Why does DVC exercise ROFR???

[OneMoreTry]

Plutofan. Consumers will always look for the best deal and sellers will always look to get the best price. It's the way a free economy seems to work and work best.

If you find a great deal that's legal, go for it.

 

[OneMoreTry]

Thanks for the great replies. Really I agree with all of these thoughts more or less. They are all of the same reasons that seemed obvious to me when I posted. I have to say I'm with Caskbill here for the most part because I do feel DVC prices would be high on the resale market with or without ROFR. There is a huge demand for DVC. Demand = high price.

Where were you about two years ago when I tried to argue this point and was shot down?

Why do I still feel like we are missing something? Am I just thinking too hard? To add to my first post I'l throw this out: If ROFR is pure genius as some suggest then why aren't all of the big timeshare companies utilizing ROFR? Wouldn't Marriott, Westin, Sheraton and other follow this same path?

Any thoughts as to why other companies aren't doing this would be great. You can buy Marriott and other timeshare for pennies on the dollar resale. These companies don't have any problem selling the new resorts at retail price even with this low resale competition. Seems to me even if DVC didn't exercise ROFR most would still buy direct through DVC.

Thanks again guys.

1. I can tell you one of Sheraton's alternate strategies from experience. When we were at the Vistana last year, where my sister is an owner, they tried to deceive her into believing that her previous purchase was now worthless unless she spent $20,000 to add on additional options. (Such things as she couldn't stay ON Disney property unless she bought into the new program -- meaning Swan and Dolphin.) The sales people had her in tears. Fortunately, I talked her out of it and got her out of there.

2. Second, they don't need it and obviously they are right. If their current sales were faltering and they thought it was due to lack of ROFR in their contracts they would probably add it, don't you think? I believe that many of the people that buy from these programs (all of em including Disney) are naive . They are suckered into a sales presentation at a beautiful resort, offered a dream come true then fall hook, line and sinker. They later realize they can't afford the payments and sell to you and me resale for "pennies on the dollar."

An idea
Maybe Disney is trying to prevent the resentment of disillusioned buyers. Don't think of it as altruistic but as self-serving. It really wouldn't be magic to buy a piece of Disney and lose thousands of dollars on it.

 

[corpcomp]

Since my purchase comments started the thought process for this post I thought I would add a few more.

I registered with DVC on March 28th. This was 3 days before they raised the BCV prices from $92 to $95 I was guaranteed the $92 price initially for 30 days and then later told it was good until the next price increase next Fall 2006 or early 2007. Current owners have til 6/30 I believe.

Why does Disney buy back the points and sell for a small profi? Two probable reasons:

1. Control that the prices do not drop as normal timeshares do and maintain a "solid value" of the resorts. The average non-disney timeshare resale is about 50% of the purchase price (Vistana is an example near Disney). DVC is about the only one in the country that goes up in value and the higher it goes up the higher they can make the points for any new resort (therefore higher profit on-going).

2. Availability for members / owners to keep people happy.

Yes the prices get significant and a couple of dollars don't seem like much but when you consider 10,000 members at BCV and 3,027,000 points (and asuming an average turnover of about 10% - many from divorce according to the Timeshare Store), they can make a lot of money off a few dollars per point.

 

[Dean]

Disney is not setting any kind of a floor. Are you saying if there was no ROFR all resale contracts would be selling for $50/point? No way. Would you sell your points for $50 if you could get $80?, or $90. The marketplace determines the selling price, not Disney. A seller is going to try to get as much as they can for their points. No one is going to sell for $50 when there are plenty of buyers who will pay $80, or more.

Would you sell your house for half of what similar sized new houses cost? Of course not. It's the 'value' of a property that determines what it sellf for. And the 'value' of DVC points sets the resale selling price, not ROFR.

I think currently ROFR IS the major force though over time it's fluctuated between market forces and ROFR. What ROFR does is prevent those fire sale situations that can be found for most ever other timeshare if one works hard enough at it. And there are still contracts that go through to DVC for ROFR that are far below market value. There is a member of this board who had a contract for $40 per point when the ROFR floor was clearly $50 for that resort. I think you are giving the overall membership too much credit.

 

[Dean]

Thanks for the great replies. Really I agree with all of these thoughts more or less. They are all of the same reasons that seemed obvious to me when I posted. I have to say I'm with Caskbill here for the most part because I do feel DVC prices would be high on the resale market with or without ROFR. There is a huge demand for DVC. Demand = high price.

I think that's been true in the past but every bit that the price goes up and every year that tics off the ROFR shifts this formula away from the value. At some point DVC will stop going up and then start going down. The only argument is when, how high it will go and how fast it will drop. IMO, the curve will shift against the value of ownership (from a dollars standpoint) somewhere in the 25-28 year range. And I personally suspect were at or near the top currently for the value vs price curve. The only question in my mind is when will we start losing ground. For one who simply buys to use the rest of the term it won't matter. But for those of us who care about the underlying value of our investment (and it is an investment), it matters a great deal.

 

[Caskbill]

As to other timeshares, I can address Marriott since we own there also. In their program, someone buying resale does not get the same 'perks' as someone who purchases directly from Marriott. The biggest is a resale owner can't convert their week into Marriott reward points which in turn can be used for airline travel and stays at other Marriott hotels.

Now whether someone thinks that 'perk' is worth paying thousand extra by buying direct is another matter for discussion.

As to if there was no ROFR, if someone wants to sell, a good broker would tell them what the market is currently worth and what they should expect to list at. While other timeshares may sell at 1/2 their original price, I don't think that would be true for DVC, right now, even if there were no ROFR.

Yes, at some point the curve will swing. Obviously no one is going to be able to sell one of the phase I resorts for very much in the year 2041. Whether we're at the top of the curve now, or it'll be another 10 years, is anybody's guess.

 

[spiceycat]

want to know how stupid people can be....

my grandmother died and left the house to my mother and her sister....

I told them over and over to get a realtor....

no they sold it to a friend of my uncle...

and GOT TAKEN

that house was a mansion sat on 3 acres in a very wonderful neighborhood - it could have easily sold for $1 Million (yes Million) they sold it for $50,000...

that is how stupid some people can be about real estate...

believe me if ROFR was not inforce some DVC member (or their families after they died) would do the same...

 

[Dean]

The biggest is a resale owner can't convert their week into Marriott reward points which in turn can be used for airline travel and stays at other Marriott hotels.

Actually that's the only difference. And even then, there are still a couple of Marriott's that don't have the points option regardless and they tend to be good trade values.

 

[DrTomorrow]

[...]before using ANOVA to solve this delema

Hey, a Babylon 5 fan!