Mutually cancelable DVC resale purchase contract

[Dean]

Thanks for the education and the reminder that there are lots of dishonest people out there.

Unfortunately there are. I'm sure we all have our price or weak point, I hope mine's much higher than this.

 

[bookwormde]

Jason thanks for the thoughtful comment it is appreciated.

There is no profit motive in it for my theoretical buyer, just a "white night" to re-level the playing field. I can only imagine the calls the realtors get from people desperate to sell their contract, and the unenviable position honest realtors are in to have to tell them that for practical purposes it does not matter how low they ask for their contracts, they are not going to sell because no one will make an offer once they are significantly below ROFR.

I assume that those who put forward the “shill” argument after reading the definition will understand that while it sounds good emotionally, factually it has no validity since it does not meet the 2 primary criteria (shill working in concert with the seller and the intent to increase the price).

I wonder from those who have a clearer ethical perception than I do how they perceive DVC’s increasing ability to for practical purposes make some members contracts “unsalable”. While this like my theoretical white knight scenario are completely “legal” both present ethical dilemmas particular when viewed as offsetting situations.

bookwormde

 

[Dean]

Jason thanks for the thoughtful comment it is appreciated.

There is no profit motive in it for my theoretical buyer, just a "white night" to re-level the playing field. I can only imagine the calls the realtors get from people desperate to sell their contract, and the unenviable position honest realtors are in to have to tell them that for practical purposes it does not matter how low they ask for their contracts, they are not going to sell because no one will make an offer once they are significantly below ROFR.

I assume that those who put forward the “shill” argument after reading the definition will understand that while it sounds good emotionally, factually it has no validity since it does not meet the 2 primary criteria (shill working in concert with the seller and the intent to increase the price).

I wonder from those who have a clearer ethical perception than I do how they perceive DVC’s increasing ability to for practical purposes make some members contracts “unsalable”. While this like my theoretical white knight scenario are completely “legal” both present ethical dilemmas particular when viewed as offsetting situations.

bookwormde

Hopefully I'm reading your post correctly. It is both unethical and illegal to enter into a contract for the purpose of manipulating ROFR. There is no need, or legal ability, to "level the playing field" since this is a legal right of the developer. ROFR has the primary purpose of directing people to retail and away from resale, in effect, to make it more difficult to sell. One of the arguments against the fairness of ROFR has always been that it significantly lessens the pool of buyers, esp for those bargain contracts, the proper way to avoid that situation is to avoid those timeshares that have ROFR rights. A shill buyer doesn't have to result in a higher price, simply attempting to force it to ROFR without the intent of completing the sale would also be the definition of a shill buyer and illegal in FL and most states I'm aware of based on the info I've gathered over the years.

 

[Maistre Gracey]

It seems crooked to me. It just doesn't pass the smell test.

MG

 

[bookwormde]

I guess you have information about ROFR law that I have never seen; I would appreciate if you could share the link. Also where you found your definition of “shill” that was different from what I have found or if this is just your “extension” of the definition, since your definition is in conflict with the one I posted which is the broadly accepted one.

If you are correct that it is illegal, which I would love to see any factual basis that you are using, then it would be wrong but since you give DVC a pass (do not hold them to an ethical standard beyond legality) then holding the counter parties to a different standard is certainly an interesting concept.

“It is both unethical and illegal to enter into a contract for the purpose of manipulating ROFR”

This is exactly what DVC had done in placing ROFR in the sales contracts and is doing by its current repurchase policy and it is legal, the question is it ethical. I understand the need to support the value of the product but to jump in and out of the market and push prices around to the point where it makes and illiquid market to me does not pass the smell test for ethical behavior. I guess my free market nature is uncomfortable with that.

Then again there tends to be perception that DVC (and other corporations) do not have to have to be held to an ethical stranded, I always find that interesting that the “if it is legal it is OK” mantra that is applied to them so often on the DVC boards without any serious consideration to if it is ethical and proper.

I have scanned Florida law titles 15,16,39,40,41, 46 and 46 which are the relevant sections on real-estate, fraud and related criminal law related to commerce and found nothing that would in any way make such a contract “illegal” or even “questionable” in any way.

Also since we were discussion contracts being retuned due to incomplete information here is the section of the FL statues, which govern this and require DVC to return these incomplete contract for adequate information.


http://www.leg.state.fl.us/Statutes/index.cfm?App_mode=Display_Statute&Search_String=&URL=Ch0721/SEC065.HTM&Title=->2008->Ch0721->Section%20065#0721.065

Hope this helps with some “factual” information.


bookwormde

 

[BWV Dreamin]

Very interesting information. So if I am understanding your position you feel ROFR inhibits prospective buyers from bidding on a contract listed too low to realistically pass ROFR, thus creating a selling issue for those that simply want to sell regardless of price?

