DVC prices going lower

[Y-ASK]

Ya know it might be worth it to put $10,000 in escrow with the TSS and low ball some of these contracts. It would get them off the books if Disney ROFR'd and you never know, you just might get lucky in the next 6-12 months and get a AKV or a SSR or a BCV at $50 - $55 per point. I would probably stick with the older resorts (except VB or HHI) so that hopefully the owner would not be in an upside down position if they had a loan out. Something to think about...

Y-ASK

 

[macman752]

Just a question of clarification--if the highest bid is over the lien amount and any costs of the foreclosure sale, the lender can't stop the sale can they if they don't like the bid? Because I would think in that circumstance the lender had a chance to make itself "whole" and if it failed to do so the lien against the borrower should be extinguished. If the highest bid was not equal to the lien amount plus costs I could see that--but in my experience the lender (in this case Disney) always is the first bid and they "bid in" their lien amount plus costs as the opening bid. So I guess I'm a little confused (or maybe it's different here in Calif.)

Disney would have obtained a judgment lien from the court stating the amount it is owed by the defaulting owner. The sale would proceed as you have indicated. If another bidder enters the sale and bids above the judgment lien amount Disney must either become a competing bidder or allow the other bidder to claim the property. Regardless of who wins the bid, Disney receives the amount of the lien and the former owner would be paid anything above that amount.

If no one bids then Disney gets the property back. They won't receive any money. I assume that Disney would then attempt to enforce the judgment lien against the defaulting borrower by filing the lien in the jurisdiction where the borrower resides.

 

[tjkraz]

If no one bids then Disney gets the property back. They won't receive any money. I assume that Disney would then attempt to enforce the judgment lien against the defaulting borrower by filing the lien in the jurisdiction where the borrower resides.

So how is the value of the property determined?

Disney's lien will include outstanding principle, unpaid dues, interest, fees, etc. Who decides whether or not the property recovered by DVC satisfies all of the outstanding liabilities?

 

[DVCPAT]

Just a question of clarification--if the highest bid is over the lien amount and any costs of the foreclosure sale, the lender can't stop the sale can they if they don't like the bid? Because I would think in that circumstance the lender had a chance to make itself "whole" and if it failed to do so the lien against the borrower should be extinguished. If the highest bid was not equal to the lien amount plus costs I could see that--but in my experience the lender (in this case Disney) always is the first bid and they "bid in" their lien amount plus costs as the opening bid. So I guess I'm a little confused (or maybe it's different here in Calif.)

The sale/auction occurs at the end of the foreclosure process. Each state has foreclosure laws that outline how and when the process starts and finishes. Once the deadline passes, ownership transfers back to the lender. The lender can then decide to hire an auctioneer, or a real estate agent to sell the property (Disney will simply resell the points). The lender decides who purchases the property and it’s selling price. Sometimes the lender will accept a lower bid if the buyer has cash. If the lender decides to auction the property, you must have 10% of the lien amount to participate in the bidding process. If your bid is accepted, they keep the 10% as a down payment and you must settle within an advertised date.

 

[macman752]

So how is the value of the property determined?

Disney's lien will include outstanding principle, unpaid dues, interest, fees, etc. Who decides whether or not the property recovered by DVC satisfies all of the outstanding liabilities?

During the course of the foreclosure suit Disney will present to the judge its claim for damages. The claim will include all that you have stated above plus Disney's legal fees, filing fees to bring the suit and any other costs attendant to the case. The judge will then issue an order awarding Disney a judgment in the amount claimed. This amount establishes what is needed to satisfy all of the outstanding liabilities and costs. Thus, the opening bid at the sale is the total amount needed to make Disney whole.

One can't bid less than the amount of the judgment lien. If no one bids Disney claims the property and has a legal "IOU" to enforce against the former owner.

 

[BWV Dreamin]

During the course of the foreclosure suit Disney will present to the judge its claim for damages. The claim will include all that you have stated above plus Disney's legal fees, filing fees to bring the suit and any other costs attendant to the case. The judge will then issue an order awarding Disney a judgment in the amount claimed. This amount establishes what is needed to satisfy all of the outstanding liabilities and costs. Thus, the opening bid at the sale is the total amount needed to make Disney whole.

One can't bid less than the amount of the judgment lien. If no one bids Disney claims the property and has a legal "IOU" to enforce against the former owner.

How about a short sale? Are timeshares ever included in those?

 

[DVCPAT]

One can't bid less than the amount of the judgment lien. If no one bids Disney claims the property and has a legal "IOU" to enforce against the former owner.

Disney may not budge on the auction price because they have buyers on a waiting list. Other timeshares/real estate aren’t in demand and they sell for much less than the lien amount.

