Maybe unpopular questions

[Grumpy Mouse]

So... we are just beginning the process to purchase our first DVC timeshare. The seller has accepted our offer and we (electronically) signed the contract today. Now apparently the fun begins with this ROFR nonsense.

1) According to contract, Disney has 30 days to exercise (or waive) their ROFR. Yet many - including those on this board - are waiting far longer, up to 50 days, for Disney to exercise/waive this right. Most ROFR's are pretty clear; if the company doesn't exercise this right in the allotted time, they by default waive the right. How, legally, is Disney getting away with this violation?

2) If Disney does exercise their ROFR and assumes the terms of the contract, the seller obviously still gets paid, but does the agent, who apparently acts as a 'transactional broker' for BOTH buyer and seller, still get paid? If so, how has the state of Florida allowed this to be legal, given that the rights of the buyer clearly were not served, or protected. In fact, under this scenario, what incentive does the buyer's agent have at all to ensure their buyer (and not Disney) gets the desired property?

Thanks for any insights that might be provided; I realize these questions might not be too 'popular'.

 

[hlhlaw07]

As to your first question: there is not a requirement for Disney to act within 30 days. I wish that myth would just die. The 30 day requirement is on you. You must submit your contract to Disney at least 30 days before it is scheduled to close. If you give them more than 30 days because your contract schedules closing 60 days out (which is the norm) then you have effectively given Disney 60 days to exercise ROFR.

As to your second question, I’m not sure you understand the relationship of a transactional broker has with the parties. They still get their commission because they found the seller a buyer. Just because a 3rd party steps in and exercises their right under the contract doesn’t mean the broker didn’t fulfill their obligation to the transaction or failed to protect the buyer. There is no rhyme or reason as to why disney exercises ROFR, so really there is nothing the broker can do to ensure Disney will not take a contract.

 

[Deb & Bill]

If DVC exercises ROFR, the seller will pay their agent their commission because the contract was sold.

 

[syderial]

We were told about resale during our sales meeting and told directly that the requirement is 30 days then it expires. It's on all of the resale sites and when we went under contract last week they reiterated that time limit.
https://www.dvcsales.com/timeline/#:~:text=Step 6 Right of First,the transaction can move forward.

As to your first question: there is not a requirement for Disney to act within 30 days. I wish that myth would just die. The 30 day requirement is on you. You must submit your contract to Disney at least 30 days before it is scheduled to close. If you give them more than 30 days because your contract schedules closing 60 days out (which is the norm) then you have effectively given Disney 60 days to exercise ROFR.

As to your second question, I’m not sure you understand the relationship of a transactional broker has with the parties. They still get their commission because they found the seller a buyer. Just because a 3rd party steps in and exercises their right under the contract doesn’t mean the broker didn’t fulfill their obligation to the transaction or failed to protect the buyer. There is no rhyme or reason as to why disney exercises ROFR, so really there is nothing the broker can do to ensure Disney will not take a contract.

 

[hlhlaw07]

We were told about resale during our sales meeting and told directly that the requirement is 30 days then it expires. It's on all of the resale sites and when we went under contract last week they reiterated that time limit.
https://www.dvcsales.com/timeline/#:~:text=Step 6 Right of First,the transaction can move forward.

You were told wrong. It’s that simple. Disney has up until closing to exercise ROFR and you have to give them at least 30 days to make the decision. Disney has historically made their decision within 30 days, but unless the contract you submit to them has closing scheduled at 30 days out, then there is absolutely no 30 day requirement placed on them. 30 days is your requirement.

 

[Grumpy Mouse]

Thanks for your replies. Interesting about the first question, my broker insisted Disney had a 30 day ROFR - and implied they (Disney) were the 'hold up' in the process. You seem to be implying this is a broker issue.

