Backing out of a DVC Resale

[ldo]

I'm all about honoring agreements. This agreement typically has a liquidated damages clause (whether it's called that or not), which is that the buyer loses his deposit. It's a financial transaction. Don't feel badly. But, I would let the agent know that you now face possible unforeseen financial difficulty as opposed to you just changed y our mind, found a better deal, etc. I'm sure you're not the only one.

 

[E2ME2]

2 sides to every DVC purchase for me:
1-Financial Impact
2-Emotional Impact
I always pursue things that I'm driven to by where my heart leads me, but my brain must also agree to follow.
My initial DVC purchase was debated heavily between my brain and my heart.
I've always clung to a Blaise Pascal quote that says: "The heart has its reasons of which reason knows nothing".
We bought Direct in 2010, not aware of the resale market at the time, but my brain was fully on board based on our expected usage and frequency of travel within DVC. I'm happy to say that the financial side has worked out well, and I believe I surpassed the "breakeven" point on my "investment" in 2018. The emotional side of the equation has been way ahead of the game, as we have stayed in many resorts and have had family vacations that we would not have otherwise been able to orchestrate. Having all 9 of our family together at WDW and staying in the same 3BR-GV was really a thrill for us, and that was only possible because we own DVC. So, in this ongoing quest, we had already targeted buying more DVC, resale, to increase our length of stay, and to leverage DVC as our primary inroad to Snow-Birding in retirement. It took quite a while for the right contract, with the points we wanted and the same use year, to pop up on the resale market*. My brain was 51% leading this one, heart at 49% I saw the "almost perfect" listing (had a few more points than we thought we needed), and I made what I thought was a low-ball offer on 2/9. It was a surprise when the seller accepted on 2/11, and a greater surprise when it passed ROFR on 3/6. So on 3/6, brain & heart were having a mutual celebration party. Then, on 3/13 (Worse Friday the 13th in forever) everything changed, and now the brain is struggling to let the heart take the lead. I will say, however, that if I were to renege on the deal, I would feel very embarrassed. Additionally, with the loss of the deposit, possibly forfeiting more for the commission and possible fees, those could be costs of $15-$20 per point that become a total loss to me. So if I then waited to take advantage of a dip in the market, it would have to be at least a $20 per point drop, and I would have to search again for the right number of points and use year*. The heart is leading the charge now, believing that this is temporary, and that we will be able to use our DVC fully again in the near future. I can't buy in to the apocalyptic view that life will soon end as we know it. I hope and pray that all our fellow DVCers stay safe and healthy through this, and that we can all celebrate a rebound in the near future.. Sorry for the lengthy post - I get long-winded some times
ET

 

[E2ME2]

I just called Fidelity and asked that same question. I just received my papers from the title company yesterday.
I was told I that I would lose my deposit plus their commission and the $195 fee.

The broker also told me I was not the first person to call with that question.

My moment of truth came today - I finally received the closing docs. on my SSR resale contract.
I could not justify to myself or to the seller a reason to back out.
I honored my commitment, signed the papers, & Fedex'd the check!
Oddly enough - I've felt really good all afternoon, and I can't wait to get the points "loaded" so I can make an add on to my January Reservation.
My DVC-Hope Springs Eternal
ET

 

[ziravan]

My moment of truth came today - I finally received the closing docs. on my SSR resale contract.
I could not justify to myself or to the seller a reason to back out.
I honored my commitment, signed the papers, & Fedex'd the check!
Oddly enough - I've felt really good all afternoon, and I can't wait to get the points "loaded" so I can make an add on to my January Reservation.
My DVC-Hope Springs Eternal
ET

Congrats! Welcome Home!

 

[Itsred]

I am in the same boat. My wife and I are currently not working and are concerned with a fallout of the DVC market. We put in an offer on a BLT contract through Fidelity for 100 pts at $132pp with a $1000 deposit. We passed ROFR and are in the closing stage but questioning what to do.

The contract states:

"3. If either Buyer or Seller fails to perform any duty required under this Agreement, such party is in default. Upon
Buyer default, Seller may terminate this contract and Buyer shall forfeit the deposit. Escrow agent shall deduct all
expenses including escrow fees and title exam fees, and pay the remainder of deposit to Seller, which shall be Seller's
sole and exclusive remedy. Buyer also agrees upon Buyer default to pay Broker liquidated damages of treble the
deposit, except that the Broker’s portion shall not exceed the full commission and/or transaction fee."

