Any FROR from international seller resale contract?

[poofyo101]

Was told by one broker that Disney does not buy back any international seller contracts?
Any truth to this?

 

[Sandisw]

I have never heard that in 10 years as a DVC member.

 

[Madame]

Was told by one broker that Disney does not buy back any international seller contracts?
Any truth to this?

I’ve heard it as well. Do a search and I’m sure you’ll find some chatter on it.

 

[HickoryDickory]

I've read multiple conversations before with the 'Disney has never taken in ROFR an international seller contract' claim. No one has ever later popped into the conversation to say they were an international seller, or were buying from an international seller, and the contract was taken in ROFR.

 

[Noodlez]

I've heard this many times, but I think it would be hard to confirm. I'm international (although not currently a seller) and I wouldn't want to tell people if this was true as I'd be worried that I'd get lower offers if people think that there's no possibility it would be taken!

There often doesn't see much sense to ROFR 'patterns' either, so even if a few people confirmed they got low prices through it could all just be coincidence.

 

[jscottnc]

A few months back we bought a 230 BLT contract from an international seller for $140pp, right at the edge of what Disney had be taken. We had intended to offer $143pp but some miscommunication (or mistyping) turned this into a $140pp offer. It was a tense month expecting Disney to take the contract. Had we known at the time it was an international seller, we might have slept more easily.

 

[Yinn]

I've read multiple conversations before with the 'Disney has never taken in ROFR an international seller contract' claim. No one has ever later popped into the conversation to say they were an international seller, or were buying from an international seller, and the contract was taken in ROFR.

This is 100% correct, there isn't an official confirmation.

That being said, there are challenges of them executing ROFR from international sellers. It ranges from prevention of fraud, money laundering, reduction of operation complexity and operation costs, etc. But I think the biggest one is th at these are deeded and technically real estate purchases. As such, they may be subject to the FIRPTA.

FIRPTA states:
"Persons purchasing U.S. real property interests (transferees) from foreign persons, certain purchasers' agents, and settlement officers are required to withhold 15% (10% for dispositions before February 17, 2016) of the amount realized on the disposition (special rules for foreign corporations)."

Now I'm not a lawyer, but based on my understanding of ROFR, Disney holds right of first refusal under the same terms. I just went through my contract/offer for my resale and it does not make any provisions for taxes. On mine specifically, it just specifies that buyer is responsible for all closing costs. So then this brings up the next item under this same point.

"If you are the transferee/buyer, you must find out if the transferor is a foreign person. If the transferor is a foreign person and you fail to withhold, you may be held liable for the tax. For cases in which a U.S. business entity such as a corporation or partnership disposes of a U.S. real property interest, the business entity itself is the withholding agent. "

So if I bought from a foreign seller and did not collect. I'm on the hook for that withholding tax. As an individual, the IRS may not come after you...or they might. But as a corporation, especially as large as they are; I bet Uncle Sam is definitely looking for that 15%.

 

[jscottnc]

I would expect the lawyer managing the closing to know and withhold taxes as appropriate from the settlement. Checking my closing documents, I see that the firm handling the closing withheld on my behalf.

Somehow I think Disney would go the extra mile and take from a foreign seller if the price offered was low enough AND they had a waitlist for the points. The breakeven price for Disney may be so low for foreign sellers that they never exercise.

The money laundering angle may have more merit.

 

[Yinn]

I would expect the lawyer managing the closing to know and withhold taxes as appropriate from the settlement. Checking my closing documents, I see that the firm handling the closing withheld on my behalf.

Somehow I think Disney would go the extra mile and take from a foreign seller if the price offered was low enough AND they had a waitlist for the points. The breakeven price for Disney may be so low for foreign sellers that they never exercise.

The money laundering angle may have more merit.

I agree on the break even, I didn’t buy international so I have some questions for you, how much were your closing costs in total?
I’m wondering if it is actually 15% that they withhold. If the closing costs are taking the extra 15% in withholding, then some international contracts may actually be more expensive.

For example, I’ve heard of The podcast talking about a $88/pt BRV contract from an international seller. Adjusted 15% would be a $101/pt contract. Which would be in line with the market ($97-125 July-Sept) I think that’s a pretty big difference and consideration for anyone looking to buy and making an offer on an international contract.

 

[CanadaDisney05]

I agree on the break even, I didn’t buy international so I have some questions for you, how much were your closing costs in total?
I’m wondering if it is actually 15% that they withhold. If the closing costs are taking the extra 15% in withholding, then some international contracts may actually be more expensive.

For example, I’ve heard of The podcast talking about a $88/pt BRV contract from an international seller. Adjusted 15% would be a $101/pt contract. Which would be in line with the market ($97-125 July-Sept) I think that’s a pretty big difference and consideration for anyone looking to buy and making an offer on an international contract.

Withholding tax is not really a tax. It's like when an employer withholds your income tax on your payroll. It's just an estimate on the tax that you owe.

Example) You buy a contract from me for $15,000. Instead of paying me $15,000, you pay me $12,750, and send $2,250 to the IRS. Your obligation is now done.

As the international seller, I must now file a US tax return that will show either a capital gain or loss. If there is a capital loss, I owe no money and get the $2,250 back. If there is a capital gain, and I owe more than $2,250, I send the IRS the difference. If I owe less than $2,250, they send me the difference.

