The Marriott ROFR Debate: helpful to sellers or not?

[PerryM]

The eBay shuffle...

This may come as a complete shock to some folks but the “eBay shuffle” (my name for it) has brought many new sales to market that normally would not have occurred-increased demand. Here is how it worked (It isn’t working right now and I think many of you know about this):

You own a Platinum plus week that Marriott sells for $45k and that the ROFR has been executed at 60% of that or $27k. You need the money fast and will gladly settle for $25k. You list it on eBay with a starting price of $1 and a reserve of $25k.

Bidding starts and quickly goes to $5k and stops – no one wants it. You then see two folks starting a bidding war and the price finally gets to $25k and you have a winner – turns out to be your brother-in-law – good for him. (The other bidder was your next door neighbor; gee is this a small world or what?)

eBay auctions for timeshares are not real estate transactions and eBay collects their fee and is happy. You fill out the paperwork to do a quit claim and send in the eMail to Marriott and pay the $99 fee for the ROFR.

Surprise, surprise Marriott decided to snap up the sale and save $2k over selling an owner’s unit that has been on the waiting list for 2 years.

You get your check from Marriott and they paid the closing fees. Everyone won here – you felt sorry for your brother-in-law and send him on a great vacation to an II exchange. Your next door neighbor got a fantastic Christmas present and Marriott saved $2k. What’s not to like?

Well the owner waiting 2 years for Marriott to sell his unit never new any of this and has high hopes that year #3 will be the charm.

That’s the eBay shuffle and I have no doubt a lot of sales took place that caused prices to remain much higher than without it. (I'm not saying Marriott knows about any of this).

As Sergeant Schultz from Hogan's Heros would say "I know nothing".

 

[BocaBum99]

This may come as a complete shock to some folks but the “eBay shuffle” (my name for it) has brought many new sales to market that normally would not have occurred-increased demand. Here is how it worked (It isn’t working right now and I think many of you know about this):

You own a Platinum plus week that Marriott sells for $45k and that the ROFR has been executed at 60% of that or $27k. You need the money fast and will gladly settle for $25k. You list it on eBay with a starting price of $1 and a reserve of $25k.

Bidding starts and quickly goes to $5k and stops – no one wants it. You then see two folks starting a bidding war and the price finally gets to $25k and you have a winner – turns out to be your brother-in-law – good for him. (The other bidder was your next door neighbor; gee is this a small world or what?)

eBay auctions for timeshares are not real estate transactions and eBay collects their fee and is happy. You fill out the paperwork to do a quit claim and send in the eMail to Marriott and pay the $99 fee for the ROFR.

Surprise, surprise Marriott decided to snap up the sale and save $2k over selling an owner’s unit that has been on the waiting list for 2 years.

You get your check from Marriott and they paid the closing fees. Everyone won here – you felt sorry for your brother-in-law and send him on a great vacation to an II exchange. Your next door neighbor got a fantastic Christmas present and Marriott saved $2k. What’s not to like?

Well the owner waiting 2 years for Marriott to sell his unit never new any of this and has high hopes that year #3 will be the charm.

That’s the eBay shuffle and I have no doubt a lot of sales took place that caused prices to remain much higher than without it. (I'm not saying Marriott knows about any of this).

As Sergeant Schultz from Hogan's Heros would say "I know nothing".

This is one example where sophisticated sellers leverage Marriott's ROFR to sell their unit to them. There are 2 risks to this strategy. First, Marriott doesn't buy it back. Then, your BIL must complete the transaction. Second, if you are found to have a pattern of doing this, Marriott identifies it and doesn't exercise just to spite you. Yes, it has happened.

 

[BocaBum99]

Can you please explain this further.

Chris,

Perry's example above is one way. There are many more. All it takes is a bit of creativity.

 

[timeos2]

Underhanded, sneaky, games, and whatever

Chris,

Perry's example above is one way. There are many more. All it takes is a bit of creativity.

You've got to love a system where the original sale is high pressure, overpriced and a bad deal in 99% of the cases. Then, for some resorts, the owners have to lower themselves to sneaky, underhanded, posssibly illegal moves to attempt to get 50% of what they paid back. Wonderful.

