CHANGED TITLE - Be creative to pass ROFR!

[JimMIA]

For those considering resale, there are many, many considerations. Obviously, you have to do your homework, learn the nuances of the process, understand and be able to compare various resale opportunities with each other and with buying direct from Disney, and a host of other things.

Probably the best advice anyone could give you is research carefully, keep asking questions until you are sure you know what you are doing, take the "conventional wisdom" with a grain of salt and understand that it may not apply at all to your family's particular circumstances, explore and consider all of the options, and then do what you think is best for your family's unique situation. There are no cookie-cutter best answers.

One of the most difficult, frustrating, and unpredictable things every resale has to go through is ROFR (Right of First Refusal). Disney reviews every resale contract and has the right to step in and purchase the contract themselves. That means that they can snatch that "perfect" contract right out of your grasp, and you have to start over.

There are many theories about what criteria Disney uses for ROFR. The truth is, none of us know for sure, and we are only guessing.

However, it is possible to track some of the ROFR activity. Beca has been maintaining a great thread (which she updates almost every day) which follows the ROFR activity we report to her. It's not all the activity, but it is that part of it which is known to us. Obviously, the more we report, the better picture everybody gets. Beca's thread can be found here: http://www.disboards.com/showthread.php?t=720134 Click on the last page to see the most current info.

There are many considerations in making a resale offer, but one thing I would urge is to be creative if you want to pass ROFR.

One Strategy:
This is just one example, and I would urge other folks to post additional strategies to help those who follow in our footsteps.

One way to improve your chances of passing ROFR may be to ask the seller to pay the closing costs (normally paid by the buyer) and then pay them a slightly higher per point price to offset the closing costs.


For example, if a contract is for 150 points and the closing costs would be $450 (hypothetical estimate, obviously you would need to know the true amount), ask the seller to pay the $450 and you pay $3 more per point.

So, let's say you find the "perfect" contract for you and it's priced at $73 for a particular resort. You look at Beca's thread, and you estimate that the ROFR threshhold is $72-73. $73 is borderline, so if you pay that, you may lose the contract. Instead, you pay $76, and the seller pays the closing costs. That should be safely above the ROFR line. The seller gets their original asking price, and you really get $73 per point, not $76, because the seller paid $3 per point in closing costs that you would ordinarily have paid.

I am sure there are other strategies which would work. Everything in a resale is negotiable, and I am sure many of the folks who frequent this board have other suggestions. We would all be doing everybody a service if we would share our innovative ideas about how to get past ROFR.

 

[ColoradoBelle1]

Good thread Jim!
There have been several posts recently where people are asking these very same strategy questions. And yes, ROFR is a trying experience at best. (I think we were among the lucky ones insofar as ease of the experience...and I credit Beca's thread with the credit for that.)

Reasearch, research, research and then applying your particular fundamental investment strategy to the purchase results in the best outcome.

My own particular strategy came about because I couldn't find a reasonable resale for the number of points I felt adequate....75 was all I felt I needed.
But when a really great resale came along for 170 points with all 2004 and 2005 intact, I found a way to afford the extra points. For me, the initial cash outlay wasn't a problem. But for me, the idea of paying a lot in maintenance fees which may rise over the years to a point that it would seem an extravegant cash outlay (for me) was problematic. However, when I realized that Disney was the ONLY 'timeshare' whose prices increased over the years and whose rentals were based on points rather that week long stays...I realized that it was 'safe' to consider renting out the extra points I didnt' need. I liked the idea that closing costs would be apportioned over more points and thus create an effective cost per point that was less than the smaller contract.

Finally, I mused over how to pass ROFR. I like Jim's idea re getting the seller to pay closing costs and then raising the cost per point to help ensure passing ROFR. My realtor told me that Disney counts ALL factors into the ROFR decision, but I don't think any of us know what causes them to repurchase. (My best guess is that they have a waitlist for the particular use year and when one comes along...they buy it if they can sell it for a profit).

