Buying a Contract in arrears.

[snoope]

So far the guidance this board has given me has been amazing! Pointed me in all the right directions. So much so to a point I am about to put an offer in at Fidelity. I just want to make sure this is ok...

The contract is a distressed sale. Its BWV 150 Points, $55pp, Dec 2010 150, Dec 2011 150. I have been told that the it is in arrears of last years MF of $819. Part of the deal is that I pay the 2011 MF. The window to bank 2010 points closes on July 31. Based on what I read, the deal will not get closed that quickly.

So here are my questions:

Once I close, the seller will have to cover the arrears and then those 2010 points will become availlable to me?

At that point I will have one of three options:

1. If it closes before July 31, I can bank the points.
2. If it closes after July 31, I can try to use those points between then and December 2011.
3. Fidelity tells me that Disney will let you bank points late once in your entire contract. If the original owner has not done that before, I can do that.

I am correct in my assumptions? Is there anything I should be aware of when buying a contract in arrears? Anything else in general I should look out for?

FYI, First American is doing the closing.

 

[Brian Noble]

I would not *assume* that #3 will be possible. It probably will be, but you never know until you know.

 

[RachaelA]

Why would you want to use your only chance at late banking as soon as you buy a contract (if you are even able to bank them)?

 

[DebbieB]

Once I close, the seller will have to cover the arrears and then those 2010 points will become availlable to me?

I don't think you will be able to close without the seller paying up on the dues.

 

[JimMIA]

I agree with Brian -- I would not assume that. You know what happens when we assume!

The Super-Secret, Once-in-a-Lifetime banking deadline exception is often granted to owners who just forget to bank. However, would they accommodate you because you ASSUMED that prior to purchasing the contract? To me, that's a different question.

I would include a clause in my offer that requires them to pay the back dues and bank the points immediately on accepting your offer...AND provide you with written proof that the points have been banked. Don't leave that to chance.

If they can't do it, there are plenty of other contracts out there.

*****
Also, a technical correction. The closing date is not the operative date for you to be able to bank the points.

You have to close AND the deed has to be recorded, a new account created by DVC Member Administration, and the points have to be transferred from the seller's account to your new account. That process is what takes 7-10 business days between closing and you being able to actually use your account.

In normal circumstances, that's just an annoying delay -- but in this situation those 10 days or so could be critical.

Good luck.

 

[chalee94]

i wouldn't count on DVC bending the rules to help a resale buyer.

 

[snoope]

I get the impression that my seller is cash strapped and cant afford to cover the MF prior to recieving payment in full.

***edit: I now actually believe that the above poster is correct in saying that the deal wont be closed until the arrears is paid. So in that case, it would just be "courtesy" for the seller to bank them. I can make that "courtesy" part of the contract.

This is becoming a confusing situation. Is the deal worth it? Yikes, starting to get cold feet already.

 

[drusba]

You should not purchase based on the assumption that you will be able to bank those points. Disney has allowed a one-time per member banking outside the regular period but that is purely discretionary, it could say no to you in this resale situation, and you would have no recourse. You should also not purchase based on the assumption that you can even use those points at BWV during the rest of the 2010 use year. You are well beyond the 7 month window for when owners of other resorts can reserve and you may find nothing that you want available at BWV. Moreover, you should assume that you may be limited to getting SSR,, OKW or possibly AKV and even then if you want holiday times you may be out of luck completely. You may well be able to get exactly what you want but do not assume in making the purchase that will occur. In other words, in your situation, the decision I would be making is whether I would still buy if I assume I will lose those points for 2010 because the the only way to be certain they will be banked is for the seller to pay all outstanding dues and bank them before end of July. That seller is prohibited from banking while dues are in arrears; thus, unless he can pay the dues before closing, which it sounds like he cannot, there will be no way he can bank them before closing occurs and once the closing occurs and the proceeds of the sale are used to pay the dues at time of closing, the only person who will be able to bank them is you and you will not be able to do so until you are in Disney's system which takes about a week after closing.

Moreover, that Fidelity salesperson should be reprimanded if that salesperson said you could bank the points after the banking window closes. That is dishonest without telling you that it is discretionary and Disney may not let you do so.

 

[snoope]

The salesperson has been 100% upfront and said that the late banking is not 100%. She clearly stated that is only chance and only could happen.

I think Im getting a good deal? Maybe I could look at is a contract with zero 2010 points, and if I can utilize those arrears points its only bonus.

My mind is thinking so many different factors right now.

The price pp is good for me and the property is my FIRST choice. Would you take the deal?