The reason they have the withholding tax is so that a foreign person who owes money to the IRS doesn't just leave the country and never pay.

 

[Yinn]

Withholding tax is not really a tax. It's like when an employer withholds your income tax on your payroll. It's just an estimate on the tax that you owe.

Example) You buy a contract from me for $15,000. Instead of paying me $15,000, you pay me $12,750, and send $2,250 to the IRS. Your obligation is now done.

As the international seller, I must now file a US tax return that will show either a capital gain or loss. If there is a capital loss, I owe no money and get the $2,250 back. If there is a capital gain, and I owe more than $2,250, I send the IRS the difference. If I owe less than $2,250, they send me the difference.

The reason they have the withholding tax is so that a foreign person who owes money to the IRS doesn't just leave the country and never pay.

So based on that scenario, if I offered you $100/pt. the reseller takes their commission - we’ll say $10, taxes of $15, you’d get $75/pt in your pocket.

So using the same podcast, that would suggest that BRV sold for $88 the seller would’ve only received $66/pt in their pocket.

This is a little different from what jscottnc said on his closing costs. I think his scenario put the concern of extra costs to the buyers at closing. Yours puts a concern of extra fees on the sellers potentially not getting as much as they’re looking forin their pocket

I Just did a quick search for reseller sites and seller fees and it doesn’t look like any of them disclose of pulling that amount out for taxes. I think I understand the withholding, but more curious as to how it’s carried out. The costs have to be absorbed somewhere..either the buyer, seller, or from Uncle Sam.

 

[CanadaDisney05]

So based on that scenario, if I offered you $100/pt. the reseller takes their commission - we’ll say $10, taxes of $15, you’d get $75/pt in your pocket.

So using the same podcast, that would suggest that BRV sold for $88 the seller would’ve only received $66/pt in their pocket.

This is a little different from what jscottnc said on his closing costs. I think his scenario put the concern of extra costs to the buyers at closing. Yours puts a concern of extra fees on the sellers potentially not getting as much as they’re looking forin their pocket

I Just did a quick search for reseller sites and seller fees and it doesn’t look like any of them disclose of pulling that amount out for taxes. I think I understand the withholding, but more curious as to how it’s carried out. The costs have to be absorbed somewhere..either the buyer, seller, or from Uncle Sam.

Its not a real cost though.....

you buy a contract for $100 from me, with broker getting 10% commission...

You pay $100.

Broker gets $10

I get $75.

IRS gets $15

Assuming I sold for less than I purchased for (capital loss), I do not owe the IRS any money. When I file a US tax return next April and show $0 of taxes, the IRS will send me $15.

I now have $90. Theres an extra step, and extra time involved, but at the end of the day its the same net effect as if I was a US citizen.

Perhaps thr closong costs are slightly higher because the closing company has more work to do, because they have to file the withholding tax to the IRS. Maybe the charge an extra $100 or something like that.

Edit: another way to think about it: withholding tax is not a noun, its a verb. Its not a tax itself. Its the action of withholding an estimate of income tax from a payment just as an emplpyer withholds income tax from an employees paycheque

 

[TP3]

Was told by one broker that Disney does not buy back any international seller contracts?
Any truth to this?

I've heard it is rare but I can personally tell you that they do. We were purchasing two contracts from an international seller and we were notified yesterday that Disney bought them back.

 

[poofyo101]

I've heard it is rare but I can personally tell you that they do. We were purchasing two contracts from an international seller and we were notified yesterday that Disney bought them back.

What was the contract?

 

[TP3]

What was the contract?

Two contracts for the Grand Californian.

 

[HickoryDickory]

I've heard it is rare but I can personally tell you that they do. We were purchasing two contracts from an international seller and we were notified yesterday that Disney bought them back.

Wow, you are the first I've ever read give a personal first hand account of an international seller contract being taken in ROFR. I guess Grand Californian would be the resort where it would happen. Sorry.

 

[TP3]

Wow, you are the first I've ever read give a personal first hand account of an international seller contract being taken in ROFR. I guess Grand Californian would be the resort where it would happen. Sorry.

Thanks. We were pretty disappointed. As I understand it, Disney has about 30 days to decide if they want to buy contracts back. Our offers were submitted to Disney on Sept. 7th and I was hopeful as we were getting close to that 30-day mark and on Oct. 1st, we got word that they bought them back.

 

[Bing Showei]

Wow, you are the first I've ever read give a personal first hand account of an international seller contract being taken in ROFR. I guess Grand Californian would be the resort where it would happen. Sorry.

There was another VGC ROFR'd yesterday on the ROFR thread. First I'd seen of VGC, and now TP3 gets two taken... international seller to boot.

 

[poofyo101]

Thanks. We were pretty disappointed. As I understand it, Disney has about 30 days to decide if they want to buy contracts back. Our offers were submitted to Disney on Sept. 7th and I was hopeful as we were getting close to that 30-day mark and on Oct. 1st, we got word that they bought them back.

Sorry to hear that. Would you mind sharing the details of the contract?

 

[TP3]

Sorry to hear that. Would you mind sharing the details of the contract?

Sure, there were two contracts each with 190 points. I don't remember the exact amount but one contract had about 90 banked points. Both contracts had all 2019 and all 2020 points available. We offered the asking price of $195 per point. The sellers were in Canada.