Can an owner sell their DVC if they haven't paid their MF's?

[najgreen]

Hello,
I made an offer on a resale DVC listing that was accepted. I am not currently a DVC owner, so not quite sure about the ins and outs! I requested that the 2020 points be banked and that it be written into the contract as I don't expect everything to be closed in time for me to hit the banking deadline (this is a Feb use year contract) with how long everything has been taking. The broker emailed me back and said the sellers have not paid the MF's for 2020. I requested that they pay them and I would reimburse them at closing. The broker said they are not in a financial position to pay the MF's. If MF's are supposed to be paid in January, wouldn't they be in default on the account and are they even allowed to sell it? And then if they are, and we close, would I then need to pay DVC the money for the 2020 points in order to make the account whole? Which would be fine if i could still bank them, but i don't want to use them this year.
Thanks for any insight you guys have! I have learned a lot from everyone on this site and was so excited for my offer to be accepted!

 

[Deb & Bill]

I'd rescind my offer. DVC could take it before you even go through ROFR since they could be foreclosed on at any time.

 

[ForWhomTheMouseTolls]

Agree. They’re going to lose that contract and DVC has no need to let it through ROFR. They have every incentive just to snatch the contract at no cost.

 

[lovethesun12]

This is a really good question. I’d rescind too based on the uncertainty, but what if the broker hadn’t told the OP? I’m just thinking with everything going on and no ROFR so far, would it have came out before it closed?

 

[Great3]

If the sellers owe, funds will be withheld from either seller's side or added to fees on borrower's side at closing, depending on the agreement of who pays the 2020 UY dues. Title company would remit payment to DVC. DVC won't transfer title until all MF dues are current. If they are not in financial position to pay off the dues, than you have no choice, but wait until closing for those dues to be paid.

I had a seller that didn't pay MF, were late on it. Title company withheld that amount plus the penalty, interest, taxes (whatever amount DVC said was owed). That's been my experience.

Great3

 

[StitchesGr8Fan]

They might be paying their MF’s monthly.

 

[najgreen]

Thanks everyone, sounds like I need to keep looking!

 

[ABE4DISNEY]

OP started the process by asking about banking...but shouldn't the broker have disclosed earlier that the owners were in default? Also just trying to learn here.

 

[Deb & Bill]

OP started the process by asking about banking...but shouldn't the broker have disclosed earlier that the owners were in default? Also just trying to learn here.

Yep, should have.

 

[ForWhomTheMouseTolls]

Not a great look for these people to have not disclosed. Sounds like the broker may have been caught off guard as well.

 

[Royal Consort]

This contract sounds like it has red flags all over it. I would walk away and find another as I wouldn't feel comfortable buying from a seller in this position who hasn't disclosed this info.

 

[_auroraborealis_]

If it is past banking deadline at close it would be a minor miracle to get late banking
.

 

[KAT4DISNEY]

It can be sold and the funds would be withheld at closing to pay the MF's.

One contract I purchased was actually in foreclosure by Disney. They (DVC) agreed to let me purchase.

 

[cometdad2010]

With the economy in turmoil, I wonder how many are delinquent on MF and how that may affect things to come...

 

[The Jackal]

Agree. They’re going to lose that contract and DVC has no need to let it through ROFR. They have every incentive just to snatch the contract at no cost.

The OP stated they they haven’t paid 2020 MF’s. From what I have seen DVC has let dues go for a couple years before they take action, besides restricting using your points. We have no information if they defaulted on a loan. If they default on a loan, they will take it back. In order for them to sell, DVC must be made whole. The money for the MF’s would be paid from sellers profits, prior to DVC transferring ownership. There have been contracts put up for auction that owed several years of MF’s and they needed to be paid before DVC will transfer ownership. I think DVC really does not like taking contracts back when people default. They would rather they be sold and they get money. In the past DVC has recommended several resale companies for people having hard financial times to sell contracts. I’m sure this situation has come up before.

 

[pirate33]

To me, the biggest issue is the sellers not disclosing this because that raises issues about them. Putting that aside (no small matter), the prior poster confirmed my initial reaction, which is that I doubt Disney would rush to foreclose to stop the owners from selling.

I’d then just look at it from a business standpoint. If the sellers have enough equity to cover the overdue MFs out of the sales proceeds, then there doesn’t really seem to be an issue with closing the transaction. As long as you get title insurance and go through escrow, you are not relying on the sellers’ trustworthiness. And (unclear from above) if the owners can bank points notwithstanding being in default, then that hurdle can be overcome. If not, then you would have to reconsider the economics of the deal. Also, this transaction may take longer than usual to close given the way the sellers have behaved, etc.; if that is a problem, I’d try to back out.

If you can resolve the banking issue (either with a credit or getting the points banked), I would proceed IF the deal is a good one or the sellers will make it so with a price adjustment. If it’s just a so-so deal I’d walk, assuming the sellers are currently in breach of contract and you can get any deposit back.

 

[KAT4DISNEY]

To me, the biggest issue is the sellers not disclosing this because that raises issues about them. Putting that aside (no small matter), the prior poster confirmed my initial reaction, which is that I doubt Disney would rush to foreclose to stop the owners from selling.

I’d then just look at it from a business standpoint. If the sellers have enough equity to cover the overdue MFs out of the sales proceeds, then there doesn’t really seem to be an issue with closing the transaction. As long as you get title insurance and go through escrow, you are not relying on the sellers’ trustworthiness. And (unclear from above) if the owners can bank points notwithstanding being in default, then that hurdle can be overcome. If not, then you would have to reconsider the economics of the deal. Also, this transaction may take longer than usual to close given the way the sellers have behaved, etc.; if that is a problem, I’d try to back out.

If you can resolve the banking issue (either with a credit or getting the points banked), I would proceed IF the deal is a good one or the sellers will make it so with a price adjustment. If it’s just a so-so deal I’d walk, assuming the sellers are currently in breach of contract and you can get any deposit back.

While it can be sold with MF's in arrears, which will need to be caught up at closing, DVC will not bank points if MF's are in arears. For that the MF's would have to be caught up now which seems to be where the problem is with the OP's sellers. They don't have the funds available to do that.