As to the second, that's a load of nonsense. For many years, and in many states, review of transactions found that seller's rights were being preserved - because after all they were the ones compensating the agents - but buyer's rights were being trampled on. So the laws were changed to specially address the preservation of buyer's rights in real estate transactions. That is not the case here - and in my mind a huge red flag. The agent simply has no incentive to ensure a favorable outcome for the buyer - because they get compensated either way. And this jives well with the amount of time (or lack thereof) agents spend addressing ROFR. Looking at the various companies engaged in DVC resale, cursory lip service is spent on the subject, but not really the kind of information that could help a buyer successfully navigate ROFR. Why? Because the agent gets paid either way. If the Florida real estate commission ruled to suspend - or significantly reduce - the commission in the event Disney exercised ROFR, you'd see a lot more 'active' ROFR management by these resale companies.

 

[hlhlaw07]

Thanks for your replies. Interesting about the first question, my broker insisted Disney had a 30 day ROFR - and implied they (Disney) were the 'hold up' in the process. You seem to be implying this is a broker issue.

As to the second, that's a load of nonsense. For many years, and in many states, review of transactions found that seller's rights were being preserved - because after all they were the ones compensating the agents - but buyer's rights were being trampled on. So the laws were changed to specially address the preservation of buyer's rights in real estate transactions. That is not the case here - and in my mind a huge red flag. The agent simply has no incentive to ensure a favorable outcome for the buyer - because they get compensated either way. And this jives well with the amount of time (or lack thereof) agents spend addressing ROFR. Looking at the various companies engaged in DVC resale, cursory lip service is spent on the subject, but not really the kind of information that could help a buyer successfully navigate ROFR. Why? Because the agent gets paid either way. If the Florida real estate commission ruled to suspend - or significantly reduce - the commission in the event Disney exercised ROFR, you'd see a lot more 'active' ROFR management by these resale companies.

What exactly do you think the broker can do to “manage ROFR”?

 

[JETSDAD]

By contract Disney has their ROFR for the resale of contracts. Seller have agreed to this when they purchased. As a buyer you are agreeing to that term being in the contract. No rights are being trampled on as it is simply a term of the contract that you've agreed to. If you don't want to deal with ROFR then you're best off buying direct. Also, brokers do tend to tell buyers to offer more money to avoid ROFR as it benefits the seller and makes it more likely to pass.

 

[BruinEd03]

Thanks for your replies. Interesting about the first question, my broker insisted Disney had a 30 day ROFR - and implied they (Disney) were the 'hold up' in the process. You seem to be implying this is a broker issue.

As to the second, that's a load of nonsense. For many years, and in many states, review of transactions found that seller's rights were being preserved - because after all they were the ones compensating the agents - but buyer's rights were being trampled on. So the laws were changed to specially address the preservation of buyer's rights in real estate transactions. That is not the case here - and in my mind a huge red flag. The agent simply has no incentive to ensure a favorable outcome for the buyer - because they get compensated either way. And this jives well with the amount of time (or lack thereof) agents spend addressing ROFR. Looking at the various companies engaged in DVC resale, cursory lip service is spent on the subject, but not really the kind of information that could help a buyer successfully navigate ROFR. Why? Because the agent gets paid either way. If the Florida real estate commission ruled to suspend - or significantly reduce - the commission in the event Disney exercised ROFR, you'd see a lot more 'active' ROFR management by these resale companies.

"Active ROFR management"? From what I've read so far the chances of ROFR generally decreases the more the buyer pays, and increases the less the buyer pays. That means asking YOU, the buyer, to pay more money to the Seller to increase the likelihood that Disney will waive ROFR. So . . . do you want to pay more money for your contract?

 

[Grumpy Mouse]

"Also, brokers do tend to tell buyers to offer more money to avoid ROFR as it benefits the seller and makes it more likely to pass."

And it also benefits the broker - as their fat 8.5% commission is a direct function of sales price.

But it's still not enough apparently. Prior to the pandemic, Disney had exercised ROFR on an astounding 25%+ of Old Key West resales in 2020. If the buyer only has a 75% chance of success in securing an OKW property, I'd say the buyer's agent wasn't doing their job. But hey, who cares when the agent got compensated anyway? In fact, the more I think about it, the more it smells. Since many are VERY dedicated to getting a DCV timeshare no matter the effort, the buyer will likely enter into another contract after losing the previous one to Disney, meaning the buyer's agent will get compensated AGAIN. And maybe again and again for a single buyer.