Nowhere could I find the fees in the documents spelled out specifically so I reached out to the agent. She came back with the following fees:

Deposit $1,000.00
Commission $ 792.00
Admin Fee $1965.00

$3757 in fees seems excessive compared to what everyone else here is posting, especially with a random $2k admin fee. Any guidance would be appreciated!

 

[CmdrThor]

I am in the same boat. My wife and I are currently not working and are concerned with a fallout of the DVC market. We put in an offer on a BLT contract through Fidelity for 100 pts at $132pp with a $1000 deposit. We passed ROFR and are in the closing stage but questioning what to do.

The contract states:

"3. If either Buyer or Seller fails to perform any duty required under this Agreement, such party is in default. Upon
Buyer default, Seller may terminate this contract and Buyer shall forfeit the deposit. Escrow agent shall deduct all
expenses including escrow fees and title exam fees, and pay the remainder of deposit to Seller, which shall be Seller's
sole and exclusive remedy. Buyer also agrees upon Buyer default to pay Broker liquidated damages of treble the
deposit, except that the Broker’s portion shall not exceed the full commission and/or transaction fee."

Nowhere could I find the fees in the documents spelled out specifically so I reached out to the agent. She came back with the following fees:

Deposit $1,000.00
Commission $ 792.00
Admin Fee $1965.00

$3757 in fees seems excessive compared to what everyone else here is posting, especially with a random $2k admin fee. Any guidance would be appreciated!

It is possible that is a typo. Fidelity has a $195 admin fee the buyer pays. Notice they put the comma in $1,000 but not $1965.00.

 

[Itsred]

It is possible that is a typo. Fidelity has a $195 admin fee the buyer pays. Notice they put the comma in $1,000 but not $1965.00.

Thank you for pointing that out. I already had a call into the agent to discuss it more in detail, however, she isn't very easy to get in contact with.

 

[E2ME2]

I am in the same boat. My wife and I are currently not working and are concerned with a fallout of the DVC market. We put in an offer on a BLT contract through Fidelity for 100 pts at $132pp with a $1000 deposit. We passed ROFR and are in the closing stage but questioning what to do.

The contract states:

"3. If either Buyer or Seller fails to perform any duty required under this Agreement, such party is in default. Upon
Buyer default, Seller may terminate this contract and Buyer shall forfeit the deposit. Escrow agent shall deduct all
expenses including escrow fees and title exam fees, and pay the remainder of deposit to Seller, which shall be Seller's
sole and exclusive remedy. Buyer also agrees upon Buyer default to pay Broker liquidated damages of treble the
deposit, except that the Broker’s portion shall not exceed the full commission and/or transaction fee."

Nowhere could I find the fees in the documents spelled out specifically so I reached out to the agent. She came back with the following fees:

Deposit $1,000.00
Commission $ 792.00
Admin Fee $1965.00

$3757 in fees seems excessive compared to what everyone else here is posting, especially with a random $2k admin fee. Any guidance would be appreciated!

WOW - that's either a $37.57 PP Hit, or a $19.87 PP Hit if the Admin Fee is a typo.
So, if you try to recoup on your next purchase, prices will need to drop significantly for you to reach a break-even.
Good luck, Itsred !

 

[twodogs]

Just a "for instance" scenario, with fictitious numbers to keep math easier -
If a seller committed to 200 Points at $100/PP, and paid a $2000 deposit.
If he/she backs out after ROFR, and forfeits the deposit, they have sacrificed $10/PP for ZERO in return
& IF there are additional costs/penalties/fees for backing out, including commission to the broker??
If those fees are another $1000, the buyer is out $15/PP, if those reach $2000 the buyer is out $20/PP
SO - for the buyer to recoup that loss on another contract for same number of points, the price would have to drop from $100/PP to $80/PP
just to get back to where they were. Does anyone think there will be such a dramatic drop in resale prices (-20%) ??
Assume that the resale price did drop by 20%, that same buyer would then have to find the same size contract/use year/ etc. just to get back to square one.

