RESALE RUMOR direct from DVC

[dbkelly]

Doc,

You make more sense to me then anyone else. Great minds think alike. Keep up the good work.

D. B. Kelly

 

[ronw]

DVC cannot legally declare themselves to be the sole market for resales in FACT. However, as pointed out, the mechanism of ROFR that exists allows them to, in EFFECT, be the sole source of resales. You are still free to sell to anyone willing to pay you more than they would pay DVC - good luck. As an owner of one of the on-site resorts, I don't see this as anything but good. My contract is now much more liquid IF DVC is willing to buy it at a fixed price. People forced to sell in a distress situation should love this. People with large contracts should love this. DVC has plenty of people to process the necessary paperwork(continued employment) and plenty of demand for the on-site resorts (they should have started doing it sooner!). As a bargain hunter, it is not good news. You will have to pay more or eek out some deal in the margin left between DVC's buyback price and DVC's sale price - it could still be done but hardly worth the effort. The big losers - resale brokers. DVC will EFFECIVELY take that business from them.

 

[Dean]

I'll repeat. DVC cannot legally force all resales to go through them but they can make an uneven playing field to highly encourage the same outcome. Many should know that a lot of timeshare companies withold certain perks from those that buy resale but not through the company. Marriott doesn't offer the frequent flier points options. Four Seasons has a lot of restricions now. Some systems that are points conversions won't transfer the points options to the new owner, only the underlying deeded week.

The only ones that will lose if DVC gets into the resale business are bargain hunters and the resale companies.

 

[StevenR]

Dean, I think you're right that DVC could do this legally. Simply by exercising the ROFR in all cases would result in DVC being the only market, therefore they could have a standard repurchase price. I don't think the resale brokers would be the only ones hurt, though. Ultimately, the selling members would get less. Right now, the free market establishes the price, & Disney matches it if it is economically beneficial to them.

Under this (rumored) scenario, it's true that members would still be free to seek persons willing to buy for more than Disney's set price. However, without a thriving secondary market, it's much less likely you would be able to find a buyer.

 

[Dean]

Originally posted by StevenR
I don't think the resale brokers would be the only ones hurt, though. Ultimately, the selling members would get less. Right now, the free market establishes the price, & Disney matches it if it is economically beneficial to them.

I don't see how the members could get less than in the current situation. If they sell through DVC, they get the then current price minus a commission. Assuming it's 25%, they still make more than otherwise. There are many timeshare resalers as well as a lot of places to list timeshare for rent and for sale. I guess I can't see a resale market so tightly bound to DVC that there's no room to breath.

 

[ronw]

StevenR
I still don't see a downside for a seller. The market cap on resale prices today is effectively determined by where DVC prices new points. If DVC offered $10 below the price for new points and the seller did not have to pay a $1000 commission, the seller comes out ahead. If DVC offers much lower than $10 below new, there would still be some incentive
to sell directly and bypass DVC. The problem now is the seller needs to find a willing buyer - enter the broker who, for a fee, connects the two. If DVC has a standing offer the seller always knows what they will net from the deal and can sell it with no hassel.

It becomes muddier to consider how DVC would deal with banked/borrowed/current points. As Dean has mentioned the point status of a conrtact appears to influence how aggressively they use ROFR today. I'm sure they would devalue contracts with no current or borrowed points because they would have to hold onto them until they became current again.

 

[StevenR]

You may be right, but now when the DVC price increases, so does the resale market prices. If the secondary market dies out because brokers can't make any money, DVC's repurchase price might not have to keep pace with the new offering prices (or at least would do so more slowly) because it knows it's less likely resellers would find someone willing to pay more than they will.

 

[Dean]

As long as there is an active market for DVC retail, there will be the option of DVC resale. The prices are pretty high right now and seem to be more from demand. In the past, and at times now, the resale prices are actually higher than the seller would accept. I'd say that overall our DVC contracts are worth more becaue of the direct retail price and the ROFR. Which is more important is anyone's guess.

 

[invalid_char]

If this is true, I think it is a BRILLIANT idean on Disney's part. If I know I can buy some points at whatever they are charging and know I have a ready buyer at $75pp, then I would be much more willing to fork over money for more points. We are seriously considering a significant add-on and this would certainly push us off the fence.

 

[KNWVIKING]

This is my understanding of DVC's ROFR: DVC has the right to match my selling price to a private individual. If I'm asking $75.00, DVC can't force me to sell for $70.00. If this assumption is basically correct,then I don't see the seller getting hurt. The buyer will wind up paying more and the broker will be out all together.

 

[Dean]

Originally posted by KNWVIKING
This is my understanding of DVC's ROFR: DVC has the right to match my selling price to a private individual. If I'm asking $75.00, DVC can't force me to sell for $70.00. If this assumption is basically correct,then I don't see the seller getting hurt. The buyer will wind up paying more and the broker will be out all together.

You are correct.

 

[CaptainMidnight]

One of the advantages of this may be the options for current owners to do moderate add-ons, which I think would be a great benefit. There are currently many on a wait list to add on at BWV. It's not worth is to pay the broker fee and closing costs for a small add on, if it is managed through Disney, the use year could be better coordinated, and greater availability for add-ons for current owners.

Lets keep the money between Disney and owners, why pay the fees for brokers? Seems like there are plenty of other timeshares they can use for income. This might be a great idea.

Very good discussion.