I used a similar but different strategy in my recent resale purchase. I had a February use year. It was March. I knew that the seller had paid the maintenance lump sum in January. So I raised my purchase offer over their asking price but didn't reimburse the seller for maintenance fees for 2005.
For this size contract...170 points, the maintenance fees at $4.51 a point were higher than the per point closing costs @$2.50 a point. The broker agreed to not charge their commission on the 'increased' part of my offer.
Seller immediately accepted and we were on our way!

My last advice is if you happen to find a seller who hasn't listed the contract and decide to do a private sale. Remember that Disney pays the broker his commission if the contract is ROFR (at least that is what my broker told me)....so consider 'adding' that commission to the price to increase the price making it less attractive to Disney. The 'commission' can be paid to anyone who helped make a viable contract...maybe your spouse or child..yet Disney would have to pay that commission to assume the contract.

Do your research and consider all options which might work for you. Be patient....I missed out on a good contract by 5 minutes and was really upset until I found a better one a few days later. Be patient!

 

[cruise-o-matic]

The 'commission' can be paid to anyone who helped make a viable contract...maybe your spouse or child..yet Disney would have to pay that commission to assume the contract.

Are you sure about this? I would think you would have to have a real estate license to get paid a commission.

Dean, can you enlighten us on this?

 

[ColoradoBelle1]

A contract between people is for whatever they want to contract for as long as it doesn't break the law. If I put together a buyer and seller and either or both wanted to pay me a 'finder's fee' ...that is their business. If they want to do it in private or put it in the contract is also their business. SInce it would be income to me, I would have to report it as income on my tax form if I made more than the $7900 minimum yearly income.

But, of course, getting another opinion is never unwise!

 

[manning]

If I put together a buyer and seller and either or both wanted to pay me a 'finder's fee' ...that is their business.
But, of course, getting another opinion is never unwise!

What's that old saying? "if it walks like a broker, talks like a broker, acts like a broker" and doesn't have a license....... it must be an unlicensed broker.

Don't plan on doing a lot of these. The penalties are steeeep!!!!!

 

[JimMIA]

I'd be very cautious about that "finders fee" idea, too... If the person was a CPA or financial planner and they performed professional services to help you evaluate deals and select the one that best met your needs, that might be a different story - provided they actually did the work and actually got paid.

As far as just raising the per point price, it seems to me there should be enough opportunity to do that between closing costs and the buyers portion of the annual dues. Together, those two could add up to $7-8 per point. You could use either one, or both, to get where you wanted to be.

I wonder if there are any non-financial provisions which could be put into contracts to make them unattractive or impossible to ROFR? Something the buyer agrees to do that Disney would not do, etc.

Any ideas?

 

[Cricket2]

To expand on Jim's idea, can you give the seller something unique as part of the sale such as a photograph or anything with a non-cash value? As long as the seller agrees that the value is unique, Disney can't match the object. The difficulty with that is getting the seller to go along with it and down the road, Disney might find some loophole. What would the seller's incentive to go along with it be?

 

[ColoradoBelle1]

I know that if you try to sell your professional football tickets and ask for more than face value...even if you offer an autographed football with the deal that you can be handcuffed and taken to the hoosegow.

On the other hand, one could certainly offer a trade for a Disney property....like I'll give you my timeshare in Hawaii in exchange for your OKW (unless it specifically states that you can't in disney's original contract)

Who knows what Disney might do in that case? And yes, you have to find a willing seller in order to do that.

Insofar as the commission thing...I was a licensed Realtor for 12 years in Colorado. I was governed by many laws because of my licensure as to what I could/coulsn't do, fiduciary obligations etc. The commission had little to do with licensing requirements...It was just how I was paid and it wasn't fixed at a % as some people think and are told...it is always negotiable.

