"First right of refusal" good ?

[Tia]

I had thought that a resort chain that has "first right of refusal" was a good thing, as it helps keep resale prices up. But someone else disagrees with this and says it's more hassle, and not a good thing for owners. Doesn't the Marriott sytem have it? Any others?

 

[CaliDave]

Hilton and DVC have it and it does keep resales prices high.
If you are trying to buy right at or just below the ROFR amount. It can be a pain as a buyer. You might have to go through the purchase process several times to get one to pass ROFR.

Most good brokers will know the amount you need to pay for it to pass ROFR.

 

[DavidnRobin]

The ROFR is to protect the resort from units being sold way below market value, then resold for a profit when they could profit instead. But I would imagine that price would have to be really low since they would have to re-inventory and resale it.

I would imagine that it would have the effect of keeping the resale prices from dropping too low, but that would be in accordance to the true market value anyway. It would be unlikely that the resort to use the ROFR in order to keep resale prices high, but it could have that effect.

I am not clear on why this is a problem for the seller (other than the delay while the resort decides on a ROFR) since they are willing to buy it for the resale price anyway.

Starwood has it - and 2x now they did not use it on my resale purchases, and it took less than a week to decide.

 

[Dave M]

Yes, Marriott has such a clause in the CC&Rs for most of its timeshares.

It's not a hassle, at least with Marriott. A simple communication to Marriott, asking if Marriott wants to exercise its ROFR, always gets a response within 10 days or so. Marriott almost never exercises its right, doing so only for a few high-demand weeks that it needs in inventory.

Assuming the buyer and seller use a closing company for the transaction, it's handled as a routine part of the closing process and doesn't slow down the closing process. Most of the high profile timeshare closing companies discussed on these forums are familiar with the ROFR process.

Is it a good thing?

I believe yes, from a seller's standpoint. It might help prop up the market a bit and the seller will sell for the same price, whether to the buyer that agreed to purchase the week or to Marriott if it exercises its ROFR.

Not so good from a resale buyer's standpoint. A buyer might miss out on a great deal if Marriott exercises its ROFR.

 

[timeos2]

It's not "guaranteed resale" it's "right of first refusal". It doesn't help sellers it hurts them. There is no guarantee to the seller who has spent the effort (and maybe money) to find a willing buyer at an agreed price. Now that buyer has to sit back and wait for the resort/developer to decide if they want the purchase or not. That can be 30-45 days of uncertainty. So the buyer may back out if they get tired of waiting - if so the seller has to start over because the ROFR only applies to actual offers pending. Or the resort/developer decides to buy - the seller doesn't get whatever the magic price that the developer is willing to pay may be but only the original offer from his buyer. The original potential buyer gets screwed out of a good deal, the seller has a long wait to get his sale and the only winner is the developer. After a few times buyers say forget it and now the willing seller has no offers so the ROFR doesn't kick in. Yes the price may be higher BUT with no one willing to make an offer there are no sales. Again the ROFR does no good unless there are willing buyers. The buyers dry up if ROFR is exercised. It is a false price prop. Better to let the market decide what the value is. Developers do it to discourage resales not protect prices.

Finally in cases where the developer regularly exercises a reasonable level (Marriott & DVC come to mind here) there is a tendency for owners to think that they are automatically able to get a certain floor level for their ownership. But that isn't so. There is no promise of buy back and, in cases where the purchase is right to use rather than deeded, as the end date gets closer the chances increase that the developer will not buy the unit back through ROFR. They will get the time back for free if they just wait it out. So then the propped up price will plummet as sellers realize they are in for years of high fees and no value at resale. All in all ROFR does not help or protect owners only the developers. As is the case in almost anything to do with timeshares developer sales.

 

[Tia]

Thanks all for the input here, I'm going to reference this thread to the yahoo group where we were talking about resales.

 

[gmarine]

It's not "guaranteed resale" it's "right of first refusal". It doesn't help sellers it hurts them. There is no guarantee to the seller who has spent the effort (and maybe money) to find a willing buyer at an agreed price. Now that buyer has to sit back and wait for the resort/developer to decide if they want the purchase or not. That can be 30-45 days of uncertainty. So the buyer may back out if they get tired of waiting - if so the seller has to start over because the ROFR only applies to actual offers pending. Or the resort/developer decides to buy - the seller doesn't get whatever the magic price that the developer is willing to pay may be but only the original offer from his buyer. The original potential buyer gets screwed out of a good deal, the seller has a long wait to get his sale and the only winner is the developer. After a few times buyers say forget it and now the willing seller has no offers so the ROFR doesn't kick in. Yes the price may be higher BUT with no one willing to make an offer there are no sales. Again the ROFR does no good unless there are willing buyers. The buyers dry up if ROFR is exercised. It is a false price prop. Better to let the market decide what the value is. Developers do it to discourage resales not protect prices.

