I know I can't be the only person who thought of this...so please help me understand

[MIALIAS]

ROFR is such a huge issue. You go through a month or 2 and then have to start over...

What I dont understand is I constantly see that the buyer is paying the MF's...am I crazy but shouldnt the seller ALWAYS pay the MF????

That would force the ROFR price higher to compensate and there for be much less likely to be ROFR'd.

Example: if I bought 200 BWV at $50 and paid the MF's. The sale would be approx 200x50=10000 + 1000 in MF's. So the sale is 11,000. Thus, this sale could be ROFR by disney at $50.

Why wouldnt we position the SAME sale as the seller paying the MF's and the sale being at $55 a point???? The seller would still walk away with same $10,000 ($11,000 sale - $1000 = $10,000)

But it would be much less likely to be ROFR'd for $55 than at $50 you'd be vulnerable.

What am I missing here????

Thanks!

 

[Deb & Bill]

Who is using the points? If the seller has already used the points, they pay the MF. If the buyer is getting the points, they pay the MF.

 

[ELMC]

ROFR is such a huge issue. You go through a month or 2 and then have to start over...

What I dont understand is I constantly see that the buyer is paying the MF's...am I crazy but shouldnt the seller ALWAYS pay the MF????

That would force the ROFR price higher to compensate and there for be much less likely to be ROFR'd.

Example: if I bought 200 BWV at $50 and paid the MF's. The sale would be approx 200x50=10000 + 1000 in MF's. So the sale is 11,000. Thus, this sale could be ROFR by disney at $50.

Why wouldnt we position the SAME sale as the seller paying the MF's and the sale being at $55 a point???? The seller would still walk away with same $10,000 ($11,000 sale - $1000 = $10,000)

But it would be much less likely to be ROFR'd for $55 than at $50 you'd be vulnerable.

What am I missing here????

Thanks!

I see your point and it's a good one. I think there are three potential problems with this.

First, I'm not sure if DVD looks at price per point or total contract price when deciding whether or not to ROFR a contract. To that end, based on what we've been seeing, I'm not so sure how much price is a consideration at all as opposed to number of points and use year (with the theory that they ROFR contracts that they have customers on a wait list for).

Second, you're not speaking directly with the seller. So if you go in and offer a higher price point with the assumption that they pay maintenance fees, they might not get what you are trying to do and ask you to pay that price plus maintenance fees as well. Could cause negotiations to break down.

Third, sellers pay a commission on purchase price but not on maintenance fee reimbursement. So to them, they would rather get a lower price per point and fee reimbursement.

Like I said, I like the way you think. Your position is all about the math. Unfortunately, when it comes to these transactions, many people put emotion first and math second.

 

[disneynutz]

Disney considers the terms of the sale when looking at the price, just as buyers should. Today ROFR is rarely invoked and won't be used unless Disney needs the inventory.

Bill

 

[WsPrincess]

And while not scientific at all, it looks like the last few that Disney refused had the seller paying either part of the MF or all of them or closing costs. It could just be a nothing thing but it has shown up a few times since I have started really paying attention.

 

[LauraLea]

It costs DVD less to ROFR a contract where the seller pays fees. DVD does not have to reimburse the seller for them.

Laura

 

[drusba]

For ROFR purposes a sale where the buyer pays $50 a point for 200 points plus $1,000 for MF's and a sale where the buyer pays $55 a point and the seller eats the MF's is really the same for ROFR purposes. Disney ROFR gives it the right to purchase the property on the same terms of the buyer inlcuding paying any MF's the buyer has agreed to pay.

In any event no one says you must pay MF's as the buyer because like the price who pays MFs is negotiable. Thus you can make an offer and include in it that the seller absorb the year's MFs. What is actually a fair bargain just depends on the situation. For example, if I were purchasing today (in April) a December contract and all the Dec 2011-12 points are gone, I would likely be telling the seller that I want him to absorb the 2012 fees. However, in the same situation if all 2011 points were still avaialble I would likely be more willing to absorb the 2012 MFs or at least a large portion of them.

 

[MIALIAS]

in the example I put in OP if I bought 200x50 disney would have to match
10,000 and in the second 200x55 disney would have to match 11,000.

So how could it cost disney less than in the first example?

Thanks Mike

 

[pmaurer74]

And while not scientific at all, it looks like the last few that Disney refused had the seller paying either part of the MF or all of them or closing costs. It could just be a nothing thing but it has shown up a few times since I have started really paying attention.

I have noticed this as well.

 

[Chase'n'Ciera]

in the example I put in OP if I bought 200x50 disney would have to match
10,000 and in the second 200x55 disney would have to match 11,000.

So how could it cost disney less than in the first example?

Thanks Mike

I don't know how its less but it will end up about the same. If the fees are'nt paid then Disney will still have to pay them when they get the points.

 

[DougEMG]

As a buyer I set a price that I am willing to pay and I don't care how that is split up between $/point, closing cost and MF.