BUT...being a Realtor doesn't give you any controls over someone else being paid a commission (only if you can prove it is YOUR commission, LOL). Paying or accepting commissions isn't bound by any law I know of...UNLESS you are a licensed Realtor in which case if you list a property and then buy it yourself, then taking the commission for the sale is not against the law BUT it is considered by most Realtors as unethical. (Tho the X sold a property I built to his friendly Broker for a low bottom price AND the broker took the commission...guess he didn't care that he was unethical and sadly, the X sure isn't.)

I used a Timeshare Broker to buy my DVC because she had a seller wanting to sell what I wanted to buy. BUt if I saw one offered by FISBO for a lot less than what I thought it would ROFR for, raising the price for say, the seller giving me back a vacation week to hawaii is the same as getting a commission for writing the contract between seller and buyer and submitting it and contacting the closing company and getting the ROFR papers to DIsney or even for just being so darn cute.

I guess I am a little sensitive to your thinking I was suggesting something il or quasilegal. I don't think it is at all quasilegal but if you have any concrete statutes or 'rules' that would confirm your thinking, I'd certainly accept it and stand corrected. But to say that there are dire consequences for doing that without any followup reasons why ...at this point seems to be only personal conjecture.

In my Disney package that came a day later than JimMIA's came a form that indicated that the sale of BWV by deed isn't really a sale in Colorado because in 2042 the property goes back to Disney...Colorado considers that a longterm lease and it is as such governed by those principles. My point is that we don't always know the 'rules'' of the game, sometimes the statute/rules are less logical than what we assume would be the case. My own form of ethics would have no more problem with accepting having a third party accept a commission than iwould I have buying a timeshare for X dollars plus my framed lithograph of Abraham Lincoln.

Finally: I am not at all hurt, angry, peeved that someone 'called me' on something I said. I'd just like some concrete evidence that the law addresses commissions and who can receive them...because I think I am both right and ethically correct on this, tho I have been wrong before and will be again!!!

 

[DrTomorrow]

No lawyer here, but I'm guessing that Disney has already seen every different "strategy" to skirt their ROFR.

As for the commission, CB1: it sounds sort of fishy to me. If I sell you my house for $1 (thus avoiding sales tax and a whole bunch of other costs) and you (in another contract, or simply verbally) promise to pay me $200,000 for coming over and, say, installing a firewall on your computer, I don't think that passes the government's "smell test". Merely because two people agree to something in a contract doesn't mean it's legal (the phrase "intent to defraud" keeps popping into my head.)

I am intregued, though, by the idea of including something in an offer that Disney couldn't match: like the buyer promising to take the seller to dinner once a year. Ooooh - what if Eisner showed up at your door....

 

[Scratch42]

I'd be very cautious about that "finders fee" idea, too... If the person was a CPA or financial planner and they performed professional services to help you evaluate deals and select the one that best met your needs, that might be a different story - provided they actually did the work and actually got paid.

As far as just raising the per point price, it seems to me there should be enough opportunity to do that between closing costs and the buyers portion of the annual dues. Together, those two could add up to $7-8 per point. You could use either one, or both, to get where you wanted to be.

I wonder if there are any non-financial provisions which could be put into contracts to make them unattractive or impossible to ROFR? Something the buyer agrees to do that Disney would not do, etc.

Any ideas?

What about the provisions that I have been seeing lately that contracts cannot close months from when they are being posted and sold?

What about those contracts that have "Reservation Points"?

Just throwing out ideas!

Scratch

 

[Dean]

I know that if you try to sell your professional football tickets and ask for more than face value...even if you offer an autographed football with the deal that you can be handcuffed and taken to the hoosegow.

Scalping is not illegal in all situations or locations. And packaging is legal even where scalping isn't many times as well. Ever try to buy a bowl ticket package where the rooms are out of sight.