As for "managing ROFR", I am new to this process and don't know the data well - but I'm guessing many do. But for one, in a cursory examination of what passed, there seemed to be threshold values that varied with market conditions AND size of point contract. I could be wrong, but Disney didn't seem to be that interested in exercising ROFR on large point contracts unless the offer was really low-ball.

But again, I'm guessing those that know the data KNOW more could be done.

But hey, why do it since they'll be paid anyway? (and maybe doubly-over)

 

[bookwormde]

I know this is a long standing discussion. Here is what I have been able to summarize.

Best legal practice is that ROFR should have a specific time frame. Unfortunately Disney does not appear follow this so it leave things in a gray area.

Without a time frame the ROFR rights ends at closing or when a waiver is given.

Without a time frame technically as long as the owner notifies Disney of sale and give a reasonable time for Disney to exercise then the owner is free to close.

The question is what is a reasonable time (not what is convenient for Disney)

From what I can tell "waiting" is more a decision of brokers and title companies to avoid being mid stream when/if Disney exercises, than anything else.

For example, if a settlement date was set at 30 days as long as it is reasonable for Disney to make a decision on ROFR then their right would expire at the 30 day settlement. Estopple is another issue if title insurance is a must. How short could a seller set the settlement, for a company the size of Disney, I would think a decision in a week is practical, though not convenient since DVD wants time to try to conform the needs of the point for direct sales

 

[CastAStone]

Grumpy, what are you suggesting the agents do? Steer the buyers to contracts that Disney is unlikely to ROFR? Im betting that if you called one of the larger ones and said that your priority was for a contact that Disney wouldn’t ROFR they would gladly help you with that - would you like Polynesian or Copper Creek?

DVC is a commodity within a resort, so the only things that differentiate contracts are Use Year (which Disney doesn’t care about), number of points (which most people are looking at a very narrow range for), amount of points currently available to use (Which again most buyers know what they want), and price. So if a buyer wants this amount of points and a loaded contract for OKW, what exactly is the broker to do to help keep it from getting ROFR’d?

Disney was plainly trying to stock up on OKW points this year. That’s their right and it’s gonna hit someone. Even if my broker finds a way to keep my contract out of it, Disney wants those points, and they’re gonna get them from someone.

 

[Sandisw]

I have been around since I bought in 2009 and I can tell you there is no real consistent pattern for ROFR over the years.

Trends happen, and we use that as a guide, but sometimes, lower prices get through and higher ones get taken.

There is no formula a broker can use to help a buyer in securing a contract to pass ROFR.

It is part of buying DVC...you hope your deal is not something Disney wants at the moment .

As others mentioned, your broker is not giving out accurate information for timeline. Whatever closing date is there, you, as a buyer, can lose it up to that point. I have never seen or heard of a closing less than 60 days out.

 

[ocdb8r1]

I have never seen or heard of a closing less than 60 days out.

...then the question is, why? While not the standard, many regular real estate transactions for property worth hundreds of thousands of dollars are set on 30 days (or less) closing. Why can't a DVC transaction be set for 30 days? I surmise brokers set 60 days to give themselves (and title companies) plenty of time to process things on their own pace. However, I don't see any reason closing couldn't be set for 30 days....the buyer and seller can always mutually agree to extend it if necessary. We're talking about a transaction where the majority of buyers are paying cash or already have financing approved. I don't see any reason it should take more than 30 days,.

 

[CarolMN]

2) If Disney does exercise their ROFR and assumes the terms of the contract, the seller obviously still gets paid, but does the agent, who apparently acts as a 'transactional broker' for BOTH buyer and seller, still get paid? If so, how has the state of Florida allowed this to be legal, given that the rights of the buyer clearly were not served, or protected. In fact, under this scenario, what incentive does the buyer's agent have at all to ensure their buyer (and not Disney) gets the desired property?

Under the Florida law that covers authorized brokerage relationships, transaction brokers do not represent either buyer or seller in a fiduciary capacity. If you want that type of relationship, you are free to hire (and compensate) an agent that represents only you. But it wouldn't help you if Disney wants to take the deal away from you. That's what Right of First Refusal means.

