Different ROFR issue!

[Dean]

As many of you know, I recently entered an agreement to sell one of my OKW contracts privately. It was a win-win situations for us IMO. There are a lot of OKW contracts, it was borrowed ahead and I didn't have to pay any commission, closing or transfer on the sale. I also had it set so the buyer paid all of the 2005 dues even though they didn't get points till April, 2005. Well, DVC bought it through ROFR, as is their option. Frankly I was surprised but it likely worked out to my advantage with an easier and quicker closing.

DVC's ROFR says they can step in at the same terms. When I got the paperwork, there was an additional paper with three provisions. One stated I would not discuss the terms with anyone. One stated I could never sue them and the third put jurisdiction in Orlando for legal issues. The latter was fine but the first two were unacceptable to me. I told them I couldn't sign them, they checked with the lawyers and said OK, they'd close anyway. I was prepared to walk away and keep the contract or get back with the buyer to see if we could proceed.

 

[Deep-Thots]

Hmmm. Curious. What do you think DVD's motivation is in attempting to apply the three additional conditions? I am particularly intrigued by the prohibition against discussing the terms of the sale. Aren't most (all?) real estate transactions -- at least with regard to such basics as purchase price, date, and so forth -- a matter of public record?

 

[drusba]

What it appears you witnessed are the actions of Disney's very "anal" and, in my view, unwise lawyers trying to tack on new conditions to the sale that the buyers did not put in their offer, which they cannot legally do when excercising an ROFR. Many courts would construe Disney's actions as a failure to properly excercise the ROFR, entitling the buyer to go forward.

 

[mickeysgal]

Aren't most (all?) real estate transactions -- at least with regard to such basics as purchase price, date, and so forth -- a matter of public record?

I always thought that real estate transactions were public county records.
What would be their purpose to want to contain the details of the sale? So that owners and buyers don't know the current ROFR threshold? Perhaps without knowledge of ROFR price levels, buyers would bid higher than perhaps they would otherwise, thus keeping the property values higher? Or maybe Disney wants buyers to bid low, so they can swoop in with ROFR, buy contracts low and make a bigger profit at resale?

Sounds like Disney strong-arm tactics to me...

 

[doubletrouble_vb]

I get the impression Disney prefers that ROFR levels be secret...its not like they announce them now. But besides the actual sales price would other items such as the way MF's were handled be public record? And the no-sue option would be prudence on their part.

I think its just a matter of pushing for a little more because they are disney.

 

[Dean]

Well, DVC wrote the contract as $10 and other considerations so public records wouldn't help. My guess is just for this reason. As for adding to it, we agree, that was one of the points i made. It was funny that they said I was the first to question this issue. I guess the others were just happy to get their money, I was more than willing to just walk away. As for making money, I don't think they really make enough on the resales to justify it for that reason alone, it's to prop up the retail price and drive new buyers that way. I'm sure they don't put the price to keep people from figuring out the ROFR levels. The other issue is that some of the closing costs are based on dollars to it saves them some money.

I thought it was funny that they came back and said they could close without it, the lawyers said so. It took about a week for them to get back to me. I waited to post until I had my money as I didn't want to complicate things but if they'd have said sign it or we back out, I'd have said "see ya later" and reminded them to send the waiver of ROFR.

 

[ColoradoBelle1]

This is really interesting seeing as I have a contract in ROFR as of this coming Monday. It is interesting that the commissions paid out must be reimbursed by Disney BUT if the contract was done without commission...then Disney gets a heck of a good deal on ROFR. Which makes doing the deal wtihout a realtor too subject to ROFR unless some alternatives are explored.
I lOVE that you called Disney's bluff ! I realize that you will get your money, but feel bad for the buyer. Disney gets off NOT having to pay the resale realtor fee since you guys didn't have one. This made the contract a much better deal for Disney to swoop up....On 200 points at $80 a pont, it would have been at least $1600 or $8.00 a point!!!!!


Hmmm

 

[calypso*a*go-go]

Disney gets off NOT having to pay the resale realtor fee since you guys didn't have one. This made the contract a much better deal for Disney to swoop up....On 200 points at $80 a pont, it would have been at least $1600 or $8.00 a point!!!!!

I am confused by this -- why would Disney have to pay the commission? Wouldn't it just be deducted from the net proceeds the seller gets? I have been under the assumption that the only person benefiting from a FSBO is the seller. Please enlighten me if I am wrong.

 

[Deep-Thots]

I am confused by this -- why would Disney have to pay the commission? Wouldn't it just be deducted from the net proceeds the seller gets? I have been under the assumption that the only person benefiting from a FSBO is the seller. Please enlighten me if I am wrong.

Yes, I'm confused, too. It's always the seller who pays the commission. That's what I remember from various real estate transactions (including our resale purchase). ???