Finally in cases where the developer regularly exercises a reasonable level (Marriott & DVC come to mind here) there is a tendency for owners to think that they are automatically able to get a certain floor level for their ownership. But that isn't so. There is no promise of buy back and, in cases where the purchase is right to use rather than deeded, as the end date gets closer the chances increase that the developer will not buy the unit back through ROFR. They will get the time back for free if they just wait it out. So then the propped up price will plummet as sellers realize they are in for years of high fees and no value at resale. All in all ROFR does not help or protect owners only the developers. As is the case in almost anything to do with timeshares developer sales.

I disagree. I think it is good for sellers in general. Look at DVC. ROFR is regularly exercised and resale prices continue to rise because of this.

Unlike almost any other timeshare, DVC resales dont save the buyer a huge amount of money because of the high resale prices due to ROFR.

It may be more difficult to sell the average timeshare, but it keeps prices from falling too low.

 

[Gadabout]

It's not "guaranteed resale" it's "right of first refusal". It doesn't help sellers it hurts them. There is no guarantee to the seller who has spent the effort (and maybe money) to find a willing buyer at an agreed price. Now that buyer has to sit back and wait for the resort/developer to decide if they want the purchase or not. That can be 30-45 days of uncertainty. So the buyer may back out if they get tired of waiting - if so the seller has to start over because the ROFR only applies to actual offers pending. Or the resort/developer decides to buy - the seller doesn't get whatever the magic price that the developer is willing to pay may be but only the original offer from his buyer. The original potential buyer gets screwed out of a good deal, the seller has a long wait to get his sale and the only winner is the developer. After a few times buyers say forget it and now the willing seller has no offers so the ROFR doesn't kick in. Yes the price may be higher BUT with no one willing to make an offer there are no sales. Again the ROFR does no good unless there are willing buyers. The buyers dry up if ROFR is exercised. It is a false price prop. Better to let the market decide what the value is. Developers do it to discourage resales not protect prices.

Finally in cases where the developer regularly exercises a reasonable level (Marriott & DVC come to mind here) there is a tendency for owners to think that they are automatically able to get a certain floor level for their ownership. But that isn't so. There is no promise of buy back and, in cases where the purchase is right to use rather than deeded, as the end date gets closer the chances increase that the developer will not buy the unit back through ROFR. They will get the time back for free if they just wait it out. So then the propped up price will plummet as sellers realize they are in for years of high fees and no value at resale. All in all ROFR does not help or protect owners only the developers. As is the case in almost anything to do with timeshares developer sales.

I agree. It not only interferes with "fair market value", it interferes with your right to sell it to whom you wish.

 

[mjs]

Just wondering, but what if I wanted to give a Marriott timeshare to my sister, or give one to somebody in exchange for a classic car etc? What do you think Marriott could/would do in this case?
Mark

 

[T_R_Oglodyte]

Instead of selling timeshares, let's imagine we are selling cars.

Let's say the Kelly blue book on a 2-year old Toyota RAV4 with a standard set of options is $20,000. That is the market price - that is where the number of people who have RAV4s they are willing to sell at that price matches the number of people who want to buy RAV4s at that price.

That is where supply = demand. Increase the price and more sellers will be willing to sell, but some buyers will walk away and there will be more RAV4s on the market than there are buyers. So some willing sellers will be unable to sell their vehicle. In a normal market motivated sellers then drop their price, more buyers come into the market and the market stabilizes at the lower price where supply = demand.

Now let's imagine that Toyota establishes a ROFR program for RAV4s, and decides to support the price at $23,000 - exercising their ROFR on any sales that are less than $23,000. Note that Toyota is not offering to buy-in RAV4s at $23,000 to anyone who wants to sell to them; they are merely exercising an ability to buy a unit that is sold for less than that.

What is going to happen in the market now? The market for sales less then $23,000 is going to start to shrivel. Many buyers who would pay $20,000 for a RAV4 won't bother putting in an offer because they won't be able to buy the unit anyway. In other words the pool of buyers will decrease.

That means there are going to be more sellers than buyers. There will be people ready to sell their RAV4s, but they won't be able to find buyers for their units. There will still be some sales of RAV4s at less than $23,000, because there will still be some people who will put in an offer, but there will be fewer buyers than there are sellers.