There's really not much point in arguing about buyer's "rights" in the ROFR process. If Disney wants a contract and is willing to accept the terms agreed to by seller & buyer, Disney gets it. Nothing you or a broker can do about it. There are no buyer's "rights" to be served in ROFR.

Here's a section of the Florida Statute Chapter 475 that covers transaction brokers (which almost all agents operate under for timeshare sales):

"475.278 Authorized brokerage relationships; presumption of transaction brokerage; required disclosures.—
(1) BROKERAGE RELATIONSHIPS.—
(a) Authorized brokerage relationships.—A real estate licensee in this state may enter into a brokerage relationship as either a transaction broker or as a single agent with potential buyers and sellers. A real estate licensee may not operate as a disclosed or nondisclosed dual agent. As used in this section, the term “dual agent” means a broker who represents as a fiduciary both the prospective buyer and the prospective seller in a real estate transaction. This part does not prevent a licensee from changing from one brokerage relationship to the other as long as the buyer or the seller, or both, gives consent as required by subparagraph (3)(c)2. before the change and the appropriate disclosure of duties as provided in this part is made to the buyer or seller. This part does not require a customer to enter into a brokerage relationship with any real estate licensee.
(b) Presumption of transaction brokerage.—It shall be presumed that all licensees are operating as transaction brokers unless a single agent or no brokerage relationship is established, in writing, with a customer.
(2) TRANSACTION BROKER RELATIONSHIP.—A transaction broker provides a limited form of representation to a buyer, a seller, or both in a real estate transaction but does not represent either in a fiduciary capacity or as a single agent. The duties of the real estate licensee in this limited form of representation include the following:
(a) Dealing honestly and fairly;
(b) Accounting for all funds;
(c) Using skill, care, and diligence in the transaction;
(d) Disclosing all known facts that materially affect the value of residential real property and are not readily observable to the buyer;
(e) Presenting all offers and counteroffers in a timely manner, unless a party has previously directed the licensee otherwise in writing;
(f) Limited confidentiality, unless waived in writing by a party. This limited confidentiality will prevent disclosure that the seller will accept a price less than the asking or listed price, that the buyer will pay a price greater than the price submitted in a written offer, of the motivation of any party for selling or buying property, that a seller or buyer will agree to financing terms other than those offered, or of any other information requested by a party to remain confidential; and
(g) Any additional duties that are mutually agreed to with a party."

.

 

[hlhlaw07]

I have never seen or heard of a closing less than 60 days out.

I don't see any reason it should take more than 30 days,.

I have seen it, but you have to specifically ask for it. There was a stretch last year where Disney started taking around 50+ days on ROFR and there was someone on the board that negotiated a 30 day close into their contract (can’t remember who). After I lost a contract to Disney after 54 days that person gave me the idea to make my offers contingent on a 30 day close. When I asked the broker about it, they were willing to write the contract up that way. So it’s not unheard, nor is it impossible. But it also isn’t in their standard contract.

 

[_auroraborealis_]

Disney had exercised ROFR on an astounding 25%+ of Old Key West resales in 2020.

A broker cannot do anything about that. Without looking, I can tell you those ROFR contracts were 2042 OKW. Disney have a specific legal reason to want to recapture those.

If you bid on OKW, and it is 2042, likelihood is good it gets taken. no broker can fix that for you even if you are willing to pay near-direct pricing for the contract. And you should not be willing to do that, as direct gets you 2057 expiry. There are not a lot of 2057 contracts in resale, so that is also a barrier.

The only thing a broker could tell you is "maybe you don't want OKW? How about a nice BWV contract?"

 

[miTnosnhoJ]

While Disney has the right to exercise ROFR up until closing, their practice has been to make a decision well before that.

This is an interesting discussion since Disney has not chosen to exercise ROFR since sometime in March, and probably will not be exercising ROFR for the foreseeable future.

I would also say that selling DVC resale is a high-volume, low-touch business, Probably the only time you will talk with a broker is the day you make the offer. It is not like residential real estate where the brokers might split a $50,000 commission. In the DVC world, they are grinding out $750-$1000 commissions.

