Why does ROFR take so long?

[3girlsfun]

Maybe I am naive, but, I was thinking today, why does ROFR take so long? Is it the amount of contracts that Disney has to go through? Is it that they only do the contracts on certain days of the month? Or some other reason? I was just thinking back to when I did real estate, in rentals, we wanted things "done" as quickly as possible so that we could move units, get commissions in for the month, and also to to get the largest occupancy number possible.

I would think the faster Disney gets you in their system, the faster they are getting your money. They are getting you booked, they are selling you tickets, AP's, dining plans, etc. They are getting your money committed.

Just curious as to what the process is...

 

[Sandisw]

From what I have read, Disney doesn't do them daily, but either weekly or a few days a week.

When I bought in 2009, it only took 14 days to hear back. Now, it seems like they are taking around 30 days to let the brokers know.

IMO, I think they are swamped and that is why it is taking so long. It also may be that they are not having as many meeting about them as they used to.

 

[ORD2KOA]

Maybe I am naive, but, I was thinking today, why does ROFR take so long?

Just curious as to what the process is...

I have the same feelings about this that you do. I think it's to make us squirm.

 

[s830632]

This is a great question, one I'd like to know as well, but would it be too far fetched to think that maybe this is a way to discourage people from going with resale rather than buying direct? Especially people like me who are unfamiliar with the process?

I was a little reluctant to buy resale because of the ROFR and the risk that I might not be able to book the property that I wanted when I wanted it this year. I ultimately ended up going with resale, but I did seriously consider the other option just for the piece of mind that it would have brought. I am worried about ROFR, but that wouldn't be such a big deal if not for the fact that it took up to 30 days to find out if you got one.

It seems to me that the approval process should be pretty straight forward, set a threshold and let those that come in at that threshold pass, and those that don't fail. Heck, we can get a credit approval in 5 seconds.

 

[disneynutz]

It's a sales tactic. You would be surprised how many people buy direct simply because they want their points now. Emotional sales are all about instant gratification.

Bill

 

[JimMIA]

There is a lot more to the process than a simple comparison of the selling price to some standard. The ownership, including the precise names on the contract, has to be confirmed. So do the status of all points, reservations, etc, on the account. Sometimes there are errors which have to be corrected.

As far as the ultimate ROFR decision, if I were a buyer right now, I wouldn't even consider ROFR as anything but a month delay. You're not likely to get ROFR'd.

And actually, the DVC resale process is very FAST compared to other systems. We bought a Wyndham resale on eBay in mid-July 2010. The broker and closing company were both very responsive and the deal closed on July 29.

After an endless series of phone calls to exceptionally nice Wyndham employees who did absolutely nothing to help, we finally learned that our account had been set up on Dec 28, 2010. (It had actually been set up on 12/12, but nobody bothered to notify us.) We received our welcoming package (third request) in mid-January, and finally had our RCI account up and running in mid-February. Start to finish-finished in SEVEN months.

However, since we've been set up, we've had very good service from Wyndham's MS folks and we're looking forward to using their system.

 

[disneynutz]

There is a lot more to the process than a simple comparison of the selling price to some standard. The ownership, including the precise names on the contract, has to be confirmed. So do the status of all points, reservations, etc, on the account. Sometimes there are errors which have to be corrected.

My understanding is that verification of points and names is a separate process that has nothing to do with ROFR.

Bill

 

[JimMIA]

My understanding is that verification of points and names is a separate process that has nothing to do with ROFR.

Bill

I think you're right, but it's all part of a process that has to happen before the transaction can close. We refer to the whole process as ROFR, but I think there's really more to it than just ROFR. And actually, the verification process probably takes much more time than ROFR itself...especially if there are any glitches.

 

[JimMIA]

The main thing that I think current resale purchasers should keep in mind is that their deal WILL pass ROFR.

In previous years, the two negatives with resale were the time the process took and the uncertainty of the outcome.

The uncertainty is GONE...and it's been gone for a year or more. Disney is simply not ROFRing, with the exception of an occasional BCV contract.

 

[mjc2003]

The main thing that I think current resale purchasers should keep in mind is that their deal WILL pass ROFR.

In previous years, the two negatives with resale were the time the process took and the uncertainty of the outcome.