 

[Shontell_Crawford]

Disney probably won't enter into "resales" until all properties are sold out...as it presents a conflict of interest. They can, and already have, been reselling sold out properties that they have re-acquired. For example: OKW foreclosures, resales sold too low and bought back, etc.

If Disney does enter into resales, rest assured they will charge more than anyone else in the industry - because they can. Marriott charges 25%, Fairfield charges 30%....I would guess Disney will charge at least 30% or more.
Let's do the math...Disney's price as of Dec. 1 = $84 per point. 30% of 84 = $25....which means as a seller, you would receive $59 per point. Still want to sell and then buy another resort at regular price? Probably not.

While Disney will always have the upper hand on a broker like myself because I don't have a multi million dollar advertising budget...they cannot force owners to sell through them. Brokers will continue to offer lower commissions and it will be up to the educated seller to decide who to use. Hence, the educated buyer will also find a better deal from the independent broker. Which is why you should always make an offer....when we as owners become sellers, we know we have to beat Disney's price or they will just go to Disney.

I will add that this "rumor" has been going around since I started reselling in '97. The only way I see it happening is when Disney stops building DVC resorts and is completely sold out. Then they will jump into the resale market if it makes financial sense for them.

One final note that has already been touched on: If Disney decides to "buy back" all resales...we as sellers still have to find a buyer first. Disney won't make us an offer we can't refuse. Right now, they won't offer anything. We must first enter a contract, then present it to Disney. That is the way the "right of first refusal" works.

Should Disney decide to enter resales, we would have to enter into a brokerage agreement with them to handle the sale and agree to pay them their commission.

Thanks for reading!

All the best,
Shontell

 

[luckytso]

I just spoke to my guide and he said this was just a rumor and there was no truth to it as far as Disney enters the resale market. He said that this topic has been talked about for the longest time but it is just a rumor.

 

[joepoe]

1) Disney could begin to exercise its right of first refusal on all contracts. This would get Disney immediate inventory to keep the guides busy.

2) Once potential buyers saw that Disney was buying back all the available points, they would not bother trying to buy DVC through the brokers, because the deals would never close.

3) DVC offers inventory to any interested buyers at all its resorts at $84 per point.
(Note: I also see point costs continuing to rise for the next twenty years, at which time the present value of future cash flows will dictate a decline in cost per point unless DVC offers more years)

4) Anyone who wanted to sell would have to accept DVC's price, (which would be set low enough to make substantial profit for DVC but high enough to attract some sellers) because they wouldn't be able to sell it anywhere else.

It COULD happen.

 

[doubletrouble_vb]

Me thinks the $75pp price people are talking more than a touch high. If it takes a difference of $7 to make the price even for the buyer (resale vs Disney) then Disney has to have an additional gap to make a profit (commission). With $84pp we are talking $77 for a resale to cost the same to the buyer...that doesn't leave any room for Disney to recapture the cost to resell plus profit. I think you have to look at a difference of double the transaction costs to cover both the buy and sell transactions then tack on a margin for profit. So you are talking a difference starting at $14 plus a buck or several...or right where the resale market currently is.

I think Disney will just raise the floor on ROFR or actively start purchasing resales from brokers without using ROFR. No conflict, no stampede by the owners.

 

[workingmom]

The only way I see it happening is when Disney stops building DVC resorts and is completely sold out. Then they will jump into the resale market if it makes financial sense for them.

It makes perfect sense for Disney to get into the resale market now. The resale market give Disney an opportunity to sell additional points to current Disney owners. New properties are selling out about as fast as Disney can build them. They are not in a position that having points from additional properties would hurt them.

Let's do the math...Disney's price as of Dec. 1 = $84 per point. 30% of 84 = $25....which means as a seller, you would receive $59 per point. Still want to sell and then buy another resort at regular price? Probably not.

First of all, I don't think Disney would offer a price as low as $59. But I will even go with that scenario and I will make the $59 price assumption. Assume I wish to sell a 150 point package. Disney could easily offer a commission- free sale so I would save about $1150 on commission (13% commission fee) ...this means that I would clear the entire $59 per point. From the buyers perspective, they don't have to pay closing cost and so they benefit as well. Alternatively, I could go to a broker and post a selling price of say $67 per point but realistically sell at $64 or so per point. After commission which average out to about $8 per point, I have cleared only $56 per point. Disney is certainly the better deal! From the buyers perspective, he/she has to pay closing costs and find their own financing if necessary.

The way I see it is that it could actually be a win-win situation if Disney took over the resale market. Sellers would clear more money not having to pay unreasonable commissions (I have always thought resale commissions are exorbitant), buyers would not have to pay closing and have financing available if needed. Disney just profited ($84-59 =$25) per point less any expenses they must incur (which would certainly be lower than that of new properties!) Sounds great to me!

 

[Dean]

$59 pp is still more than most, if not all, sellers are getting now after commissions.

 

[DVCajun]

What a scam! I hope I am never in the position to have to sell my points. I personally think all real estate commissions are bunk-- especially now that we've got the internet I think real estate agents are on the way out, and good riddance!

 

[joepoe]

Originally posted by DVCajun
What a scam! I hope I am never in the position to have to sell my points. I personally think all real estate commissions are bunk-- especially now that we've got the internet I think real estate agents are on the way out, and good riddance!

I agree! I think you can sell on TUG without using a broker, although I am not positive. I have not been on their site in a while.