This assumes that the buyer IS going to buy DVC at some point, either now with the current contract or in the future. For many people, they may not be able to go through with their previously planned purchase now due to a change in financial circumstances, and they may not recover enough to buy at a later date, or by the time they financially recover, they may have other priorities than buying DVC. So I think that your analysis is a great one if someone is SURE they are buying DVC at some point, no matter what. But for someone who is now in serious financial distress, they may not be able to consider future prices in their calculus of needing to get out of the current contract, loss of deposit/fees and all.

 

[E2ME2]

This assumes that the buyer IS going to buy DVC at some point, either now with the current contract or in the future. For many people, they may not be able to go through with their previously planned purchase now due to a change in financial circumstances, and they may not recover enough to buy at a later date, or by the time they financially recover, they may have other priorities than buying DVC. So I think that your analysis is a great one if someone is SURE they are buying DVC at some point, no matter what. But for someone who is now in serious financial distress, they may not be able to consider future prices in their calculus of needing to get out of the current contract, loss of deposit/fees and all.

The only other alternative is that the buyer just absorbs it as a total loss.
That's also a big financial drain, with no way to recover. I wish buyers in this situation all the best!
ET

 

[Brian Noble]

Thanks for the feedback. I can definitely weather the costs, but similar to fixerupper, I'm just more bummed that I wouldn't be able to use the points now.

Plus with the forfeiture of the deposit + commissions, I'd have to at least save $2k on a subsequent purchase, which may or may not even be feasible.

If I were in this position, I'd base my decision on what sort of income and benefits security I expected my family to have over the next few years, and to a lesser extent how long our emergency fund/liquid assets would carry us if we had a sharp drop in income or a gap in benefits coverage. This is a very uncertain time, and there are definitely going to be some people who are surprised. But, if you are in a high-demand or counter-cyclical industry, chances are good that you can weather a change without a huge disruption.

There are two places where I'd try to think differently than you are right now.

First, it sure is disappointing not to use the points right away but this was originally a purchase that you expect to enjoy over many many years, and this won't last forever. So, I'd try to discount the near-term disappointment in making any decisions.

Second, if you decide not to go forward, I think you'd be better served ignoring the $2K as a sunk cost, and not factoring it into any future purchase decisions. That money is spent no matter what you do next, so any future purchases can be evaluated independently. That's hard, but I think it is worth trying to do.

 

[ziravan]

The market crashed in 2008. I picked up BCV for $84/point in 2014, and the DVC market took off right after that.

Luxury items like timeshares are the first ballast tossed over the side on a sinking boat and one of the last pieces of decoration bought on a new luxury liner.

What I’m saying is prices will almost certainly fall from here and it’ll be years before they make it back. There’ll be a gap somewhere down the line where people will be in a better place to predict their finances but before the market catches fire again (2014 in my case).

If you think there is even a remote possibility of getting caught in the financial fire coming, you’d be better off waiting for that gap,

I have been a big booster of DVC, I love the product etc etc and I’m not trying to run it down. But Maslov’s hierarchy is in place here: take care of your family first. It’s not just that DVC is an expensive product, utilizing it is expensive too.

 

[E2ME2]

If I were in this position, I'd base my decision on what sort of income and benefits security I expected my family to have over the next few years, and to a lesser extent how long our emergency fund/liquid assets would carry us if we had a sharp drop in income or a gap in benefits coverage. This is a very uncertain time, and there are definitely going to be some people who are surprised. But, if you are in a high-demand or counter-cyclical industry, chances are good that you can weather a change without a huge disruption.

There are two places where I'd try to think differently than you are right now.

First, it sure is disappointing not to use the points right away but this was originally a purchase that you expect to enjoy over many many years, and this won't last forever. So, I'd try to discount the near-term disappointment in making any decisions.

Second, if you decide not to go forward, I think you'd be better served ignoring the $2K as a sunk cost, and not factoring it into any future purchase decisions. That money is spent no matter what you do next, so any future purchases can be evaluated independently. That's hard, but I think it is worth trying to do.

Yes Brian; "Sunk Costs" are not recoverable. But these costs will be totally unrecoverable/sunk if the would be buyer walks away now, and takes the hit.
If they go forward with the purchase, as per the contract they signed, they are obtaining goods/services in return for those costs.
Granted, either way can be a tough call, depending upon that would be buyer's risk & pain thresholds.

 

[Brian Noble]

I was suggesting to ignore them only in the “backing out” case. Sorry if that wasn’t clear!