 

[Brian Noble]

There might be another way to structure it:

Structure the agreement as a point rental, costing exactly the back Dues, and pick a week in the *next* UY you can vacation with those points. Pay the back Dues, and have the current Member bank the points and book that vacation. In parallel, write in an option to sell for the price-per-point. If the sale does not go through for some reason, you still have the rental agreement in force. If the sale does go through, the booked vacation will cancel, but as the points were banked, they will revert to the following use-year. You may also need a clause that says if the current Member sells to anyone else, that buyer is to reimburse you for the back Dues (to deal with ROFR) I'm not sure if this works, but it might.

In any event, let's suppose you lose the points entirely. That just means that the back dues can be thought of as applied to the purchase price. That adds about $5.50 to the purchase price, and $60.50pp for BWV is still a fair price. I think I'd go ahead either way.

 

[csharpwv]

I wouldn't touch a distressed contract with a 10 Ft. pole.

The current owner is behind - there is no excuse to be behind on maintenance fees - RENT YOUR POINTS OUT- PAY YOUR FEES!

With all of the deals that are out there on the resale market, this contract is sure to be more trouble than its worth.

Something that people often neglect to put a value on is their own time.

You are better off continuing your hunt, unless the seller is willing to bring the contract up to date before you ever put an offer on it.

It really isn't an unbelievable deal - Boardwalk contracts are out there as low or lower than $60.00 p/p - to why not find a contract that is in good standing - offer $50.00 p/p - and let the seller counter offer. Worst case scenario is that they reject your offer - best case scenario is they make a counter offer that you can live with.

Don't waste your time with the contract that is in arrears - it's not worth the time, extra work, and hassle!

 

[snoope]

So I was thinking of pulling out of this deal for all of the above reasons. I called my broker and told her my decision and why. She told me to makle a new offer, now considering all the litigating factors. I did that...I made an offer at $48 pp and the seller agreed! I think I am going to proceed with the deal thinking that the 2010 points are gone. The price drop does give me a little piece of mind.

 

[Disneypubgal]

So I was thinking of pulling out of this deal for all of the above reasons. I called my broker and told her my decision and why. She told me to makle a new offer, now considering all the litigating factors. I did that...I made an offer at $48 pp and the seller agreed! I think I am going to proceed with the deal thinking that the 2010 points are gone. The price drop does give me a little piece of mind.

Sounds like a good deal assuming no ROFR...

 

[JimMIA]

She told me to makle a new offer, now considering all the litigating factors.

Wow, I hope that turns out just to be a typo!

You should have no worries with ROFR. 46 has cleared, so I would expect 48 to clear as well. Hopefully DVC will slide you through ROFR in less than 30 days and you'll be able to bank the points yourself after all.

Good luck!

 

[RachaelA]

The member fees in arrears need to be paid though before it can close. Can the seller pay them?

 

[JimMIA]

The member fees in arrears need to be paid though before it can close. Can the seller pay them?

Normally, any dues owed would be paid out of the proceeds of the closing -- just like any mortgage on the contract would be paid.

If the seller doesn't have a mortgage on the contract, paying the $800 in dues should be a non-issue.

Where it gets dicey is when the seller is unside-down on a mortgage and finds out they have to PAY IN to cover the loans, dues, commissions and other costs. You'd think a seller would know that way up front (like before they LIST, hello!), but for some people ignorance is truly bliss!

 

[LoveToDisney]

I'm guessing Disney will be quite happy to ROFR BWV at $48 per point and resell them for someone willing to pay direct prices. I personally would be surprised if this goes thru but I have not been reading the ROFR threads so I could be totally wrong.

 

[JimMIA]

I'm guessing Disney will be quite happy to ROFR BWV at $48 per point and resell them for someone willing to pay direct prices. I personally would be surprised if this goes thru but I have not been reading the ROFR threads so I could be totally wrong.

From the ROFR thread:

PASSED - BWV (2042):
dismagiclover------- 150 BWV (Jun) $48, 50 banked '10 pts, all '11 & '12 points, buyer pays closing, seller pays mf (sub 4/8, passed 4/25)

krisnchris-------- 150 BWV (Mar) $46, 31 '11 pts, all '12 pts, buyer pays closing, seller pays mf (sub 4/5, passed 5/3)

 

[Brian Noble]

Yep. Disney isn't ROFRing anything except the infrequent BCV deed, and maybe one or two others.

ROFR is dead, Jim.
http://i619.photobucket.com/albums/tt275/Skawtt/Dead-Its-dead-Jim.jpg

 

[hansel1]

From the ROFR thread:

PASSED - BWV (2042):
dismagiclover------- 150 BWV (Jun) $48, 50 banked '10 pts, all '11 & '12 points, buyer pays closing, seller pays mf (sub 4/8, passed 4/25)

krisnchris-------- 150 BWV (Mar) $46, 31 '11 pts, all '12 pts, buyer pays closing, seller pays mf (sub 4/5, passed 5/3)

That is disturbing!