The seller on the other hand has a vested interest in making sure that the offer include closing costs and MF since the seller has to pay a commission on the $/point.

So taking as an example a 200 point contract, at $50/point, with 400 closing cost and $1000 MF and 10% realtors commission.

Method 1
If the buyer offers $50/point and seller pays closing and MF.
The buyer's cost is $10,000.
The seller though only gets $10,000 - $400 (closing) - $1000 (MF) - $ 1000 (commission) = $7,600

Method 2
If the buyer offer $43/point and pays closing and MF.
The buyer's cost is $8,600 + $400 (closing) + $1000 (MF) = $10,000 which is still the same.
The seller though gets $8,600 - $860 (commission) = $7,740 which is a better deal for them

So both offers are the same for the buyer, while the 2nd offer is better for the seller even though the $/point looks a lot worst. The loser is the realtor who gets the lower commission.

Now if the seller can't do math, then the 1st option looks better to them.

So when in doubt about the math skills of the seller, make your offer using both methods and let the seller choose; which I have done in the past.

 

[MIALIAS]

Doug I think you didn't say that correctly

 

[DougEMG]

Doug I think you didn't say that correctly

Thanks, have corrected it.

 

[Sandisw]

in the example I put in OP if I bought 200x50 disney would have to match
10,000 and in the second 200x55 disney would have to match 11,000.

So how could it cost disney less than in the first example?

Thanks Mike

When Disney ROFR's a contract, they take the same terms as the buyer so if you offer $50/pt plus MF's and it will cost you $11,000, it will cost Disney $11,000 for that same deal.

If you offer $55/pt with seller covering MF's, then it costs your $11,000 and it would cost Disney that same $11,000 to ROFR it. So, it doesn't really change the bottom line for Disney.

But, as mentioned, in resale, MF's are negotiable. I bought last summer BWV and asked the seller to cover all 2011 MF's, even though I got all of my 2011 UY points.

 

[Dean]

It really makes no difference assuming the same in pocket to the seller and the same out from the buyer. It's really just smoke and mirrors. Disney is smart enough to look at the big picture. As for who should pay, generally buyers overpay because the fees are charged on a calendar year basis. That means if you bought an Aug UY with points coming Aug and nothing else, you'd overpay if you paid the entire years fees.

One night say to throw in something DVD could not match and that's a discussion for another day, one that has always ended with DVD requiring a $$ value on the other item.

 

[andreadoiron]

I don't know how its less but it will end up about the same. If the fees are'nt paid then Disney will still have to pay them when they get the points.

as a dvc owner, i don't understand the buyer paying the mf either since i already paid for the year (due in feb and i have a dec uy) if my mf are already paid as i assume everyone's are past mid feb, not sure why they are factored in? of course i am assuming that everyone gets their bill in jan due by feb? not sure

 

[chalee94]

as a dvc owner, i don't understand the buyer paying the mf either since i already paid for the year (due in feb and i have a dec uy) if my mf are already paid as i assume everyone's are past mid feb, not sure why they are factored in? of course i am assuming that everyone gets their bill in jan due by feb? not sure

many owners pay monthly by bank draft.

 

[ELMC]

as a dvc owner, i don't understand the buyer paying the mf either since i already paid for the year (due in feb and i have a dec uy) if my mf are already paid as i assume everyone's are past mid feb, not sure why they are factored in? of course i am assuming that everyone gets their bill in jan due by feb? not sure

The theory is that whoever uses the points should pay the maintenance fees. As a buyer, however, my theory is that it's a sunk cost and I usually don't offer to reimburse fees. I also get told "no" a lot. I wonder if there's a connection...

 

[AllieV]

OP, I've wondered the same thing and figured there had to be a good reason since the buyer almost always pays closing and fees. It's interesting to see why (commission percentage). I just tweaked my offer based on some info here. Thanks.

 

[ELMC]

ROFR is such a huge issue. You go through a month or 2 and then have to start over...

What I dont understand is I constantly see that the buyer is paying the MF's...am I crazy but shouldnt the seller ALWAYS pay the MF????

That would force the ROFR price higher to compensate and there for be much less likely to be ROFR'd.

Example: if I bought 200 BWV at $50 and paid the MF's. The sale would be approx 200x50=10000 + 1000 in MF's. So the sale is 11,000. Thus, this sale could be ROFR by disney at $50.

Why wouldnt we position the SAME sale as the seller paying the MF's and the sale being at $55 a point???? The seller would still walk away with same $10,000 ($11,000 sale - $1000 = $10,000)

But it would be much less likely to be ROFR'd for $55 than at $50 you'd be vulnerable.

What am I missing here????

Thanks!

Your point makes total sense. But here's the problem. The buyer and seller don't communicate. So it's hard to tell the seller that's what you're doing. All they hear is the reverse sticker shock of your offer that is $5-6 less than what they expected. So even though the numbers work out in their favor, some sellers can't get past the initial lowball number. At least that's what I think.