 

[hlhlaw07]

I know this is a long standing discussion. Here is what I have been able to summarize.

Best legal practice is that ROFR should have a specific time frame. Unfortunately Disney does not appear follow this so it leave things in a gray area.

Without a time frame the ROFR rights ends at closing or when a waiver is given.

Without a time frame technically as long as the owner notifies Disney of sale and give a reasonable time for Disney to exercise then the owner is free to close.

The question is what is a reasonable time (not what is convenient for Disney)

From what I can tell "waiting" is more a decision of brokers and title companies to avoid being mid stream when/if Disney exercises, than anything else.

For example, if a settlement date was set at 30 days as long as it is reasonable for Disney to make a decision on ROFR then their right would expire at the 30 day settlement. Estopple is another issue if title insurance is a must. How short could a seller set the settlement, for a company the size of Disney, I would think a decision in a week is practical, though not convenient since DVD wants time to try to conform the needs of the point for direct sales

Maybe you have never purchased direct nor read the actual purchase agreement from DVD, but you have stated a lot as fact that is really a misinformed assumption on your part. The contract spells out ROFR really clear. There is no grey area built into the contract. Here is what the actual contract provides: (note the term purchaser refers to the original individual who purchased the contract direct from Disney, but you could easily switch that out with owner as it applies to all subsequent owners as well)

“Before purchaser may resell, transfer or assign purchaser’s ownership interest to a third party, Purchaser is required to offer it to DVD upon the same terms and conditions, including financing, as is offered by or to the third party. Accordingly, Purchaser must notify DVD in writing NO LESS THAN THIRTY (30) days in advance of the proposed closing date of Purchaser’s intent to sell and must include a copy of the proposed transaction reduced to writing in all respects. Upon receipt of such notice, DVD shall determine prior to the proposed closing date whether it wishes to exercise its right of first refusal. If DVD elects to exercise its right of first refusal, DVD shall notify Purchaser in writing of such election, and the purchase by DVD shall be closed on or before the proposed closing date. If DVD fails to notify Purchaser of its election to exercise its right of first refusal prior to the proposed closing date, Purchaser may proceed to close the transaction with the third party upon the original terms and conditions offered by or to the third party. DVD’s right of first refusal is a covenant that runs with the land and shall always be a requirement binding on any successor in title to Purchaser.”

*The bolding is mine as those are the parts that people always seem to not understand.

 

[CastAStone]

Maybe you have never purchased direct nor read the actual purchase agreement from DVD, but you have stated a lot as fact that is really a misinformed assumption on your part. The contract spells out ROFR really clear. There is no grey area built into the contract. Here is what the actual contract provides: (note the term purchaser refers to the original individual who purchased the contract direct from Disney, but you could easily switch that out with owner as it applies to all subsequent owners as well)

“Before purchaser may resell, transfer or assign purchaser’s ownership interest to a third party, Purchaser is required to offer it to DVD upon the same terms and conditions, including financing, as is offered by or to the third party. Accordingly, Purchaser must notify DVD in writing NO LESS THAN THIRTY (30) days in advance of the proposed closing date of Purchaser’s intent to sell and must include a copy of the proposed transaction reduced to writing in all respects. Upon receipt of such notice, DVD shall determine prior to the proposed closing date whether it wishes to exercise its right of first refusal. If DVD elects to exercise its right of first refusal, DVD shall notify Purchaser in writing of such election, and the purchase by DVD shall be closed on or before the proposed closing date. If DVD fails to notify Purchaser of its election to exercise its right of first refusal prior to the proposed closing date, Purchaser may proceed to close the transaction with the third party upon the original terms and conditions offered by or to the third party. DVD’s right of first refusal is a covenant that runs with the land and shall always be a requirement binding on any successor in title to Purchaser.”

*The bolding is mine as those are the parts that people always seem to not understand.

Why couldn’t you just avoid ROFR then by adding some ridiculous, hard to find yet virtually worthless non-cash compensation to your offer, like say an autographed Karlos Williams rookie card?