers who are doing this. While I have no doubt that it's happening, I can't say for sure which brokers are engaged in this practice.
 
I wonder if that's illegal for a situation where they are supposed to represent both parties equally.
Dean, my understanding is that under Florida law, brokers are transaction brokers and do not have a fiduciary responsibility to the buyer or the seller. That being said, there are many clauses in the transaction broker description such as "dealing honestly and fairly" and "disclosing all known facts that materially affect the value of residential real property and are not readily available to the buyer". In that case I think a broker acting as the buyer or seller without disclosing that fact to the other party may be treading pretty deep in the ethical gray areas.
 
Dean, my understanding is that under Florida law, brokers are transaction brokers and do not have a fiduciary responsibility to the buyer or the seller. That being said, there are many clauses in the transaction broker description such as "dealing honestly and fairly" and "disclosing all known facts that materially affect the value of residential real property and are not readily available to the buyer". In that case I think a broker acting as the buyer or seller without disclosing that fact to the other party may be treading pretty deep in the ethical gray areas.
I was thinking out loud questioning this issue. My only opinion at this time is that it is unethical to fake a back and forth without disclosing the situation, no gray area. The gray area may be whether it's legal or not. My guess is it isn't in this situation.
 
I'm curious how you came to learn about the brokers who are doing this. While I have no doubt that it's happening, I can't say for sure which brokers are engaged in this practice.

He told me he does it, and others do it as well. :)
 


He told me he does it, and others do it as well. :)
Perhaps I came across the same person:

When I did my own research on OCC to track recent sales of SSR (Jan-May), I began to notice the same, and somewhat unusual surname pop up in many, many recent transactions. It was familiar and I finally realized it/he was a broker with whom we had communicated. Just looking at transactions for the one resort it was a very sizable number of purchases across a wide array of price and contract size. I also remember an email exchange where he replied that a listing we were interested in was under contract but that he anticipated one with XX points and XX UY to "be coming available soon".
 
How can someone holding 24-48 contracts simultaneously not trigger DVC's limit on total number of points? Or, is this individual using variations of his name ("John Smith", "John M Smith", "J Smith", etc...) in order to circumvent that?
 
How can someone holding 24-48 contracts simultaneously not trigger DVC's limit on total number of points? Or, is this individual using variations of his name ("John Smith", "John M Smith", "J Smith", etc...) in order to circumvent that?
As suggested by Dean, it's possible that Disney treats each individual membership (UY) as a separate ownership. If so, as long as each ownership stays under the limits (e.g. maximum points owned at any one time and number of rentals per year), then Disney would have no problem with these brokers' business practices. This would explain how there can be so many contracts under one name on the county website. (If broker is buying or selling their own contracts, definitely think they need to disclose this to buyers and sellers.)
 
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Last I heard, the limit is 2,000 points per resort and 5,000 points per membership.

That is only if you buy direct, and the numbers are higher. Disney will not sell directly to certain people who engage in certain activity, but that does not stop them from going on the resale market. The only way they could stop it would be to rofr all of the contracts that person would buy. It won't happen.

I am pretty sure I know who we are nocking here.... he has a good reputation on tug
 
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Just off the top of my head math. YMMV.

A 200 point loaded contract (2016, 2017, and 2018 points) could probably be stripped for $5-6/point price differential plus 6/point MF on the 2017 and 2018 points and 10% in fees (closing to buy, broker to sell).

If you bought a loaded 200 point AKV contract for $92, stripped and rented 600 points for $14/point, and sold the now stripped contract for $87, then:

Buy cost is $18,400 plus about $600 in closing so $19,000 and sell for $17,400 minus $~1800 in fees means selling for $15,600 or $3,400 cost.

But. Rent 200 2016 points for $14/pt and 200 2017 for $8 (after crediting back MFs) and same for 2018 and you make $6000.

So. $2600 for your effort. Spin 3-4 contracts a month that way and you could make a decent living.
Thinking thru the feasibility here...
Buying loaded @ $92... OK.
Selling stripped @ $87... I don't think you can expect this consistently.
Lots of AKV contracts in the $70's with 2018 points. Fully stripped you're looking low-$70s and it will sit on the market for a long time. If you use $72 and keep everything else the same you've got $14,4 revenue instead of $17,4. $3000 less. Your proceeds become $3k instead of $6k. That's less than your costs of $3400.

You're going to have to be pressing your sellers and pushing your buyers for every $ on the spread to make it positive. Margins will be slim. If you had the "in" as described above and you could own the commission part of the sale, (or two of you doing it, listing each others' properties so you benefit from each other) that would pad the margins by that $1800 and make it feasible.

Also if you do not perfectly optimize the rental side, you may end up only renting 540/600 points, or fully loaded is missing a few points. This could cost you 10% of your $6000 rental income. It's also not guaranteed you'll get $14pp on AKV points. On the latter 2 years probably, but on the earlier you could be in the $10-$11 range.

Good analysis overall, but very tight margins. A savvy negotiator could make it happen, but much of the profitability here will come from convincing buyers to overpay while finding steals of your own that pass ROFR. Buying when the economy is down is an obvious win. Generally if you're going to make money flipping houses you're going to want to have an in with your realtor so that the commissions are staying w/in your circle of profit. Same thing here.
 
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Buying, stripping, renting and then selling works real well when the market is rising, which it has been doing for the last few years. If and when prices level off and drop, it will be a lot harder to make this work.

A broker though would have a definite advantage on being able to pick up the best contracts first before anyone else even sees them.
 
So, brokers are buying up loaded contracts, then renting out the points, and finally selling the contracts stripped? Maybe this is why we've been seeing so many stripped contracts on the market.
 
So, brokers are buying up loaded contracts, then renting out the points, and finally selling the contracts stripped? Maybe this is why we've been seeing so many stripped contracts on the market.

And driving up the prices on resale contracts...... So I would negotiate the price that you think is fair instead of listening to the brokers about what is a fair deal.
 
Yeah I'm seeing listings now stripped into 2019.
That's effectively a price increase. As I've said before, some brokers appear to have manipulated prices for years. One has refused to take lower priced contracts at least a couple of times, presumably to prop up their prices overall.
 
And driving up the prices on resale contracts...... So I would negotiate the price that you think is fair instead of listening to the brokers about what is a fair deal.

This has been my philosophy all along. Brokers are salesmen and saleswomen. Just remember that everyone.

That's effectively a price increase. As I've said before, some brokers appear to have manipulated prices for years. One has refused to take lower priced contracts at least a couple of times, presumably to prop up their prices overall.

I know the brokerage you speak of, and I despise that company. I've had quite a few terrible dealings with them, and I won't use them for buying OR selling even though their sales prices are higher.
 
I am pretty sure I know who we are nocking here.... he has a good reputation on tug

I dont understand why not just mention his name?

If its the same person which come to mind, then he is also flipping HGVC contracts. At least I have found that he had purchased more HGVC contracts in NYC than what regular people would do.
 

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