 

[Deep-Thots]

Well, DVC wrote the contract as $10 and other considerations so public records wouldn't help.

Interesting. Clever way to get around the public records issue. Kinda skanky, but understandable from a business point of view.

 

[Dean]

I lOVE that you called Disney's bluff ! I realize that you will get your money, but feel bad for the buyer.

The buyer knew up front and was an experienced DVC owner and resale buyer. They were willing to take the chance to get a better deal, they had the chance to up the offer up front as I told they it might not go through. DVC doesn't pay the commission but the seller does so to DVC, the purchase price is the issue regardless.

 

[ColoradoBelle1]

OK...sometimes I get a bit math dyslexic, so maybe I'm thinking this out the wrong way, but here's my reasoning.

I asked my Realtor if Disney exerted ROFR would she still get her commission.She said yes.
So...the contract was for $80 a point. Her commision was $8.00 a point.
I paid $80 a point plus closing costs if it went through ROFR. If Disney ROFR's the contract, seller gets $72, and the Realtor gets $8 and I get ...nothing!
But Disney's cost is $80 a point.

Lets say Seller and I got together and made our own contract without a realtor for $74 a point I pay less but seller gets more)
And Disney ROFR'd it. Seller gets $74. Seller still pays transfer to Disney.
I still get NOTHING...but DIsney only has to pay $74....so it seems the likelihood of an ROFR is much higher.

The way the Realtor explained it to me: Disney has to pay exactly what the buyer would have had to pay (except since it does it's own closing it doesn't have to pay the closing costs as stipulated in the contract.) So in the first case, Disney has to pay $80 a point and int he second Disney has to pay $74.

So it seems that if you want to save money by not having your points listed with a broker, that you should reconfigure your contract so that it is still over the 'ROFR' going rate with perhaps a 'sweetener' to the buyer after the contract is completed so that the savings in commission are somehow giving benefit to both the buyer or seller. I don't think this would be at all illegal or unethical but I'm neither an attorney nor Realtor so please don't flame me if I've offended anyone...it's just an observation.

Please explain it to me, if I've erred in my processing of the transaction...again, sometimes I'm math dyslexic.

Colorado Belle

 

[calypso*a*go-go]

C.Belle -- That's the point I was making earlier -- the only one that benefits from not using a resale agent is the seller. Because "sweetening" the deal would be illegal and would get both parties in a lot of trouble if Disney found out. I have no doubts that these types of deals exist -- especially in transactions between families members or close friends. But boy, all parties involved better be discreet.

 

[Deep-Thots]

OK...sometimes I get a bit math dyslexic, so maybe I'm thinking this out the wrong way, but here's my reasoning.

I asked my Realtor if Disney exerted ROFR would she still get her commission.She said yes.
So...the contract was for $80 a point. Her commision was $8.00 a point.
I paid $80 a point plus closing costs if it went through ROFR. If Disney ROFR's the contract, seller gets $72, and the Realtor gets $8 and I get ...nothing!
But Disney's cost is $80 a point.

Lets say Seller and I got together and made our own contract without a realtor for $74 a point I pay less but seller gets more)
And Disney ROFR'd it. Seller gets $74. Seller still pays transfer to Disney.
I still get NOTHING...but DIsney only has to pay $74....so it seems the likelihood of an ROFR is much higher.

The way the Realtor explained it to me: Disney has to pay exactly what the buyer would have had to pay (except since it does it's own closing it doesn't have to pay the closing costs as stipulated in the contract.) So in the first case, Disney has to pay $80 a point and int he second Disney has to pay $74.

So it seems that if you want to save money by not having your points listed with a broker, that you should reconfigure your contract so that it is still over the 'ROFR' going rate with perhaps a 'sweetener' to the buyer after the contract is completed so that the savings in commission are somehow giving benefit to both the buyer or seller. I don't think this would be at all illegal or unethical but I'm neither an attorney nor Realtor so please don't flame me if I've offended anyone...it's just an observation.

Please explain it to me, if I've erred in my processing of the transaction...again, sometimes I'm math dyslexic.

Colorado Belle

I cannot imagine a reason why a seller would want to decrease the cost per point significantly below market value (as in your example. The $6 ppt differential is a huge one, from a ROFR point of view.). The whole purpose of not using a broker (from the seller's point of view) is to increase the amount of money one makes in a sale. Also, trying to "sweeten the deal" after the fact just doesn't make sense for the seller. Why bother? Again, a seller is trying to net more $$ by not using a broker.

What should ultimately matter to the buyer in a deal is price per point. As long as trust is part of the relationship, it really shouldn't matter to the buyer whether a seller uses a broker or not.

 

[ColoradoBelle1]

I guesss the difference between regular real estate that doens't have right of first refusal is that the buyer normally doesnt' care what the seller does with the money received...he can pay a commission or pay off his MIL or run away.