There are many possible strategies to block ROFR some are legal and others are not. One possibility is putting together a package that DVC could not match by including non generic payments like a swap or non cash payment. Another is to specify a broker that DVC will not use. But rebates and commissions to non brokers can be illegal in most situations. We can expand on this topic if the group desires though I'm sure there'll be many who don't want them discussed because we must be secretive and not give anyone ideas.

 

[DrTomorrow]

Heck, I'm not worried about ROFR, but I'm up for an expanded discussion, Dean. I like ideas!

 

[RobDoc]

... I'd just like some concrete evidence that the law addresses commissions and who can receive them...because I think I am both right and ethically correct on this, tho I have been wrong before and will be again!!!

While I can't quote any specific statute, I do know that the law will vary by state - just as Colorado has a statute covering RTU timeshares. Consider the timeshare laws that DVC abides by regarding it's referral program- many members live in states where any remuneration for such referral is not allowed - and DVC does honor the laws of the states in which they are registered. I know that I am not eligible to receive any rewards for referrals as long as I live in Indiana or any of several other states. When each new property has begun sales, some states were not yet registered and buyers could not even get information sent to them- but they could purchase while at WDW.

In the case of a resale, since the onsite DVC properties are located in Orange County, FL and the deed will be recorded there, some details of the sale will likely be governed by that locale. If someone pays a commission to an individual not licensed within the proper jurisdiction, they may find themselves having to respond to authorities from that locale.

Certainly, offers might include a trade of property or some other item that DVC would be unable to match, but DVC can also ask for an appraisal of that exchange and match the appraised value within the boundaries or ROFR. Whether DVC would go to that extreme remains to be seen, but it would surely be within their right of refusal. They do have the right to know the value placed on the contract (and everything will have some $$ value). The real issue comes when someone "forgets" to mention the $$$ that will be exchanged in addition to the lithograph of Lincoln.

 

[lisabarr]

As a licensed Florida Real Estate Broker, it is against Florida law to pay a commission to anyone not licensed to sell Real Estate in Florida.

Per Florida statue 475.25h) "Has shared a commission with, or paid a fee or other compensation to, a person not properly licensed as a broker, broker associate, or sales associate under the laws of this state, for the referral of real estate business, clients, prospects, or customers, or for any one or more of the services set forth in s. 475.01(1)(a). For the purposes of this section, it is immaterial that the person to whom such payment or compensation is given made the referral or performed the service from within this state or elsewhere; however, a licensed broker of this state may pay a referral fee or share a real estate brokerage commission with a broker licensed or registered under the laws of a foreign state so long as the foreign broker does not violate any law of this state."

Hope this helps

 

[ColoradoBelle1]

Thanks LisaBarr for the statute.
I checkied with a Real Estate lawyer here is Colorado and with a long time friend who is a long time Realtor and pretty savvy....
Both said, in Colorado, you can pay a comminssion to anyone...no statute against it. My broker friend said she pays finder's fees all the time.

So I guess it really does vary by state. Wonder if the Realtor Lobby in Florida had anything to do with that statute?

But since Disney and the deed are recorded in Florida, I guess that settles that...and I stand corrected for Florida timeshare resales!

 

[JimMIA]

Thanks LisaBarr for the statute.
I checkied with a Real Estate lawyer here is Colorado and with a long time friend who is a long time Realtor and pretty savvy....
Both said, in Colorado, you can pay a comminssion to anyone...no statute against it. My broker friend said she pays finder's fees all the time.

So I guess it really does vary by state. Wonder if the Realtor Lobby in Florida had anything to do with that statute?

But since Disney and the deed are recorded in Florida, I guess that settles that...and I stand corrected for Florida timeshare resales!

But I don't see any prohibition in that statute for a commission for just being so darn cute!

 

[JimC]

I suspect that Disney puts the variables of each resale contract in a model that gives them a buy or pass decision. Those variables include resort, use year, price, points status, who pays closing costs, commissions, maintenance fees, wait list demand, current and wait list resorts retail prices, current resort inducements, demand for current resort, inventory still owned by DVD and the like.

