Question about Disney's Right of First Refusal

[Ken the Retired Cop]

I have a question regarding disney's right of first refusal regarding resale contracts. We have been following some current contracts for sale, and while some are priced right at the $58 mark (which I've read is when Disney will buy them back) why do these people not go directly to Disney and allow them to buy them back instead of going through brokers and such?

 

[ralphd]

Disney does not want to buy the contracts. They want to keep the market stable. The buy back price is not disclosed, but is probably a calculated discount off the DVD (Disney) market price.

ralphd

 

[Ed T]

Disney is not in the business of buying back resale only if they are ridiculous offers. Maybe someone can shed some light on why disney wouldn't buy back members points at a lesser than going rate price and just resell them at the current $ 75 a point.

Ed

 

[friskykitten]

I am on a waiting list for OKW points through Disney. My guide, Randy Kruger, said that I am 5-6th on the list and it could be after January before they have anything for me. As much as I would like to buy a resale, I need the longer term to keep my monthly payments down. That way if we have a few bad months we won't have to worry about making the payment. And we can still pay it off early during our good months.

I do wonder how many contracts they buy back. And do they do it just because the price is low or because they do have these waiting lists of people wanting to buy through them???

 

[Dean]

Several points. Any resales DVC would do is in competition with active retail sales (VWL). It costs money to buy and resale. I'd guess the break even difference considering legal fees, recording fees, commissions, etc is around $2000 per contract or maybe even more. In general, about 50% of a timeshares sales proceeds go to things other than the actual cost of the structure. Things like advertising and enticements are very expensive, even for DVC. As noted, you cannot approach DVC directly to simply buy a contract. They act like the government and grab the deal once things are already set up and others have done most of the work.

It's also possible to buy resale and finance over a longer period. Home equity loans and home refinancing can be a better deal than DVC financing for many.

I know we've seen it reported that the buy back level is $58-59 per point but I seriously doubt those numbers and by association, those that originate them. While the resale companies may be in the best position (other than DVC itself) to know the information, they also have the most to gain by exagerating the numbers. With the MB lowering the upfront cost to around $65 per point, I don't see how DVC could possibly financially justify buying back contracts that are within $10 per point of $65. Obviously the numbers will vary with the contract size. It should be more economical to buy back large points packages as DVC would sell them off in chunks when an individual member couldn't. However, DVC has been more willing to buy back smaller contracts than larger ones in the past.

 

[EROS]

When we purchased 2 resales several years ago, DISNEY was using a floor of $50/point. Clearly the market has risen since that time though recently it appears that prices have softened. If you're dealing with a resale broker, he/she can give you a pretty good idea of the current floor.