 

[Dean]

I guess you have information about ROFR law that I have never seen; I would appreciate if you could share the link. Also where you found your definition of “shill” that was different from what I have found or if this is just your “extension” of the definition, since your definition is in conflict with the one I posted which is the broadly accepted one.

I don't have a specific place to send you to, that's why I said it was my understanding and what I've been told over the years (by RE people in the state). I'll be happy for you to prove me wrong if you can find a legal status otherwise. You'll want to look at RE law for FL, which in most states prohibits the creation of false RE contracts and in most cases it's also a violation to do so for the purpose of defrauding another. You'll also want to look at the Florida Administrative Code, rules under the statues. If you want to believe otherwise, that's OK. Those involved with RE in FL here on this board may be able to point you to the right statute or rule that applies.

I used the term shill buyer to denote a fake buyer from the standpoint of one posing to buy for the sheer purpose of activating ROFR. It is a little different than the usual concept of shill bidding on auction but the principles seem to apply, you can call them something else if you want as long as it's sleazy.

If you are correct that it is illegal, which I would love to see any factual basis that you are using, then it would be wrong but since you give DVC a pass (do not hold them to an ethical standard beyond legality) then holding the counter parties to a different standard is certainly an interesting concept.

I don't give DVC a pass, I give them the legal right to use the option since each and every member has legally agreed to that up front.

This is exactly what DVC had done in placing ROFR in the sales contracts and is doing by its current repurchase policy and it is legal, the question is it ethical. I understand the need to support the value of the product but to jump in and out of the market and push prices around to the point where it makes and illiquid market to me does not pass the smell test for ethical behavior. I guess my free market nature is uncomfortable with that.

If you're uncomfortable with it enough then maybe owning DVC isn't right for you. Many timeshares use ROFR and use it appropriately. Timesharing is not a level field between the buyer and developer, the buyer is merely a pawn with the developer holding most of the cards. Westgate has ROFR for part of their resorts. They have tried to, fairly successfully, institute ROFR where they did not have the legal right. In addition, they took it a step further and insisted that they got the commission in addition. Thus at the time, many resale companies stopped even listing them and it became almost impossible to resell a westgate week at all. I haven't heard anything on them about this in 2-3 years do I don't know where that situation is today, I'm sure you could find info on TUG if you're interested. Speaking of TUG, you may want to look there for discussions of ROFR, there have been some big ones over the years and there are those that feel no one should ever buy a timeshare that has ROFR associated.

Then again there tends to be perception that DVC (and other corporations) do not have to have to be held to an ethical stranded, I always find that interesting that the “if it is legal it is OK” mantra that is applied to them so often on the DVC boards without any serious consideration to if it is ethical and proper.

That's not accurate from what I've seen, no free pass, we've discussed this concept many times on other BBS over the years. It is not unethical to enter into a binding contract and institute conditions. DVC discloses this up front, it's included in the POS, one is told not to buy with the expectation of being able to rent or sell (not a legal restriction but setting reasonable expectations). ROFR doesn't hurt a buyer, it may or may not hurt a seller. Many sellers over the years have likely gotten more than they would have without ROFR in place. However, when the market evaporates, ROFR can be a deterrent to sales in some situation, again this is part of the reason for ROFR. DVC members are far better off than most (? all) under ROFR.

I have scanned Florida law titles 15,16,39,40,41, 46 and 46 which are the relevant sections on real-estate, fraud and related criminal law related to commerce and found nothing that would in any way make such a contract “illegal” or even “questionable” in any way.

Also since we were discussion contracts being retuned due to incomplete information here is the section of the FL statues, which govern this and require DVC to return these incomplete contract for adequate information.


http://www.leg.state.fl.us/Statutes/index.cfm?App_mode=Display_Statute&Search_String=&URL=Ch0721/SEC065.HTM&Title=->2008->Ch0721->Section%20065#0721.065

That URL link is incorrect. We don't disagree that certain info has to be included in a contract, an early post seemed to suggest they could simply return it because they didn't like it, you've since clarified that issue to suggest I was reading too much into it.

Hope this helps with some “factual” information.