The sales price will look as if it is higher because of the ROFR because more of the sales that are completed will occur at a higher price. But what about the sales that don’t happen because sellers can't find buyers?

And that is precisely what happens when a developer tries to establish a floor with a ROFR that is higher than what the current market pricing.

TUGgers probably won't be influenced much, because TUGgers are savvier about marketing and selling their timeshares. TUGgers are more likely to be the few who do manage to connect with a buyer who is willing to pay more than the ROFR floor.

The people who are affected are the less savvy owners who would love to get rid of their timeshare, but who can't find a buyer. Or they drop the price so low that a buyer figures it worth taking a shot at in case the deal somehow slips through.
__________________

 

[DavidnRobin]

Let's keep this in perspective - the ROFR doesn't mean they resort can underbid, or prevent your resale by insisting you sale it to them for less. Yes, it can create delays - but at least in my case - Starwood did not excercise their ROFR and let us know in less than a week.

Personally - I have no problem with the ROFR - it can keep the value up and the 'riff-raff' out. They are in business afterall, and have every right to profit from a Development that they financed and maintain - and have every right to control the market value as not to lessen the value of the resort (as I would want as an owner).

When you buy a TS - the ROFR is in the contract - it is not an after-the-fact measure.

As to giving it to your sister - you can always Grant Deed.

 

[DavidnRobin]

The RAV analogy would only work if the RAVS were all connected by a common chain like TSs are. It would be bad business for a resort to use a ROFR only to get stuck with a bunch of units that they couldn't re-sell. It is directly linked to the market value of the unit minus their overhead cost to maintain the unit in their inventory and the cost to sale the unit.

 

[jacknsara]

My recent experience:
The developer is the only real beneficiary of ROFR.
Let's imagine an ebay auction where there is one serious buyer and a few bottom feeders. A timeshare comes up on ebay auction. The serious buyer puts in a bid that is 5x higher than the bottom feeders with a few seconds to go. The bid is now 1x+$5. The bottom feeders hit it a few times and run it up another $100 - $200 and quit. The serious buyer is still willing to 3x ++ the current bid, but wins at a small fraction of what he/she is willing to pay.
The developer steps in and exercises the ROFR instead of bidding the floor price.
The developer has harmed both the willing buyer and seller.
I've modified a few facts, but this is not hypothetical.
How could an informed buyer be willing to pay so much more than the market price set by the bottom feeders? One answer is that sometimes the true value of the specific timeshare is not obvious in the ebay listing, but someone who knows the property recognizes the special value even though it is not explicitly described.
Jack

 

[timeos2]

It's a perfect comparison

The RAV analogy would only work if the RAVS were all connected by a common chain like TSs are. It would be bad business for a resort to use a ROFR only to get stuck with a bunch of units that they couldn't re-sell. It is directly linked to the market value of the unit minus their overhead cost to maintain the unit in their inventory and the cost to sale the unit.

Last time I checked there was a network of car dealers as exclusive sources for brands of cars sold new. If they decided to put a ROFR on the sale it would parallel the timeshare model.

 

[Gadabout]

Personally - I have no problem with the ROFR - it can keep the value up and the 'riff-raff' out.

Money doesn't necessarily equate to being "well-mannered" (I assume that's what you mean here ), and the "nicest" owners could very well rent to people you'd rather not have at the TS, but you can't necessarily do anything about it.

Also, there are people who think all TS fall into some other undesirable (to their minds, anyway) category, because it is, no matter how you look at it, mostly a rental and not true ownership situation.

I think the ROFR hurts by discouraging people from getting into TS to begin with, as soon as they figure out that ROFR is *not* a guaranteed buyback program.

 

[T_R_Oglodyte]

The RAV analogy would only work if the RAVS were all connected by a common chain like TSs are. It would be bad business for a resort to use a ROFR only to get stuck with a bunch of units that they couldn't re-sell. It is directly linked to the market value of the unit minus their overhead cost to maintain the unit in their inventory and the cost to sale the unit.

No. The "stuick with inventory issue" is not relevant. The fact remains that if the ROFR increases the price above the point where supply=demand, theere will be sellers ready to sell who are unable to find buyers. That is basic economics. In fact, the ROFR is worse because it drives away buyers. Not only does it artificially raise the price above the price point, it chases away buyers who might make legitimte offers.

You try do distinguish on the basis of a reasle market. That is not why the developer maintains the ROFR. It the motive were the developer restocking inventory that they could resell at retail rates, then they developer would offer a buyback program, not a ROFR.