The uncertainty is GONE...and it's been gone for a year or more. Disney is simply not ROFRing, with the exception of an occasional BCV contract.

While I would agree that this seems to have been the case leading up to the 3/20 deadline, with the exception of BCV where Disney seemed to set a floor around $83, I would wonder if this will continue to be the case going forward. Reason being, if they made these changes in order to get more people to buy direct, I think they will still find people going to resale if prices drop much further. We are thinking about a 2nd contract at BWV, and I would never pay $100+ direct when I can get it for $50ish resale, lost perks aside. But if they make token buybacks through ROFR, and can bring prices back up a bit (say BWV back to $75+), don't you think it will help them towards their goal of herding people towards direct purchases?

I guess I'm simply saying it will be interesting to see if they change their current practice of letting everything through now that we are past 3/20.

 

[s830632]

Yeah, as much as I want to believe that they'll approve everything, the pessimist in me is thinking that it would be more likely for them to ROFR those of us that just submitted our contract simply because they know we did it to keep those extra perks, it stands to reason that if those perks were important to us, we'd buy direct if ROFR'd, right?

That'd be pretty rotten of them to do, and I'm not trying to suggest that they would, but, I'm also not going to trust that just because they've been approving all the contracts that they'll approve mine as well.

 

[ORD2KOA]

I was a little reluctant to buy resale because of the ROFR and the risk that I might not be able to book the property that I wanted when I wanted it this year.
.....
It seems to me that the approval process should be pretty straight forward, set a threshold and let those that come in at that threshold pass, and those that don't fail. Heck, we can get a credit approval in 5 seconds.

I keep thinking that with computers, this process should be quicker. You can look at your information on the website and see your contract, available points, banked points, current and past vacations. IMO, there's no reason for it to take 30 days. (BTW - we've currently got 2 contracts - one selling, one buying. The selling was submitted 2/24, passed on 3/21. The one we're buying was submitted 3/17.)

But as an owner, there's no other way to sell your deed except resale. DVC isn't going to buy it back from you. They know that people's needs change and there will be sales. So you're forced into this process as a seller. As a buyer, I think it's a protective sort of thing, you'll know if the mortgage has been paid, etc. But I have always wondered why they didn't broker resales inhouse.

 

[JimMIA]

Yeah, as much as I want to believe that they'll approve everything, the pessimist in me is thinking that it would be more likely for them to ROFR those of us that just submitted our contract simply because they know we did it to keep those extra perks, it stands to reason that if those perks were important to us, we'd buy direct if ROFR'd, right?

That'd be pretty rotten of them to do, and I'm not trying to suggest that they would, but, I'm also not going to trust that just because they've been approving all the contracts that they'll approve mine as well.

If you look at the history of DVC's implementation of the 3/20 change in resale points perks, I think you'll see that for them to now start ROFRing contracts purchased in that period would be exactly the opposite of what they were trying to accomplish.

DVC announced the change on January 19, giving prospective buyers two full MONTHS to find a contract they liked and purchase it. I'm sure they did that because they didn't want to look like they'd pulled the rug out from under any prospective members, and because they wanted to implement the change in as fair manner as possible. Not because they're kind people...just because it makes good business sense.

I don't see them doing a 180 at this point.

 

[JimMIA]

I would wonder if this will continue to be the case going forward. Reason being, if they made these changes in order to get more people to buy direct, I think they will still find people going to resale if prices drop much further.

Oh, I'm sure people will continue to buy resale because of the price differential. But I think Disney will use ROFR very sparingly and only in very specific circumstances from now on for two reasons: 1) ROFR is a very costly proposition for DVC, and 2) they have other tools to use.

When WE look at ROFR, we say, "Okay, Disney buys back a BWV contract at $55, sells it for $115 (or whatever they're charging now), and they make a nice profit." Problem is, that's not what happens.

The truth is, Disney owns tens of thousands of DVC points and they have considerable difficulty selling them. They're having big trouble selling AKV and SSR -- so much so that they've pretty much stopped -- and they sure aren't selling many points from the sold out resorts. Therefore, if Disney is going to ROFR, they've got to figure they're going to own those contracts for some period of time. So they have to pay $55 per point for the contracts, and then pay annual dues on top of that. They can recoup some of that by renting the rooms, but considering the discounts they're offering via CRO, it doesn't seem like occupancy is where they want it, and that means difficulty renting DVC villas. Sooner or later, DVC will sell those ROFR'd points, but they won't be making the huge profit we assume they're making.

