Best way to get past ROFR?

[JudyS]

As I mentioned previously here, I've found a BWV contract (from a private seller) to buy!

Now I'm worried about ROFR. The contract has all its 2004 points coming and half of the 2003 points banked. The purchase price is $70.28 a point, and I'm paying closing and all the 2004 dues.

I know that a BWV contract recently got through ROFR at $65 a point, but I don't think that one had any points banked.

Anyway, I think I will *probably* be safe with ROFR. However, I'm wondering if it matters how the contract is described. Last summer, I spoke to Lee Reid (the broker at www.reid4florida.com -- he's *not* the source of this contract.) He said he thinks it's easier to get contracts past ROFR if *all* costs are stated as part of the purchase price. In other words, according to him I'd be better off having the contract written up as 77.25 a point, with the seller paying 2004 dues and closing.

What do people think? I'm worried that changing the terms of the contract will confuse my seller.

 

[bobbiwoz]

We just bought a contract using Jaki, and it was painless. However, on the contract, she did what I think you are describing. The contract was sold in April, March use year points, and we agreed to pay the maintenance fee for all '04 points. It was written up as if the sellers paid the January to April Dues, and the additional money (the January to April Dues) was added to the cost of the points. We absoluely paid the same amount we agreed to, but it was allocated differently than we thought it would be. It was a VB contract and it did have banked points 88 of them, and they were not mentioned in the pricing at all, but they were mentioned in the contract.

Perhaps someone else will also comment on their experience.

Bobbi

 

[CarolMN]

FWIW, I don't see what difference it makes. I can't believe the Disney ROFR people are so stupid that they can't properly evaluate a contract - surely they can see through these "reallocations" to determine how much the buyer is actually paying.

Seems to me that geting by ROFR will just depend on Disney's current needs/thoughts on price. Again, it's JMHO. YMMV.

 

[JudyS]

Originally posted by CarolMN
FWIW, I don't see what difference it makes. I can't believe the Disney ROFR people are so stupid that they can't properly evaluate a contract - surely they can see through these "reallocations" to determine how much the buyer is actually paying.

Seems to me that geting by ROFR will just depend on Disney's current needs/thoughts on price. Again, it's JMHO. YMMV.

I'm thinking it *may*make a difference in what Disney is required to pay, Carol. If the contract is written as $20,000 with buyer paying dues and closing, then Disney would only have to pay $20,000 to the seller if they exercise ROFR. If the contract was described as, say, $20,500 including closing costs, then Disney might legally have to pay the full $20,500 to buy the contract back. But, I'm not sure of this, which is why I'm asking.

 

[CarolMN]

Originally posted by JudyS
I'm thinking it *may*make a difference in what Disney is required to pay, Carol. If the contract is written as $20,000 with buyer paying dues and closing, then Disney would only have to pay $20,000 to the seller if they exercise ROFR. If the contract was described as, say, $20,500 including closing costs, then Disney might legally have to pay the full $20,500 to buy the contract back. But, I'm not sure of this, which is why I'm asking.

Disney has the right to take the place of the buyer for the exact same terms and conditions specified in the contract. I still don't see any difference, because Disney would have to pay the same amount as the buyer would.

I don't think it matters to Disney who they pay - only how much they pay in total for the contract. So in your example, it doesn't matter to them if they pay $20,500 to the seller (who then pays the closing costs) or pay $20,000 to the seller and $500 to the closing company. For the example, I am assuing that the seller determined that closing costs will be $500 and that both deals net the same to the seller.

Best wishes -

 

[JeffPort]

The question boils down to whether or not Disney gets to act as its own closing agent when it takes over a contract through ROFR.

If Disney is able to bypass the independent closing agent (agreed upon by the original buyer/seller), then Disney can save money if the "buyer" pays the closing costs -- Disney's costs would be negligible as it already has the resources to close these properties on its own. However, if the contract's price is inflated and stipulates that the "seller" pays all closing costs, then Disney will have to pay the seller the higher sales price. Disney would then have to try to bill the seller for its closing (something it does not do for any regular DVC transactions) or maintain the closing process through the original closing agent.

I get the feeling that there is some truth to Lee's assertion. It certainly can't hurt to fold the closing costs into the sales price and then stipulate that the seller will "pay all closing costs."

 

[JudyS]

Originally posted by JeffPort
..If Disney is able to bypass the independent closing agent (agreed upon by the original buyer/seller), then Disney can save money if the "buyer" pays the closing costs -- Disney's costs would be negligible as it already has the resources to close these properties on its own. However, if the contract's price is inflated and stipulates that the "seller" pays all closing costs, then Disney will have to pay the seller the higher sales price. Disney would then have to try to bill the seller for its closing (something it does not do for any regular DVC transactions) ....

Right, this is exactly what I have in mind. I really can't imagine that Disney would bill the seller for a closing fee. So, I think having the seller pay closing would make it cost Disney more to exercise ROFR.

I'm not sure if having the seller pay the dues matters, though -- any thoughts on this?

 

[CarolMN]

Originally posted by JudyS
Right, this is exactly what I have in mind. I really can't imagine that Disney would bill the seller for a closing fee. So, I think having the seller pay closing would make it cost Disney more to exercise ROFR.

Ok. That makes sense. Thanks for the additional explanation.

Disney can't bill the seller for the closing fee unless Disney does the closing work and the contract specifies that the seller will pay the closing fees. So, if Disney has people on staff that do closings, then it makes sense to me that they may able to do closing cheaper than an outside company. If the contract says the seller will pay closing and the price/point is higher because of that, Disney would pay more than if the buyer (Disney) paid closing and did the closing work themselves.

I'm not sure if having the seller pay the dues matters, though -- any thoughts on this?

Now you've got me thinking. There is some statement in the annual dues about a developer's guarantee to cover any "overruns" in the annual operating costs. (Overruns to budget on which the dues are based, except for taxes, LOL). IIRC, they get something for this and it may be a waiver or discount on dues. Just can't remember.

Anyway, I think that the brokers who are familar with Disney's MO know how to "work the system", so I would tend to accept their advice as long as my net (as the seller) was the same. After all, as long as I got what I needed out of the contract, I wouldn't care how the costs were allocated. JMHO.

 

[JudyS]

Originally posted by CarolMN
Anyway, I think that the brokers who are familar with Disney's MO know how to "work the system", so I would tend to accept their advice as long as my net (as the seller) was the same. After all, as long as I got what I needed out of the contract, I wouldn't care how the costs were allocated. JMHO.

Thanks for your comments, Carol!

Actually, I'm the buyer in this transaction, and my concern is whether I'll lose the contract to ROFR. There isn't a broker in this situation -- it's "for sale by owner." So, I'm trying to get advice on how to handle the transaction. I might also start another post just on general advice of how to buy via a FISBO.