Other than a general link to the FL statues with a broken URL, I don't see any factual info, only your thoughts. Remember there is an entire additional layer to FL law, the FAC. There My info is my opinion and my understanding. Here is a LINK to BPR in FL that may help. Again, my understanding that submitting a false sales contract is illegal, I also feel it is unethical. I do not believe ROFR is a sleazy practice if used legally even if it prevents one from selling their timeshare when they need to. YMMV.

 

[bookwormde]

Dean

Sorry the link did not work it is title XL chapter 721.0625 of the 2008 Florida Statutes

http://www.leg.state.fl.us/Statutes...r=2008&Tab=statutes&Submenu=1&NewSelection=Go

It is not directly germane to our core discussion but was clarification about why DVC returns some contracts. There was nothing in the statute that addressed your concerns in any way or in any way would gives any basis for this type of contract not to be valid and legal.

I looked through your link and could find no information that would indicate that this type of contract would be “false” it simply gives both parties the “option to terminate” before settlement which is an allowable practice in all the sates I have worked in (although FL is not one of then) If you can link me to the specific area that provides you with the information that these types of contracts are considered to be “false” (I am assuming you are using this in terms of “false statements”). It is not a hidden “side agreement” which might make a related contract “false” it is a term in a complete agreements and therefore unless specifically disallowed by law, statute or regulation is completely valid.

I accept that this is “your opinion” but that does not make it FL law. We all at time quote out of the “ the way we think it should be” law book, but when it comes down to it until section can be quoted it have little basis beyond person opinion, which it is certainly appropriate for both of us to express.

We have different perceptions of corporate responsibility, mine goes past the strict letter of the contract but I am probably in the minority.

BVW dreamin

Yes that is the problem is some cases with DVC (if has been much worse with other ROFR timeshares though), But with DVC raising ROFR in their recent buys they have put a much large group of contracts in this position (particularly the SSR and larger 250+ point and stripped contracts). Who is going to make an offer an tie up their purchasing process for a contract that they know is very likely to be bought by DVC. I am not talking about those that are within a few $ of the ROFR level, but those that are closer to $10 or even below. No one is gong to write a contract on them when there are “better ones” (less stripped, available in smaller chunks etc) available at the ROFR level. These members cannot lower the price to attract a buyer, as it typical in an efficient market so they are stuck. If they are in financial distress or cannot handle the payments if they financed, I can only imagine how frustrating that would be.

The most obvious example is that there is a 1000 point OKW 2057 contract with all points for $58/pt, and unless someone “white knights” it is for all practical purposes unmarketable. You can buy the same points at ROFR in smaller more marketable chunks so who would attempt to buy this one. With the r“rise in SSR ROFR there are probably 100+ contracts that fall into this category to a lesser extent.

Just to be clear I am not in the market to sell my contract, I just feel bad for these members.

Bookwormde

 

[Dean]

I looked through your link and could find no information that would indicate that this type of contract would be “false” it simply gives both parties the “option to terminate” before settlement which is an allowable practice in all the sates I have worked in (although FL is not one of then) If you can link me to the specific area that provides you with the information that these types of contracts are considered to be “false” (I am assuming you are using this in terms of “false statements”). It is not a hidden “side agreement” which might make a related contract “false” it is a term in a complete agreements and therefore unless specifically disallowed by law, statute or regulation is completely valid.

The link was general as was yours. IMO, the intent is the issue. IF the intent is to trigger ROFR without a plan to complete the transaction, then it would be fraud because you're submitting a false contract with no intent to proceed if ROFR is not activated. I do see your point and realize unless it were to go into the legal system, there's likely no way to absolutely say for certain.

I accept that this is “your opinion” but that does not make it FL law. We all at time quote out of the “ the way we think it should be” law book, but when it comes down to it until section can be quoted it have little basis beyond person opinion, which it is certainly appropriate for both of us to express.

agreed.

We have different perceptions of corporate responsibility, mine goes past the strict letter of the contract but I am probably in the minority.

So be it. I would agree that legal is not always ethical (and ethical is not always legal) but in this case one entered into a contract for a luxury purchase willingly knowing (or should have) the risks involved as this is clearly spelled out actually beyond the letter of the law. I can see no way to judge a properly set up ROFR as unethical, I'm curious as to what grounds you would see it as unethical. I'd suggest that the fact it might have a negative impact on a given owner or group of owners wanting to sell does not add any credence to such an interpretation of ethics.

