Why NOT buy resale?

[tjkraz]

Hi, I'm a newbee to the DVC boards. We are looking at purchasing and found out a friend is thinking of seeling their points. So, If I make a deal with her, since we are friends, is the process the same?

In fact, what would the process be? Also, what is ROFR?

ROFR is short for Right of First Refusal. Whenever a DVC contract changes hands, DVC retains the option to review the terms of the deal and purchase the contract at said terms if they wish. So, if you should decide to purchase your friends' DVC contract, the offer would still have to be submitted to DVC. If the terms are to their liking, they can actually take the contract. DVC pays the seller and you get nothing.

DVC will occasionally waive ROFR on transfers to immediate family, but I can't see them doing so in this situation.

 

[schwaja3]

ROFR is short for Right of First Refusal. Whenever a DVC contract changes hands, DVC retains the option to review the terms of the deal and purchase the contract at said terms if they wish. So, if you should decide to purchase your friends' DVC contract, the offer would still have to be submitted to DVC. If the terms are to their liking, they can actually take the contract. DVC pays the seller and you get nothing.

DVC will occasionally waive ROFR on transfers to immediate family, but I can't see them doing so in this situation.

Ok, let me take this one step further. I'm going to make #s up since I really don't know the resale rates, so just go with me on this.

Let's say the going rate for her 160 points is $90 a point. She wants to sell to me for $80 since we are close friends. Could I sign a contract with her for $93/point so that it gets past the ROFR, and then she could reimburse me the $13/point?

This way, it get's by Disney, and I still get it at the price I want to pay and she wants to sell?

 

[tjkraz]

Let's say the going rate for her 160 points is $90 a point. She wants to sell to me for $80 since we are close friends. Could I sign a contract with her for $93/point so that it gets past the ROFR, and then she could reimburse me the $13/point?

This way, it get's by Disney, and I still get it at the price I want to pay and she wants to sell?

1. That would be illegal.

2. There may be capital gains tax implications that would impact your friend.

3. If she gets a broker involved to handle all of the paperwork and filings, the commission paid would be based upon the contracted purchase amount.

 

[LisaS]

Could somebody call DVC today and ask to buy, say, 200 points at a sold out resort with a September Use Year (assuming Disney has the points). Would they get 200 points now, and then another 200 points on September 1st? And how would maintenance fees work - would they pay a full year or pro-rated year in 2007 (I assume a full 2008 dues would be owed on 1/1/2008).

Yes you would get the Sep 2006 points as part of your purchase provided you purchased before Sep 1st. They would be in your account about 24 hours after you pay the deposit on your add-on contract. They have also been allowing members to bank those points, even if they are past all of their banking deadlines.

You would pay pro-rated fees for 2007, starting from the day the points are added to your account. You would pay a full year's dues for 2008 and beyond. Also, there are no closing costs for members adding on points.

 

[CarolA]

1. That would be illegal.

2. There may be capital gains tax implications that would impact your friend.

3. If she gets a broker involved to handle all of the paperwork and filings, the commission paid would be based upon the contracted purchase amount.

I will bite... what's illegal?

While it might be considered unethical as long as you pay the taxes etc. I am not sure it's illegal UNLESS perhaps you got a mortgage.

Hypothetically if you did this as two seperate tranasactions. Sale to XYZ being one transaction and a GIFT from person a to person b being the second...... I don't think there would be much Disney could do.

I have seen sales structured as I will pay you $90 a point and then you are going to rent back the first year's points at $10 per which in truth brings the sale price to $80... SInce the "rent back" is not the selling price I don't think it had to be on the sale doucment. Sepereate transaction.

Now I don't like many of my friends enough to sell under market rate, but when you figure no 10% commission....

 

[tjkraz]

I will bite... what's illegal?

So you believe that entering into a fraudulent agreement solely to bypass DVC's ROFR is legal?

 

[Mule2007]

Regardless of the shenanigans trying to avoid ROFR - why would you want to deny legitimate property appreciation value to a friend?


Mule

 

[salmoneous]

I will bite... what's illegal?

I checked into this a bit a while back. You are required to submit to Disney all aspects of your sale for ROFR. Any agreement that is tied to the sale must be disclosed. If you don't disclose it, that would be fraud, which is illegal.