If I am the seller, and I do a FSBO...then my savings of a commission allows the purchasher to 'buy in' at a cheaper price than if I, as seller, added in a commission to the 'sale price'. The buyer saves, because he buys at a lower price (usually) than the non FISBO properties. In a seller's market, many people take advantage of this way of selling. Both buyer and seller benefit.

If it is the Seller offering points to a BUyer at slightly under market (in order to get a quicker sale ) and without using the benefit of a realtor, you are right...the buyer is still paying slightly less than he might if paying the market rate.

If it is the BUyer who finds the seller and has the knowledge and abiltiy to put forth a legal contract, the the buyer can certainly point out to the seller...well, if you sell this through a Realtor at $80 a point you will only net $72, so I will give you $74 a point. Now, the buyer and seller make a good deal . ROFR lets DIsney capitalize on that good deal if the structure of the contract doesn't address a 'comission'. If the seller says: well my friend will give me $76 a point...then the seller has every right to sell to a better deal.
BUt if the only options are this savvy buyer OR listing with a full price broker...then the seller woudl be happy to get more per point than the $72 Net.

Finally...I can see where DISney would be upset if EVERYTHING weren't acknowledged in the contract, but as to ILLEGAL....I don't think it is illegal (but again I am NOT an attorney) to write into a contract FOR EXAMPLE:
In lieu of a commission, a $2000 finders and contract negotitation fee will be paid to ABCREALTY, LLC at the completion of contract. ABCREALTY,LLC can be owned by anyone. OR: SUbject to completion of this contract, buyer will alllow seller to stay at DVC resort of choice not to exceed X points.
As I understand it, Disney would have to honor that if it took over the contract in RORF. Getting ludicrous here, but still within the realm of legality, how about: Buyer will pay $75.00 per point and throw in buyers daughter's hand in marriage to seller's son.....I wonder how Disney could ROFR THAT!!!

So Kim...if the seller can sell on the open resale market at $80 a point but his net is only $72 a point....then of course if he finds a willing buyer who will pay him $79.99 or even $85 without a realtor...he can do that. But if the willing buyer says...how about you don't list and I'll pay you $76...then it is to seller's advantage to do it that way. My point was only that when this happens...Disney might find it cheaper to ROFR and the contract won't pass ROFR.

 

[Dean]

The private sale can be win-win, it was in my case. You also find buyers interested that wouldn't be so otherwise. Some resale agents will list none exclusively. That way if you find a buyer, you own them nothing. It is illegal to have under the table terms in real estate contracts.

 

[cruise-o-matic]

Dean, weren't you going to post something about why Timeshare Transfer is now requiring a ROFR fee as a fall out from this?

 

[jekjones1558]

Dean,
For those of us always trying to follow the market for a resale contract, could you post the details of yours (since you didn't sign Disneys "no disclosure" paper)?

 

[Deep-Thots]

So Kim...if the seller can sell on the open resale market at $80 a point but his net is only $72 a point....then of course if he finds a willing buyer who will pay him $79.99 or even $85 without a realtor...he can do that. But if the willing buyer says...how about you don't list and I'll pay you $76...then it is to seller's advantage to do it that way. My point was only that when this happens...Disney might find it cheaper to ROFR and the contract won't pass ROFR.

Sure. This is why, if a seller intends to go the non-broker route, it is better for him/her to set the price somewhere near market value (and not significantly below it). It can certainly be, as Dean pointed out, win-win for both buyer and seller if the sale is completed at a price only slightly below the ROFR threshold (say $78 ppt vs. the $80 ppt market value of the example).

 

[Dean]

Dean, weren't you going to post something about why Timeshare Transfer is now requiring a ROFR fee as a fall out from this?

I thought I did that. Just that they didn't want to keep submitting contracts and have them taken by DVC. They get nothing if that happens but have costs and work involved. They've started requiring a $50 fee though I don't know if it comes off the price if it goes through or not. This happened, it appears, largely due to my contract. At least it happened after we had submitted to them and prior at the same time DVC notified us they were exercising ROFR on my contract.

Dean,
For those of us always trying to follow the market for a resale contract, could you post the details of yours (since you didn't sign Disneys "no disclosure" paper)?

I thought I did that also. OKW April 270 pts at $18500 with buyer paying all closing, transfer and all 2005 fees. All points available for April, 2005 but none prior. And while I might have been able to wait a few months to a year and get a few more dollars, I think $68.50 pp in my pocket was a fair deal in the situation. The alternative was simply to keep it and rent out the points which I preferred not to do. I'll likely sell my other OKW contract at some point and eventually BWV as well and just trade in through II. But I've got to get past a Xmas 2006 OKW GV trip with family and close enough to any points to have the contracts viable.