If you don't like the car analogy, then try an analogy with two comparable housing subdivisions located next to each other, but where one developer puts in a ROFR program that tries to drive prices 20% higher than in the neighboring subdivision. There will be houses in the ROFR subdivision tat sit unsold because the buyers will all buy in the adjacent subdivision where they can find comparable houses for less than in the ROFR subdivision.

 

[grupp]

Is this a joke?

Personally - I have no problem with the ROFR - it can keep the value up and the 'riff-raff' out.

Your are kidding aren't you?

Gary

 

[gmarine]

No. The "stuick with inventory issue" is not relevant. The fact remains that if the ROFR increases the price above the point where supply=demand, theere will be sellers ready to sell who are unable to find buyers. That is basic economics. In fact, the ROFR is worse because it drives away buyers. Not only does it artificially raise the price above the price point, it chases away buyers who might make legitimte offers.

You try do distinguish on the basis of a reasle market. That is not why the developer maintains the ROFR. It the motive were the developer restocking inventory that they could resell at retail rates, then they developer would offer a buyback program, not a ROFR.

If you don't like the car analogy, then try an analogy with two comparable housing subdivisions located next to each other, but where one developer puts in a ROFR program that tries to drive prices 20% higher than in the neighboring subdivision. There will be houses in the ROFR subdivision tat sit unsold because the buyers will all buy in the adjacent subdivision where they can find comparable houses for less than in the ROFR subdivision.

The bottom line is that ROFR keeps prices from falling. Just look at DVC. ROFR keeps resale prices high and getting higher every year. All the analogies dont matter if they arent true in the world of timeshares.

Both analogies are difficult to compare to timeshares. With the cars you can always choose a similar car if the price of one has a ROFR that is too high. Same with a home, in similar subdivisions.

But take one of those homes, same size or smaller and put it in a better location more convenient to schools, give it access to more amenities etc and ROFR wont have any effect on the amount of buyers because the demand will be greater than the other.

This goes for many timeshares with ROFR. If you want to buy DVC or a Marriott, Hyatt etc in a certain location then you have no choice but to go through ROFR. Many of these resorts dont have any other resorts that are comparable in location,quality or amenities.

ROFR may make it slightly more difficult to sell but it absolutely keeps resale prices higher than without it. There are many quality resorts than sell for much less than they would if the resort had a ROFR program.

 

[CaliDave]

If you don't like the car analogy, then try an analogy with two comparable housing subdivisions located next to each other, but where one developer puts in a ROFR program that tries to drive prices 20% higher than in the neighboring subdivision. There will be houses in the ROFR subdivision tat sit unsold because the buyers will all buy in the adjacent subdivision where they can find comparable houses for less than in the ROFR subdivision.

I dont think any of these analogy's work.

The houses will sit unsold if the developer is no longer selling any homes higher than those prices. If the developer is still active in sales and someone can walk out the door.. drive down the neighborhood and see the exact house they want for 50% less than the contract they signed.. They will buy it, even if its priced 20% more than another subdivision.

This happens with Hilton all the time. I've been tracking Hilton sales for almost 2 years.
2 years ago, they did not excercise ROFR. I bought 4800 points on ebay for $6000
Soon after Hilton started buying any contracts less than $6500
Recently I sold my 4800 points, Hilton took it at $7600

Buyers are now having to pay around $8K and these are typically people that come out of the presentation and either recind or they love the program but didn't want to spend $18K. So they feel they are getting a bargain.
Can people buy another timeshare in Vegas.. sure.. but its not the excact one they want. Its not the system they want.

Hilton will typically let you know within 7 days if they are taking the week.
Transfering of timeshares takes a few months, what's an extra week or two.

I agree it does hurt the buyer, they can't buy the weeks as cheap as they'd like. I just don't see how it hurts the seller. Its not going to sit unsold. You can still price it as low as you want and you'll get that price.
If Hilton was taking all 4800 points at or below $7K, but all the buyers are only willing to pay $6K. Then I can still sell it at $6K. Market price. A buyer would come along, Hilton would take it and I'd get my asking price. I'd rather sell to Hilton. I get the $$ much quicker that way. Some buyers are very slow. Seller can still find buyers if they are desperate, but it will be at market price, not at ROFR price. Same as if there was no ROFR.
It does seem funny that all the Hiltons I have seen sold in the past 2 years , either to Hilton or to private parties have been much higher than they were 2 years ago. Its a direct correlation to Hiltons ROFR.


I'd rather have Hilton buy it from me.