And why would the BIL HAVE to complete the sale? He backed out - he doesn't want to deal with ROFR nonsense. Neither the seller nor Marriott can force the sale. The whole thing is a nigtmare game where the players are all trying to shaft each other. No thanks. Just avoid any timeshare with ROFR and save yourself a ton of nightmares.

 

[BocaBum99]

You've got to love a system where the original sale is high pressure, overpriced and a bad deal in 99% of the cases. Then, for some resorts, the owners have to lower themselves to sneaky, underhanded, posssibly illegal moves to attempt to get 50% of what they paid back. Wonderful.

And why would the BIL HAVE to complete the sale? He backed out - he doesn't want to deal with ROFR nonsense. Neither the seller nor Marriott can force the sale. The whole thing is a nigtmare game where the players are all trying to shaft each other. No thanks. Just avoid any timeshare with ROFR and save yourself a ton of nightmares.

I agree with both of your conclusions for me, personally. I haven't purchased a Marriott Platinum week to date because ROFR has pushed up the prices to be not economically a good deal. But, that's for me. Some people believe those Marriott's are worth it even at the higher prices. Since Marriott has been minimizing/eliminating ROFR, I believe it is the good time to buy NOW.

I also agree that the BIL thing is semi-shady, but not illegal. I know people who have used a similar strategy to get Marriott to buy back units. I've never sold a Marriott. So, I am not speaking from direct experience but from the experience of people whom I have met.

 

[BocaBum99]

You've got to love a system where the original sale is high pressure, overpriced and a bad deal in 99% of the cases. Then, for some resorts, the owners have to lower themselves to sneaky, underhanded, posssibly illegal moves to attempt to get 50% of what they paid back. Wonderful.

And why would the BIL HAVE to complete the sale? He backed out - he doesn't want to deal with ROFR nonsense. Neither the seller nor Marriott can force the sale. The whole thing is a nigtmare game where the players are all trying to shaft each other. No thanks. Just avoid any timeshare with ROFR and save yourself a ton of nightmares.

By the way, I agree that the entire timeshare sales and marketing model is the root cause of the market price distortion for timeshares.

I have stated before and still believe it now that the key to making timesharing an efficient market is for the economics of timesharing to be obvious to resale purchasers. In other words, when a potential purchaser can make a simple buy vs. rent analysis and the economics of owning is superior to the economics of renting given the risks, then a real and efficient resale market can exist. This will require resorts to dramatically reduce their maintenance fees and do a better job and marketing their timeshares destination for renters.

Once timeshare slum lords think they can make money renting, they will load up on timeshares and put in a price floor for timeshares. As long as resorts don't follow this advice, there will remain loads of timeshares with negative values since the price of renting will be below annual maintenance fees and dues.

 

[BocaBum99]

You've got to love a system where the original sale is high pressure, overpriced and a bad deal in 99% of the cases. Then, for some resorts, the owners have to lower themselves to sneaky, underhanded, posssibly illegal moves to attempt to get 50% of what they paid back. Wonderful.

And why would the BIL HAVE to complete the sale? He backed out - he doesn't want to deal with ROFR nonsense. Neither the seller nor Marriott can force the sale. The whole thing is a nigtmare game where the players are all trying to shaft each other. No thanks. Just avoid any timeshare with ROFR and save yourself a ton of nightmares.

So, do you now concede that you were wrong that sellers NEVER benefit from ROFR? In Perry's ebay shuffle, that seller clearly benefits from ROFR. One case proves NEVER wrong. He may have benefited in a semi-dirty way. But, the seller benefited nonetheless.

By the way, there are other ways to make this happen without there being any sleaziness or perceived sleaziness.

 

[timeos2]

So, do you now concede that you were wrong that sellers NEVER benefit from ROFR? In Perry's ebay shuffle, that seller clearly benefits from ROFR. One case proves NEVER wrong. He may have benefited in a semi-dirty way. But, the seller benefited nonetheless.