But more importantly, they have many more tools to drive direct sales that cost them little or nothing. Why pay $55 per point to acquire a ROFR burden if you can add some cheap perks to direct sales for next to nothing? ROFR is just one tool to achieve a goal...and it's by far the most expensive tool they have.

The other thing to remember is that VERY few of DVD's prospects even know the resale marketplace exists. To them, DVC IS Disney and most of them don't know there is any alternative -- so they are not aware of the prices of resales. For most DVC prospects, resale is irrelevant.

 

[DVCconvert]

But more importantly, they have many more tools to drive direct sales that cost them little or nothing. Why pay $55 per point to acquire a ROFR burden if you can add some cheap perks to direct sales for next to nothing? ROFR is just one tool to achieve a goal...and it's by far the most expensive tool they have.

And perhaps their "best" method is by the recapture of foreclosures and take backs of direct sales. Presumable they made $$ on the orginal sale, made $$ on financing, and despite a period of loss of an income stream get to sell the same potato again for the same or more than before.

 

[s830632]

Thanks for the info jimmia, I wondered myself about why they wouldn't just use ROFR because it seems to me that they'd make money by doing that.

 

[3girlsfun]

This is the exact kind of info I was looking for. I like to have information. I'm not finding the wait too brutal, but, I do have my cash ressie still for sure!

 

[JWG]

And perhaps their "best" method is by the recapture of foreclosures and take backs of direct sales. Presumable they made $$ on the orginal sale, made $$ on financing, and despite a period of loss of an income stream get to sell the same potato again for the same or more than before.

Is this necessarily true? Wouldn't the financing portion of a DVC purchase (even if financed through Disney) be financed by someone other then DVC? Wouldn't there be a separate division/company within Disney to handle that? Therefore, wouldn't DVC have to pay off that loan to the lender even if intercompany?

I don't see this as a big profit center for anyone. We've not financed or looked into financing, so maybe I'm wrong - maybe DVC does self-finance their loans. Just seems like there'd be too many for that though.

 

[DVCconvert]

JWG wrote:

maybe DVC does self-finance their loans

DVC lost it's credit facility 2 years ago.

http://articles.orlandosentinel.com/2009-02-12/business/diztimeshare12_1_disney-vacation-club-share-disney-profits

Tom Staggs:

...warned at the time that the nation's frozen credit markets would likely make lending terms so unfavorable that Disney would do "less or no" securitization in 2009. He also acknowledged that being forced to carry the time-share mortgages, rather than cash them out immediately, could slow Disney Vacation Club's earnings growth.

"There is profit that we don't make," Staggs said. "We'll make it over time, as opposed to realizing it in the current year when we do the securitization."

 

[Jason@dvcstore]

Maybe I am naive, but, I was thinking today, why does ROFR take so long?

In my opinion the answer to the question is Disney has money tied up (I am guessing the money comes from our annual dues) to pay for the workers at Disney to

1) Provide The Timeshare Store, Inc.® and other resalers with Points Activity Statements so they can list the property for the sellers
2) Process the contracts once it has been sold and they review it from top to bottom ensuring names are correct, clauses are correct (that the buyer is getting the correct points in the contract)
3) Then reviewed for ROFR
4) Then Disney has to provide the closing company the estoppel information so they can provide final documents
5) Then once the final documents are returned from buyer and seller Disney has to provide the closing company with up to date information before they close the file to make sure seller hasn't made more payments
6) Then Disney has to put the member in the system
7) Then typically 48 hours later Disney has to put the points in the account
8) Then Disney has to mail membership cards and any other info to the buyer

The Timeshare Store, Inc.®, of course, does not have any of these people at Disney on the payroll so I feel very blessed for all the help.

I think Disney would prefer that all members simply bought and kept their points and maybe only 12 resales per year. If that was the case then I am sure the process would be about 20 days from start to finish.

In my opinion if people wanted the process to be quicker then Disney would have to hire more help and this would bring annual dues up even higher (I could be wrong about the annual dues not paying their wages but if Disney was making money on resales then they would be encouraging more people to buy resale and not less).

Jason