 

[timeos2]

ROFR is not a guarantee of anything

How many more resale buyers of DVC would there be if current owners could sell at any price? There have been posts where DVC owners had time to sell yet couldn't get an offer because people weren't willing to pay the "magic" amount yet, without a bonefide offer, the ROFR doesn't kick in. It is a type or restraint of trade and it does not ultimately benefit the consumer. In the short term those that either want to believe it places a floor on the selling price OR manage to get an offfer that triggers a ROFR for them see it as OK. But those that want to get a deal and, eventually, those that decide to sell and find they can't get a bid or that the ROFR is no longer being exercised get a rude awakening.

Right now there are one or two specific cases that can be pointed at for seeming to prop up pricing. But those are the exception and there are no guarantees the ROFR will be exercised tomorrow or next year or whenever. It is a false sense of security even in those cases. For almost every other case where there is a ROFR in the sale it is to the developers advantage not the owner/sellers. In the long run ROFR is not a benefit for buyers. Guaranteed buy back is but those deals are few and far between. Unfortunately many buyers now think the two are the same and nothing could be farther from the truth.

 

[CaliDave]

I agree John with some of your post.

I know the moment Hilton is no longer in active sales in Vegas or Orlando. ROFR will be over and prices will start dropping. It's like one of the real estate bubbles.. I will sell and buy it back a year or two later. ROFR is driven by $$ for the developer.
Why build new resorts when you can buy back your existing weeks for a huge discount.

DVC owners can sell and list at any price they choose. Its only matter of who buys it. DVC or the private party.

People that buy need to realize that ROFR can and will stop at anytime and if you are considering selling.. you'll need to get out quick.

DVC has to be one of the worst... the clock is against you. Disney isn't going to keep buying back units for a resort as it's getting closer to the RTU date.

 

[T_R_Oglodyte]

ROFR drives away buyers. ROFR makes it harder for sellers to even get the offer to submit to the developer.

If you're not trying to sell your unit it looks great, because it appears that your unit will be worth more should you ever decide to sell it. The hooker comes when you do try to list it and you can't get anyone to offer on it at a price above the ROFR. So you drop the price, and you still can't get offers because why would anyone waste their time putting in an buy offer that isn't going to be accepted anyway.

 

[Gadabout]

The bottom line is that ROFR keeps prices from falling. Just look at DVC. ROFR keeps resale prices high and getting higher every year. All the analogies dont matter if they arent true in the world of timeshares.

Both analogies are difficult to compare to timeshares. With the cars you can always choose a similar car if the price of one has a ROFR that is too high. Same with a home, in similar subdivisions.

But take one of those homes, same size or smaller and put it in a better location more convenient to schools, give it access to more amenities etc and ROFR wont have any effect on the amount of buyers because the demand will be greater than the other.

This goes for many timeshares with ROFR. If you want to buy DVC or a Marriott, Hyatt etc in a certain location then you have no choice but to go through ROFR. Many of these resorts dont have any other resorts that are comparable in location,quality or amenities.

ROFR may make it slightly more difficult to sell but it absolutely keeps resale prices higher than without it. There are many quality resorts than sell for much less than they would if the resort had a ROFR program.

ROFR is a form of price fixing. The truly outstanding (in terms of location and/or amenities) TS resorts would never need it. And what percent of TS falls into that category?

You always have some alternative to TS in terms of at its simplest, lodging, in any given area: camping, rental of private homes or apartments, hotel/motel. DVC is unique really because of the theme park and its aura, but take away that and it is not much different than any other TS. It is the traveller that makes the choice of what is or is not "equal to" or "just as good for our purposes". You place the constraints on yourself, in other words.

 

[CaliDave]

As a seller, If you know what the ROFR amount is, I don't think it would be difficult to get a friend or family member to buy it from you and get it taken ROFR. If it doesn't get taken. The deal with the original buyer might just fall through.
All you need to do is send in a sales contract to the developer.

 

[Gadabout]

Just wondering, but what if I wanted to give a Marriott timeshare to my sister, or give one to somebody in exchange for a classic car etc? What do you think Marriott could/would do in this case?
Mark

As was mentioned, you could grant deed it. But from what I understand, you can't have a money contract tied to the TS, otherwise the ROFR provision kicks in.

And you wouldn't want to do any "informal" type contract (e.g., mow my lawn every week for 6 months, or the classic car you mentioned) with any total stranger, because if either party did not perform, and it went to court, again, the ROFR kicks in, if and when the TS finds out about the dispute in ownership, voiding the contract anyway.