By the way, there are other ways to make this happen without there being any sleaziness or perceived sleaziness.

OK - never should have been rarely. And then the new buyer/future seller has placed themselves in the mostly losers spot. And the rarely winners are far outnumbered by the nearly sure losers. Odds are not good for those who choose to play.

 

[BocaBum99]

OK - never should have been rarely. And then the new buyer/future seller has placed themselves in the mostly losers spot. And the rarely winners are far outnumbered by the nearly sure losers. Odds are not good for those who choose to play.

My whole thesis behind this being a good time to buy Marriott platinum weeks is based on two assumptions.

1) Since Marriott is no longer exercising ROFR, it is possible to get a smokin' great deal that is at or below the nominal resale market. In fact, this creates a flip opportunity in Marriott's that didn't previously exist.

2) That there is a very good chance that ROFR will be reinstituted at a level that benefits buyers now when ROFR is not being exercised.

Point one ensures you can get a deal that makes economic sense.

Point two is a potential upside that could benefit lots of owners who are buying in this period. It's not guaranteed, but I bet it will happen.

So, just as it is a risk to buyers during aggressive ROFR buying that their resale prices will plummet when ROFR stops. The converse is also true which is that it is a potential boon to buyers in a non-ROFR period when it is likely that a new round of aggressive ROFR buying will occur.

The only questions are:

1) what is the expected time for ROFR to resume?
2) will it likely be at a rate higher than you are purchasing now?
3) what can you do with the unit while you are waiting for that time to occur?
4) what if your purchase is worthless after 5 years, is it still a good deal?

If you have good answers to the above questions, you have a good buying opportunity.

 

[AwayWeGo]

One More Question - - -

The only questions are:

1) what is the expected time for ROFR to resume?
2) will it likely be at a rate higher than you are purchasing now?
3) what can you do with the unit while you are waiting for that time to occur?
4) what if your purchase is worthless after 5 years, is it still a good deal?

5) how long can you afford to keep on paying the annual maintenance fees & possible occasional special assessment while you're waiting for the balloon to go back up ?

-- Alan Cole, McLean (Fairfax County), Virginia, USA.​

 

[thinze3]

5) how long can you afford to keep on paying the annual maintenance fees & possible occasional special assessment while you're waiting for the balloon to go back up ?

-- Alan Cole, McLean (Fairfax County), Virginia, USA.​

This is the reason why I mentioned BeachPlace to Boca. MBP is sold out and its 10 year renovations are complete. Also, the platinum units do rent for a minumum 1.5 times MF's. MBP can be purchased for 20-30% of retail. There are other deals like this as well to be had if one is patient.

The Marriotts in Palm Desert are pricing at 30-35% retail and can also rent very easily. If using them to trade, they offere AC's every year. Of course that can change, but I would bet that these become MORE in demand as Hawaii demand wanes.

IMHO there is NO reason to wait, hoping that prices will fall further. If tomorrow Marriott decides it will be cheaper to resale existing units than to build new ones, those who wait will most likely miss the boat.

Terry

 

[timeos2]

Don't bet on it

This is the reason why I mentioned BeachPlace to Boca. MBP is sold out and its 10 year renovations are complete. Also, the platinum units do rent for a minumum 1.5 times MF's. MBP can be purchased for 20-30% of retail. There are other deals like this as well to be had if one is patient.

You mean rented (as in the past) for 1.5 the MF. Don't assume that is true now as rentals have been hit even harder than sales. Even RCI admits having problems renting - and if you believe some here they have the best of times to offer. Every resort I know of has had a steep decline since the 3rd quarter in rentals (as have hotels). The price is most likely going to come down - perhaps substantially - to spur rentals. Everything is in flux right now. The old rules don't apply.

 

[taffy19]

Marriott has two things intertwined here:

1) The ROFR
2) Their resale business

Marriott will gladly be your real estate broker and charge 40% commission to do so (If the resort is close to being sold out). However, if the resale market is below that 60% that the owner gets for a resale folks will buy from eBay for pennies on the dollar.