 

[macman752]

How about a short sale? Are timeshares ever included in those?

I doubt Disney would be interested in accepting a short sale unless the owner has enough equity to make it a good deal and Disney was the buyer. If a third party tries to take a "great bargain" short sale to Disney they would exercise ROFR and close the sale.

Something I've been thinking about during this discussion is a case where the foreclosure is due to unpaid annual dues. Assume for a moment that the property is free and clear and only the annual dues remain unpaid. The judgment lien might amount to just a few thousand dollars. This type of situation would make for a very interesting bidding war at the courthouse steps. I would guess that Disney would be an aggressive bidder in this scenario.

 

[calypso*a*go-go]

Something I've been thinking about during this discussion is a case where the foreclosure is due to unpaid annual dues. Assume for a moment that the property is free and clear and only the annual dues remain unpaid. The judgment lien might amount to just a few thousand dollars. This type of situation would make for a very interesting bidding war at the courthouse steps. I would guess that Disney would be an aggressive bidder in this scenario.

There are quite a few that end up at auction this way. I was tracking this a few months ago and was shocked that some great contracts were available with only a couple thousand dollars owed on them. I guess it's probably people that have owned quite awhile and feel like they've vacationed enough to get their money's worth out of it and just don't care about it anymore...people that basically want out from under the annual fee obligation every year.

 

[tjkraz]

If no one bids Disney claims the property and has a legal "IOU" to enforce against the former owner.

I understand everything that you said, but the part that confuses me is this last part. If nobody bids, how to you establish a value for the contract that Disney has taken back?

Let's say someone bought 160 points at BLT for $107 each plus closing. With 90% financed, the principle balance is around $16,000. Payments were made for a few months, which would only knock a few hundred dollars off of the debt. Then payments stopped.

By the time Disney goes through foreclosure, the debt is up to $19,000 which includes principle, past-due interest, fees, etc. Obviously nobody is going to bid $19k on 160 DVC points, so it goes back to Disney. What method is used to determine the portion of the $19,000 liability satisfied by the return of the property?

 

[toocherie]

Disney would have obtained a judgment lien from the court stating the amount it is owed by the defaulting owner. The sale would proceed as you have indicated. If another bidder enters the sale and bids above the judgment lien amount Disney must either become a competing bidder or allow the other bidder to claim the property. Regardless of who wins the bid, Disney receives the amount of the lien and the former owner would be paid anything above that amount.

If no one bids then Disney gets the property back. They won't receive any money. I assume that Disney would then attempt to enforce the judgment lien against the defaulting borrower by filing the lien in the jurisdiction where the borrower resides.

I guess the difference is that you're talking about getting a judgment of ownership and then the lender selling; in California we use the deed of trust method for real estate loans--and except in limited circumstances the lender can choose to go straight to a foreclosure sale using a trustee's sale, rather than going through the judicial process. However, if the lender does so, then it gives up the right to collect a so-called "deficiency judgment"--i.e., the difference between the amount the property sells for and the amount the lender is owed (assuming the property doesn't satisfy the loan amount plus all costs). If it wants to preserve its right to collect the deficiency, it has to go through the court process.

Sounds like the Florida system is different and they have to go through a judicial process first?

 

[macman752]

I guess the difference is that you're talking about getting a judgment of ownership and then the lender selling; in California we use the deed of trust method for real estate loans--and except in limited circumstances the lender can choose to go straight to a foreclosure sale using a trustee's sale, rather than going through the judicial process. However, if the lender does so, then it gives up the right to collect a so-called "deficiency judgment"--i.e., the difference between the amount the property sells for and the amount the lender is owed (assuming the property doesn't satisfy the loan amount plus all costs). If it wants to preserve its right to collect the deficiency, it has to go through the court process.

Sounds like the Florida system is different and they have to go through a judicial process first?

Yes, here in Florida the judicial process must be completed before the sale. After the judgment is entered a sale is scheduled. The sale is advertised and any member of the public may bid for the property.

 

[macman752]

I understand everything that you said, but the part that confuses me is this last part. If nobody bids, how to you establish a value for the contract that Disney has taken back?

Let's say someone bought 160 points at BLT for $107 each plus closing. With 90% financed, the principle balance is around $16,000. Payments were made for a few months, which would only knock a few hundred dollars off of the debt. Then payments stopped.

By the time Disney goes through foreclosure, the debt is up to $19,000 which includes principle, past-due interest, fees, etc. Obviously nobody is going to bid $19k on 160 DVC points, so it goes back to Disney. What method is used to determine the portion of the $19,000 liability satisfied by the return of the property?

Until Disney resells the points the entire 19k is the full liability. If the points are later sold for 16k the former owner would still owe Disney 3k.