Getting back to the specific question, if you make a deal with your friend that you will kick back the $13/point to her that has to be disclosed to Disney. But if you don't have an agreement ahead of time and you just, out of the goodness of your heart decide to give her $13/point, that wouldn't necessarily be a problem.

 

[JimMIA]

Let's say the going rate for her 160 points is $90 a point. She wants to sell to me for $80 since we are close friends. Could I sign a contract with her for $93/point so that it gets past the ROFR, and then she could reimburse me the $13/point?

1. That would be illegal.

It's called real estate fraud. You would be defrauding Disney out of the opportunity to purchase the points for $80 and resell them for $92, or whatever they are now charging. A more common use of this type of fraud is overstating the selling price to try to make it look like the buyer put more money down, and therefore make the mortgage look better to a lender.

This is exactly the same thing, and there is a ton of criminal case law with these exact facts.

 

[Caskbill]

Actually our UY is sept, sorry for the confussion, what a I was referring to was that the seller wanted us to pay the 2006 & 2007 MF. We agreed on just the 2007, Using calandar year since MF are paid in Jan. My point was that we did not pay for the 2006 Caladar year MF.

I was under the impression that MF and UY have nothing to do with each other, that MF are paid 1/1 - 12/31. It really doesn't matter, I believe that we purchased a good deal. We took posession of the contract in Jan of 2007.

I do not think that I could purchase a 300 pt contract through Disney for less then 27k

Thanks for you insight.

Maintenance Fees are NOT directly related to the Use Year points since they are paid per calendar year as you state. However, when purchasing a resale contract, determining how maintenance fees work with the particular use year's points helps determine the 'value' of the purchase.

This is especially important when banked or borrowed points are part of the contract.

The way it works is to evenly divide the use year itself into 12 months as if 1/12th of the points applied to that month's vacations. Then simply see which months fall within each specific calendar year. Thus with a September UY month, then for calendar year 2007 it could be equated to 8/12ths (8-months of calendar year 2007) are applicable to UY 2006 points, and 4/12ths (Sep, Oct, Nov, Dec) are applicable to UY 2007 points.

The seller was probably thinking that since you got all 2006 points that you should pay all the calendar year 2006 fees. If you had then you would have been paying some fees that were applicable to the seller's 2005 UY points. I.E. those points applicable to Jan, 2006 thru Aug 2006.

All contracts are negotiable. But if one only wanted to calculate the fair maintenance fees for what you purchased, then since you received all the 2006 and 2007 UY points, then the appropriate maintenance fees would have been for you to pay all the 2007 calendar year points, and 4/12ths of the 2006 calendar year points. Since you didn't pay 2006 calendar fees at all, then you got a better deal.

In your original post you refered to the 2006 points as 'free points' since you didn't pay the calendar year 2006 maintenance fees. I was simply trying to point out that you effectivesly paid 8/12ths of the maintenance fees associated with those 2006 UY points when you reimbursed the seller the 2007 MF's.

Hope this clarifies.

 

[JimMIA]

But if you don't have an agreement ahead of time and you just, out of the goodness of your heart decide to give her $13/point, that wouldn't necessarily be a problem.

Unless you get caught, of course...

The transaction would be conducted in Florida, and here in Florida, you (both of you) would probably be charged with Grand Theft 3rd degree, which is a third degree felony (up to 5 years).

If they really wanted to go after you, you would commit a series of fraudulent acts in the process of the transaction, and they could charge you with conspiracy, schemes to defraud, and about a hundred other things...for each fraudulent act, of course.

The answer to the question is NO -- DON'T do that.

 

[vwlvette]

Caskbill,
I do understand what you are saying, All I was saying that I believe that we got a good deal! lol, hopefully, even if it isn't as good a deal as I think it is, we are extremely please to own at VWL, We love the area, The transportation to the MK & TTC, The idea of the 11 month window at VWL is what we really wanted. With our little princess "Anastasia" the proximity to the MK is priceless for us. I thank you for clearing things up! folks on this board are terrific!

 

[salmoneous]

Let me start off by fully agreeing to you last point - it's best to not do it.