This is the SOLE reason Marriott uses the ROFR – to buy the cheapest units available for their sales offices. As a side benefit Marriott owners enjoy an artificially higher resale rate and Marriott acting as your broker.

During these times folks aren’t buying timeshares so no need to worry about folks buying $1 Marriotts on eBay. A timeshare comes with a lot of baggage – they are hard to understand , hard to make reservations, hard to maintain (MF) and hard to sell when you want to get out.

Once this relationship of sales in the sales office is linked to resale prices in eBay you then understand why Marriott uses the ROFR if it is to their advantage and why the ROFR closely follows the percentage Marriott owners get when Marriott sells their unit in their sales office.


Expect both the ROFR and the percentage you get from Marriott resales to plummet - there is a glut of timeshares up for sale.

I doubt if the percentage you'll get from the Marriott resale will plummet as that is their commission fee but they will stop taking resales for the time being as they can't sell fast enough what they have got already. JMHO.

I see resale prices go lower yet with the next phase of commercical RE foreclosures starting to show up now so more uncertainty in the economy.

I believe that renting a timeshare is much smarter than buying one today and being stuck with the maintenance fees that may have to increase because other timeshare owners are bailing out. I see rents going down further too so why buy?

 

[billymach4]

ROFR is intended to placate brand new buyers that got snuckered by the salesman.

I sat in a focus group a few years ago with some recent new buyers of Marriott TS's. Marriott execs, as well as Marriott advertising people were running the panel asking and prying for ideas. We were all brand new buyers within 12 months of our purchase.

Some people expressed frustration that the Salesman did not present the EOY option. The Marriott exec also wanted to point out the ROFR and what the Marriott corporate line of intent was. The exec stated that Marriott wanted to protect new buyers, and help maintain the market price. Marriott's intent FWIW is to protect the new buyer. They want to assure the new buyer of a $50K TS that his investment is protected by at least 60% of value.

Well fast forward to 2008, and we all know that is a crock.

For better or worse I have no care or opinion what ROFR does for Buyer or Seller. However it is simply a sales tool to benefit Marriott plain and simple.

 

[beachlimey]

Sorry to jump in 6months into this debate but can someone please decipher EOY, ROFR and FWIW for me!

 

[Dave M]

EOY = a timeshare ownership that allows occupancy Every Other Year

ROFR = Many developers have a Right Of First Refusal to repurchase a resale timeshare at the same price that a buyer and seller have agreed upon.

FWIW = a common Imternet acronym meaning For What It's Worth

See this link in the TUG Advice section for more timeshare acronyms.

 

[AwayWeGo]

E. O. Y. Can Be Ambiguous.

EOY = a timeshare ownership that allows occupancy Every Other Year

Alternate-year timeshares come in 2 flavors -- EOY & EEY

EOY = Every Odd Year.

EEY = Every Even Year.

There is even such a thing as "triangle" timeshare ownership -- the deeded occupancy comes up once every 3 years. I have no idea how that's designated, or how they keep track of those.

-- Alan Cole, McLean (Fairfax County), Virginia, USA.​

 

[Dave M]

I agree, Alan. However, when the term "EOY" is used on these forums, it virtually always means either of those two alternatives, unless otherwise specified.

 

[dioxide45]

Sorry to jump in 6months into this debate but can someone please decipher EOY, ROFR and FWIW for me!

You aren't jumping in 6 months in to the debate. The debate has been raging far longer than that. Also this was just recently reprised with some new added passion. This tends to go in cycles here, this thread will die off in a week or so and then come back hot and heavy 2-3 months from now with pretty much all the same arguments, several of which will likely be from me rehashing what I said before.

 

[Transit]

I know we have been through the ROFR debate a million times but DVC is still buying back and resales are still high.?

 

[PerryM]

Wait for it....wait...wait...

I’d like to make something very clear:

“Don’t buy a timeshare now under ANY circumstances” – developer or resale.