Yes that is the problem is some cases with DVC (if has been much worse with other ROFR timeshares though), But with DVC raising ROFR in their recent buys they have put a much large group of contracts in this position (particularly the SSR and larger 250+ point and stripped contracts). Who is going to make an offer an tie up their purchasing process for a contract that they know is very likely to be bought by DVC. I am not talking about those that are within a few $ of the ROFR level, but those that are closer to $10 or even below. No one is gong to write a contract on them when there are “better ones” (less stripped, available in smaller chunks etc) available at the ROFR level. These members cannot lower the price to attract a buyer, as it typical in an efficient market so they are stuck. If they are in financial distress or cannot handle the payments if they financed, I can only imagine how frustrating that would be.

The most obvious example is that there is a 1000 point OKW 2057 contract with all points for $58/pt, and unless someone “white knights” it is for all practical purposes unmarketable. You can buy the same points at ROFR in smaller more marketable chunks so who would attempt to buy this one. With the r“rise in SSR ROFR there are probably 100+ contracts that fall into this category to a lesser extent.

Just to be clear I am not in the market to sell my contract, I just feel bad for these members.

Bookwormde

$58 pp is far too much for this contract even with the extension. DVC has bought back some contracts directly though at a much lower price. I can tell you if I wanted 1000 OKW points I wouldn't hesitate to bid on it. I would offer less for such a contract that for a smaller one, in this case likely $40-50 a point depending on specifics but likely on the lower end. I HAVE bid and entered into contracts on DVC contracts that I knew were below ROFR levels. My current BWV contract was such a situation. The absolute floor at the time appeared to be $58 and I got it for $54. This was enough of an anomaly that when I posted the details one of the DVC specialty brokers specifically contacted DVC to find out why, but it did go through.

 

[Maistre Gracey]

I'm not a lawyer of any sort, but just curious.. Why are you limiting this to real estate law? It sounds like general fraud to me. Isn't there some law against that?

MG

 

[BWV Dreamin]

Other than commission being due, this would be an avenue worth taking, from a seller's perspective. As Jason pointed out, there would be nothing from preventing a buyer to put $0 deposit, testing ROFR, and should it pass, back out on the deal. The seller than would be responsible for the commission. Might be worth the risk if a buyer could be found to execute the contract. So then the question is, "What's in it for the buyer if they truely don't want the contract?" I think we can figure that out....

 

[Dean]

Other than commission being due, this would be an avenue worth taking, from a seller's perspective. As Jason pointed out, there would be nothing from preventing a buyer to put $0 deposit, testing ROFR, and should it pass, back out on the deal. The seller than would be responsible for the commission. Might be worth the risk if a buyer could be found to execute the contract. So then the question is, "What's in it for the buyer if they truely don't want the contract?" I think we can figure that out....

IF one were going to go this route, no reason to involve a listed contract to do so or they could remove the listing accordingly. Most timeshare listings are non exclusive anyway meaning if you find your own buyer you don't owe a commission. I also doubt you'd get much cooperation from a broker in such a deal, at least a reputable one. An analogous situation is when one writes a false contract on a short sale situation with the intent of getting the lender to get all the paperwork and appraisals done with the intent of finding a real buyer later but the previous work will shorten the process and make it more likely for the sale to go through. Or if you have a legit buyer but then things fall through, some don't tell the lender and let them complete the process for the same reason. I doubt the later is illegal but I'd feel it's unethical. Some would counter that the lenders drag their feet so much it almost forces you to play games such as this.

 

[Deb & Bill]

Having had two buyers back out after ROFR was passed on by Disney, I wouldn't accept a contract for $0 deposit from a buyer. In both cases, I got half of the deposit with the other half going to the agent. With a $0 deposit, I would lose the time the contract was going through ROFR only to have the buyer back out and I get nothing. I'd rather not tie up my contract in a deal such as this.

 

[BWV Dreamin]

Having had two buyers back out after ROFR was passed on by Disney, I wouldn't accept a contract for $0 deposit from a buyer. In both cases, I got half of the deposit with the other half going to the agent. With a $0 deposit, I would lose the time the contract was going through ROFR only to have the buyer back out and I get nothing. I'd rather not tie up my contract in a deal such as this.

You may not be in the same financial or personal situation as others. As this type of scenario would not work for you, doesn't mean others would forgoe such an option. Desperate people take desperate measures.

