Developer: no buy back but wants first refusal

[Jollyhols]

I contacted my timeshare resort to see if they would buy back my timeshare -I knew they wouldn't but needed to see if there were any transfer fees etc in any case. They said it is in the original disclosure paperwork which I haven't yet checked, but the salesperson did say at the time of purchase they they would be happy to rent our week for us - of course that didn't happen because they have a no rental on behalf of owners policy.

What I didn't know was that they reserve the right of first refusal - so if I receive an offer they want the option to match it. Considering I paid them a total of $19k and will be lucky to get - well, I don't know - hoping for $10k but ...) they want the chance to buy it back at a bargain and go on to sell it to a new buyer at the normal current developer price. Cheek!
I haven't read my paperwork yet, but has anyone else come across this?

:annoyed:

 

[irish]

sure, MARRIOTT has the same policy. they do however have a rental division for which they take either 30 or 40% of the money paid.

 

[Dave M]

It's a very common provision in developer documents. Not many developers exercise the option often, but it happens.

Marriott is another developer that has such an option for most of its resorts.

Generally, it shouldn't adversely affect you. Make a deal with a potential purchaser, subject to the developer's ROFR. You'll sell it to the purchaser, unless the developer decides to buy at the same price. No big deal to you.

Some would argue that such a provision tends to depress resale prices, on the theory that purchasers are less likely to make an offer if they believe they might lose out to an ROFR.

I would counter that with two arguments. First, for those who want to buy into your resort on the resale market, they'll have to pay a decent price, thus keeping resale prices up. Further, most potential purchasers have no idea that a ROFR exists and, even if they are aware, they may well know that the option isn't exercised very often.

 

[BocaBum99]

I believe ROFR does two things. First, it makes it appear that the market price for resales is higher than it actually is. This is because those buyers can never get a unit below a certain price. It doesn't mean that there aren't sellers at those lower prices.

Second, it eliminates some of the demand that otherwise would have been there if there were no ROFR. When a potential buyer knows that they are likely not going to get a timeshare at a certain price, they may not bid below the price they believe is the exercise price. This isn't necessarily bad, but it could lead to a longer time to sell the timeshare.

Here is an example of how that could work. Today, Disney Vacation Club actively exercises it's ROFR. Checking today, it looks like Disney exercises it's right between $75-85/point depending on the resort, anniversary date, points, etc.

Let's say there was a major national catastrophe that hit Orlando like a hurricane that blew down half the theme parks and closed most resorts in the area.

Let's further say that this reduces the resale demand for DVC purchases by 30%. Logic would follow that prices would decrease by some. But, since buyers are conditioned to not bid below $75-85, there will be lots more inventory taking a lot longer to sell since there will be a 30% surplus of inventory available at that price.

That said, it does appear that ROFR does prop up prices. Perhaps that's good because it forces sellers to look for better venues to sell before they give up and dump their timeshares.

 

[wcfr1]

I would counter that with two arguments. First, for those who want to buy into your resort on the resale market, they'll have to pay a decent price, thus keeping resale prices up.

I not only agree with Dave here I have experienced it. I was contacted by a buyer who had purchased a unit at my resort (and apparently yours also) to purchase one of my weeks. He offered me what I was asking because the previous one he bought on ebay at a cheap price was lost due to the developer exercising the Right of First Refusal.

He really wanted that resort and realized there was now a minimum price he would have to pay for it. That's good news for anyone selling a unit.

BTW- Hate to tell you this but if your looking for 10K you will probably be dissapointed.

 

[JillChang]

Let's say there was a major national catastrophe that hit Orlando like a hurricane that blew down half the theme parks and closed most resorts in the area.

Let's further say that this reduces the resale demand for DVC purchases by 30%. Logic would follow that prices would decrease by some. But, since buyers are conditioned to not bid below $75-85, there will be lots more inventory taking a lot longer to sell since there will be a 30% surplus of inventory available at that price.

A hurricane hitting Orlando is only going to depress t/s price in the short-term, not long-term. If we believe, which we do, Disney is a reputable company and will rebuild WDW probably even better, then the t/s will bounce back in no time. I don't think it is a very good example.

In San Francisco, the entire city is talking about the big earthquake of 1906, being the 100th anniversary. It is discussed daily on the newspaper and everyone knows there is another big one coming and the city isn't prepare for it. This, however, does not depress the RE at all, not even a tiny bit. Not even the ones that are situated on reclaimed land that the paper say for sure will not survive a big earthquake. I joked that I should wait until the big one hit then buy a house cheap, the reply from several people was that wait in line, becuase that's what eveyone else has in mind!

This led me to believe, that RE in SF might suffer a little in the short run from a big earthquake, but certainly not in long-run. At least not as severe as the crash of the dot com boom!

 

[Dean]

Certainly ROFR is for the developers benefit. But it also does benefit some owners to a degree it that it provides a floor to resale prices. And it prevents those fire sale finds. This is frequently good for owners and bad for buyers (who cares if they have to pay more) and this is definitely true in DVC's case. If you have a timeshare that sells itself like DVC, then it's win-win. If you have a timeshare with less demand, it may mean you have far less buyers to chose from as they may move to options that are less expensive and easier to deal with. It isn't a big deal for Marriott and DVC owners but appears to be a nightmare for Westgate.

 

[Gadabout]

Well, another option is to transfer the TS first, (maybe add them on then quitclaim it, or just quitclaim it), and then get money later. This obviously involves some level of trust on the part of the parties involved, because there is no connection between the TS and the money.

I imagine a lot of sales between relatives and friends are done that way.

 

[Seth Nock]

Disney, Hilton, Manhattan Club, Hyatt and Marriott are ACTIVELY exercising right of first refusal. The percentage of units that these developers take off the market through right of first refusal, lowers supply thereby incresing prices. As resale prices rise, some of these developers have been raising the level at which the right of first refusal would be exercised.