I truly believe that in the next 2 – 4 years you will be able to buy MOST timeshares for $1 on eBay – all the name brands – Marriott, Westgate, Westin, Wyndham (that one you can do now), everyone of them but Disney. (That's Platinum Marriott weeks too - probably not Platinum Plus holiday weeks - maybe $10 for those)

You can’t have an artificially accelerated market skyrocket for 40+ years and not have one single correction. All those pent up corrections are about to hit all at once. So wait and buy virtually anything you want for a buck.

In the mean time use eBay, VRBO, and other places to rent what you want and keep “your powder dry” until the mother of all timeshare corrections hits.

Just look at the debacle the 3 Detroit auto makers are in - that's what awaits the timeshare industry, only much worse. Don't count on our insane Uncle Sam to bail us out.

Heck, those .99 cent stores might be the place you go to buy a timeshare in the not too distant future. Maybe they'll throw in a Tootsie Roll as the free gift. (Old habits are hard to break)

 

[Icarus]

I don't get it either

I think I might, but I'm not sure. In my case, I priced my KBC 1BR OV at about 60% of retail and listed it on redweek. A broker, with a buyer, picked it up, tacked on her buyer paid fixed fee and after we agreed to terms, sent it to the ROFR desk. The sales price included her fee, tacked on to my price, because that is the selling price to the buyer.

Marriott decided to exercise ROFR, so the broker gets her commission (now paid by Marriott instead of the original buyer), I get what I wanted and the broker still has a buyer for another unit. So, I'm happy, the broker is happy, and the broker still has a buyer and can find another unit out there for the buyer and start all over again. Repeat until Marriott lets one go by either because they don't need any more units or the price is higher than their threshold that day or the buyer gives up. Presumably, if the buyer hangs in there and keeps trying, eventually one will get by ROFR (well, in a normal market, anyway.)

Of course, none of this applies in the current market.

That's why I asked if it included multiple transactions.

BTW, the brokers fee was not insignificant. (not like a 6% commission on a house.)

-David

 

[dioxide45]

I know we have been through the ROFR debate a million times but DVC is still buying back and resales are still high.?

The difference with DVC is that they have almost created a floor with their ROFR. They are consistent and methodical with ROFR. As with any ROFR option, they have the ability to stop exercising it tomorrow, if that happens prices will drop. So as I have tried to point out, just because a developer has ROFR there is no guaranty that it will help you sell for a higher price.

A consistently exercised ROFR will help prop up prices, but all those who purchased when they were exercising will be burned when they stop.

 

[PerryM]

Bombs away......

For those of you daredevil bargain hunters out there 20¢ on the dollar Marriotts are apparently becoming available. Personally I’d wait until they get to $1 on eBay; but that’s just me.

We WM owners can only get about 28¢ on the dollar and we never had to worry about the ROFR.

Thank goodness that pesky ROFR is no longer being enforced by Marriott; bombs away.

 

[BocaBum99]

For those of you daredevil bargain hunters out there 20¢ on the dollar Marriotts are apparently becoming available. Personally I’d wait until they get to $1 on eBay; but that’s just me.

We WM owners can only get about 28¢ on the dollar and we never had to worry about the ROFR.

Thank goodness that pesky ROFR is no longer being enforced by Marriott; bombs away.

I agree with your more moderate position rather than the don't buy any timeshare at any price recommendation.

The way to decide to buy or not is this.

Multiply the probability that you believe all timeshares will drop to $1. Multiply the expected reduced value of ROFR that Marriott is likely to exercise times the probablity that that scenario shall return. The sum of the two probabilities = 1.

This will give you the weighted average expected future value of that timeshare. Don't buy it unless you can buy it at 50% of that value.

Perry believes most timeshares will be $1 on eBay with nearly 100% certainty. So, he should purchase at $.50.

I give it 10% that Perry is right and 90% that Marriott will exercise at 50-70% of the past ROFR values.

So, if a Marriott timeshare used to pass ROFR at $20k, I get (10% of $1 + 90% of 60% of 20000)/2 = $5400.

If Marriott was exercising at $20k just 8 months ago, I would have a hard time saying no to something selling for $5400 today.

If I want to own that destination and the maintenance fees aren't too bad, I'd probably be buying it.