 

[JimMIA]

I suspect that Disney puts the variables of each resale contract in a model that gives them a buy or pass decision. Those variables include resort, use year, price, points status, who pays closing costs, commissions, maintenance fees, wait list demand, current and wait list resorts retail prices, current resort inducements, demand for current resort, inventory still owned by DVD and the like.

I'm sure you are right that they consider multiple factors, including what the total cost to them would be. And I'm also sure the ROFR prices are, and will continue to be, a moving target.

I assume that they would like to maintain some reasonable relationship between resale prices and their prices; otherwise, their marketing would be much more difficult. Seems to me, that has to be the main (but not only) objective of ROFR. So, I'm sure they have a price for most resorts below which they will not let resales occur. That assumption leads me to believe that the ROFR levels, and hence resale prices, will rise slightly if DVC raises SSR prices as many believe they will in June.

I also assume they do watch their wait lists, and in fact several of us have been told that the wait lists were getting out of hand and DVC was going to be more aggressive on ROFR to be able to meet the demand in a couple of resorts. A waitlist sale is just an immediate, very low-cost, quick profit for DVC, plus most of the buyers are existing owners who they want to take care of presumably.

I suspect the waitlists account for some of the volatility in ROFR prices. For that reason, I think it is wise for folks in the resale marketplace to watch Senecabeach's excellent add-on thread, as well as Beca's ROFR thread.

On the other hand, DVC was recently sending out emails advertising what looked like about 10,000 OKW points available for add-on, and the only OKW contract I've seen ROFR'd was one at a ridiculous $65 per point. Also, the recent VB ROFR success at $58.42 per point makes me wonder if they want any VB points!

I'm sure ROFR will remain one of life's little secrets, but hopefully some creative thinking will help some people get past it.

 

[calypso*a*go-go]

I still feel the whole ROFR process is the luck of the draw. So much depends on which resort you are trying to buy, how long the waiting lists are with DVC for sold-out resorts, etc. Plus there are probably many things we aren't even aware of that involve the inner-workings of DVC...phew, I get a headache just thinking about it!

In our case (as buyers), the first offer did not pass ROFR. We immediately counter-offered by removing some credits for used points but actually lowered the price per point. It ended up being a few hundred dollars more out of our pockets...and it passed ROFR. That is just one example of how small that margin is to either pass or fail.

Pretty much all you need to do is research the resort you are interested in as to what contracts have been passing at (Beca's thread is great for this!) and make an offer. Then you need to cross your fingers, knock on wood, shake some salt over your shoulder, wear the same socks until you get an answer...you get the idea. (And a couple of Hail Mary's never hurt, either!)

 

[T.E. Yeary]

I was just sick to hear about Laura's ROFR. Because I've made the commitment to myself to read these boards everyday, I feel like I am getting to know each of you. We at The Timeshare Store, Inc. feel your pain. Even though we were able to bring about a sale for the seller, the disappointment in the purchaser's post comes through loud and clear. When my wife and I began this business back in 1994. Our goal was of course to make a living, but also, we truly enjoyed the experience of helping a seller and a buyer have a happy ending. We probably celebrated in our hearts as much as the buyer & seller did. It was a win win win situation! So, I want you to know the joy is not there because of this particular purchaser and all the others that have experienced this kind of disapointment. I sincerely hope that working together with your ideas and ours about creative purchase offers we can come up with a solution. Maybe the only solution is to settle for saving a little money as opposed to alot. I'm really not sure. The one area that you all should take to heart is that you too, at some point in your life, may need to sell your DVC. Hopefully someone will step up and place that offer that will get the job done. So, purchasing a Resale does help your fellow DVC owner.

I felt an overwhelming desire to get this off my chest. So, I hope you don't mind this rather lengthy post.

Sincerely,
Thomas E. Yeary (Tom)
Owner/Broker
The Timeshare Store, Inc.