 

[ELMC]

I am in the same boat. My wife and I are currently not working and are concerned with a fallout of the DVC market. We put in an offer on a BLT contract through Fidelity for 100 pts at $132pp with a $1000 deposit. We passed ROFR and are in the closing stage but questioning what to do.

The contract states:

"3. If either Buyer or Seller fails to perform any duty required under this Agreement, such party is in default. Upon
Buyer default, Seller may terminate this contract and Buyer shall forfeit the deposit. Escrow agent shall deduct all
expenses including escrow fees and title exam fees, and pay the remainder of deposit to Seller, which shall be Seller's
sole and exclusive remedy. Buyer also agrees upon Buyer default to pay Broker liquidated damages of treble the
deposit, except that the Broker’s portion shall not exceed the full commission and/or transaction fee."

Nowhere could I find the fees in the documents spelled out specifically so I reached out to the agent. She came back with the following fees:

Deposit $1,000.00
Commission $ 792.00
Admin Fee $1965.00

$3757 in fees seems excessive compared to what everyone else here is posting, especially with a random $2k admin fee. Any guidance would be appreciated!

These numbers do seem a bit strange.

You could possibly rent out the existing points to get a small cash infusion upfront and then re-evaluate your position in a year or two. Or, thinking a little differently, you could ask the broker if they will give you a discount if upon closing you were to immediately relist the contract with them. You might take a small hit on the price differential and the commission, but it could be less than the penalty for backing out. Good luck!!!

 

[E2ME2]

Thank you for pointing that out. I already had a call into the agent to discuss it more in detail, however, she isn't very easy to get in contact with.

Itsred - can you give us an update?
What did you decide?
ET

 

[we"reofftoneverland]

I am in the same boat. My wife and I are currently not working and are concerned with a fallout of the DVC market. We put in an offer on a BLT contract through Fidelity for 100 pts at $132pp with a $1000 deposit. We passed ROFR and are in the closing stage but questioning what to do.

The contract states:

"3. If either Buyer or Seller fails to perform any duty required under this Agreement, such party is in default. Upon
Buyer default, Seller may terminate this contract and Buyer shall forfeit the deposit. Escrow agent shall deduct all
expenses including escrow fees and title exam fees, and pay the remainder of deposit to Seller, which shall be Seller's
sole and exclusive remedy. Buyer also agrees upon Buyer default to pay Broker liquidated damages of treble the
deposit, except that the Broker’s portion shall not exceed the full commission and/or transaction fee."

Nowhere could I find the fees in the documents spelled out specifically so I reached out to the agent. She came back with the following fees:

Deposit $1,000.00
Commission $ 792.00
Admin Fee $1965.00

$3757 in fees seems excessive compared to what everyone else here is posting, especially with a random $2k admin fee. Any guidance would be appreciated!

If there is any way to swing it, I would do it. That is a very good price for that size BLT contract. You will be able to turn around and sell it for more in a year when the market recovers if you have to.

 

[E2ME2]

Thank you for pointing that out. I already had a call into the agent to discuss it more in detail, however, she isn't very easy to get in contact with.

Have you made a decision??

 

[Itsred]

Have you made a decision??

Sorry for the lack of update. Despite multiple attempts to contact my agent, I have not heard anything from the agent. I am going to attempt to reach out again tomorrow. The escrow agents have contacted me a couple times to try and finalize paperwork, but I have told them we have a 45 day extension and I am not signing anything more. My gut is telling me if those fees for defaulting are correct, I will be taking the contract. I feel stuck and am disappointed with the contact from the agent.

 

[Itsred]

These numbers do seem a bit strange.

You could possibly rent out the existing points to get a small cash infusion upfront and then re-evaluate your position in a year or two. Or, thinking a little differently, you could ask the broker if they will give you a discount if upon closing you were to immediately relist the contract with them. You might take a small hit on the price differential and the commission, but it could be less than the penalty for backing out. Good luck!!!

Thanks for the ideas and the encouragement. Overall I am optimistic that everything is going to be just fine as we have prepared well for the unexpected. Mostly I am just frustrated at the lack of communication. We have basically frozen our assets and we were hopeful to minimize this cash flow out and possibly even come out ahead if the market dives. If the quoted numbers are correct, I feel trapped by a vague contract .... not that knowing the specifics would have changed our choice because we could have never predicted the situation.