However - and just having a discussion here, not suggesting policy - but I can't agree with your first part. My point was that if giving the $13/point to the friend isn't tied to the sale in any way it wouldn't be illegal. I didn't mean *wink-wink-nudge-nudge* it isn't tied to the sale, I mean *in reality* it isn't tied to a sale. There would be no getting caught, no conspiracy, no scheme to defraud, etc.

There was a specific case of a parent who had bought 200 points at $79 a point and wanted to sell the points to her kids. She didn't want to make a profit, so was going to sell them at $79/point, even though the market price was something like $89. She was advised to sell the points to her kids at $89/point and then give them a Christmas present of $2000 instead. To make it especially cleanr, she gave the kids the Christmas present first, then sold them the points at $89.

Assuming that the gift wasn't tied to the sale (the kids could have kept the money and not bought the points) are you saying this would be fraud? Can somebody who sells a DVC to somebody else never have given that person a gift, or never give them a gift in the future?

 

[spree]

Or just be above board about the whole thing and put something like this in the contract:

$80.00 per point plus I'll wash your car every sunny Tuesday in July.

I doubt if Disney is going to want to come down and wash your car every Tuesday in July so it would be easiest for them to just let the sale pass

 

[dmarino5084]

Sorry just wanted to add something and maybe this was addressed. I didn't read all the posts.

The good news is that people will continue to buy resales. It is nice to know that if the need comes to sell your points there is a market to do it. They seem to hold their value and if you bought at low prices then sure you are getting your money back.

As a buyer you can't ask for more. Options are always great to have as a buyer. Disney or resale is a good choice to have. Thanks to companies like TSS for helping those sellers and buyers out there.

 

[salmoneous]

I doubt if Disney is going to want to come down and wash your car every Tuesday in July so it would be easiest for them to just let the sale pass

Cute idea, but Disney just has to match the monetary value of any offer, not the actual terms.

 

[JimMIA]

Let me start off by fully agreeing to you last point - it's best to not do it.

However - and just having a discussion here, not suggesting policy - but I can't agree with your first part. My point was that if giving the $13/point to the friend isn't tied to the sale in any way it wouldn't be illegal. I didn't mean *wink-wink-nudge-nudge* it isn't tied to the sale, I mean *in reality* it isn't tied to a sale. There would be no getting caught, no conspiracy, no scheme to defraud, etc.

There was a specific case of a parent who had bought 200 points at $79 a point and wanted to sell the points to her kids. She didn't want to make a profit, so was going to sell them at $79/point, even though the market price was something like $89. She was advised to sell the points to her kids at $89/point and then give them a Christmas present of $2000 instead. To make it especially cleanr, she gave the kids the Christmas present first, then sold them the points at $89.

Assuming that the gift wasn't tied to the sale (the kids could have kept the money and not bought the points) are you saying this would be fraud? Can somebody who sells a DVC to somebody else never have given that person a gift, or never give them a gift in the future?

People who get caught have all kinds of stories, like "They said I was with some dudes who broke into a house, but I didn't know what they were doing." Those stories are interesting; they just don't work.

The problem is that any transaction like this is not a single act, but a long series of acts, and those acts can be reconstructed easily. When they are, you see not only one odd coincidence, but a dozen, or two dozen. That's called "course of conduct," and it's one of the primary means of proving criminal intent in a fraud case. It quickly becomes very difficult to believe that things are not connected.

People often think if they have one semi-clever idea they can get away with anything. The investigator's, however, just say "Thank God they're stupid!"

 

[starbox]

I can answer about why we did not buy resale.

I was on a resale waiting list for points at VB, and in the 4 months that I was on the list, nothing close to the contract size I wanted came through that was not stripped of points until at least December of next year. I just do not like to borrow points, and so paying for a year and a half (plus MF plus closing costs) on a contract before I would have even use it was not an attractive option.

I ended up adding on through Disney. I paid more per point, but I also got a resort with a much longer contract. I got use of my points right away, plus I got 100 developer points, plus I got all my current year points even though my UY has passed. I was easily able to keep the same UY. The whole transaction took about 25 minutes to complete - including signing paperwork. Plus, I got a free totebag!

 

[salmoneous]

one of the primary means of proving criminal intent in a fraud case.

If there is no criminal intent and there is no crime, there is nothing to prove.

 

[luna99]