 

[BWV Dreamin]

IF one were going to go this route, no reason to involve a listed contract to do so or they could remove the listing accordingly. Most timeshare listings are non exclusive anyway meaning if you find your own buyer you don't owe a commission. I also doubt you'd get much cooperation from a broker in such a deal, at least a reputable one. An analogous situation is when one writes a false contract on a short sale situation with the intent of getting the lender to get all the paperwork and appraisals done with the intent of finding a real buyer later but the previous work will shorten the process and make it more likely for the sale to go through. Or if you have a legit buyer but then things fall through, some don't tell the lender and let them complete the process for the same reason. I doubt the later is illegal but I'd feel it's unethical. Some would counter that the lenders drag their feet so much it almost forces you to play games such as this.

Yes I forgot if one found their own buyer no commission would be due. So simply going to an attorney to write the contract would be sufficient enough to forward on to Disney? Or simply a hand written agreement?

 

[Deb & Bill]

You may not be in the same financial or personal situation as others. As this type of scenario would not work for you, doesn't mean others would forgoe such an option. Desperate people take desperate measures.

But to have your contract tied up for nearly two months only to have the buyer back out without any compensation, that would leave a desperate seller even more desperate.

 

[CarolMN]

But to have your contract tied up for nearly two months only to have the buyer back out without any compensation, that would leave a desperate seller even more desperate.

I think the hope is that Disney would exercise ROFR and thus the seller gets rid of the contract.

Apparently, Disney will not buy back every contract a seller wants to get rid of. I know there have been some cases where Disney has made an offer to someone wanting to sell back, but the offer was way below existing resale prices.

So if you want to make a little more than the rock-bottom price Disney will offer on a straight buy back or if Disney isn't buying at all, then you would arrange for the fraudulent offer to entice Disney to exercise ROFR.

 

[Dean]

Yes I forgot if one found their own buyer no commission would be due. So simply going to an attorney to write the contract would be sufficient enough to forward on to Disney? Or simply a hand written agreement?

No attorney needed, a timeshare contract is a very simple process. I'd suspect it'd depend on the contract whether a commission were due but most of the ones I have any familiarity with do so non exclusively.

I think the hope is that Disney would exercise ROFR and thus the seller gets rid of the contract.

That's what I understand is being presented, a fake contract with the idea of getting ROFR dollars quickly in an economy where it is harder to sell and the prices are lower. Worst Case scenario for a given owner is they can walk away giving up any equity plus taking the additional hit on their credit.

Apparently, Disney will not buy back every contract a seller wants to get rid of. I know there have been some cases where Disney has made an offer to someone wanting to sell back, but the offer was way below existing resale prices.

So if you want to make a little more than the rock-bottom price Disney will offer on a straight buy back or if Disney isn't buying at all, then you would arrange for the fraudulent offer to entice Disney to exercise ROFR.

If ROFR is active at a given resort, I'm sure there is some price they could consider buying a given contract for. But given the few offers I've seen were 60% of market, I suspect it be very low.

 

[bookwormde]

Actually even if you put down $0 the contract is binding, it is just that very few people will enforce the contract in court because of the costs, for me even if I put $0 down I would consider bound to pay the fee (actually perform on the contract unless it was a cancelable one as I described).

Yes I reviewed the “fraud” statues and fraud involves concealment or misrepresentation (in my scenario every party knows that the contract can be cancelled at any time for any reason), which does not exist in this case. As I said earlier if the buyer has the financial ability and any potential thought of buying the contract no mater how remote it is definitely not fraud, even if they did not it most likely would not meet the standard.

And yes no one who had a readily marketable contract would accept no deposit but for those whose contracts for practical purposes are not marketable then what is the risk?

The primary reason (beyond the small chance that in the end they would purchase the contract) is to be an altruistic “white night” to help other member out, that is why the contract would have to be a cancelable with no fee contract (common in the commercial real-estate market for difficult to market properties).

Any agreement that meets the legal requirements that are listed in the timeshare law link that I posted is adequate for DVC to review, although its ability to protect the interest of the 2 principle parties would certainly be an issue, and yes as long as a contract is clear and legible it can be hand written.

Wow if $58 it too much for this contract those with big contracts are at an amazing disadvantage since they just paid $15 to upgrade it making their standard contract equivalent $43 that is 25 % less than any OKW contract has sold for in recent history.

bokwormde

 

[marynvince]

How much will Disney pay for a contract, Given the resort and number of points. It would be nice if they provided a chart available only to owners that listed those variables and the appropriate "buyback" price. Like a used car guide, it could be updated periodically to reflect market conditions. This way buyers and sellers don't have to wonder if a contract is going to pass. The fact that Disney will could use factors such as new vs. existing member attempting to buy the resale contract does not sit well with me in the scheme of ethical. Why so nebulous?