Selling my CCV contract and Disney exercised ROFR

[Sandisw]

I get that they step in as the buyer, but is this outlined in more detail somewhere? I'm asking because our contract has an assignability of contract clause that states "this contract is not assignable". I thought that meant that the contract must stay between the original parties i.e. if ROFR was exercised, the original contract wouldn't matter anymore.

Our contract also mentions that Disney may exercise their ROFR, but it doesn't really clarify what that means. I would think this would be a good place to have something stating that Disney steps in as the buyer and agrees to all terms of the original contract. Maybe other contracts are clearer.

Here is the actual language. From RIV POS.

 

[chalee94]

I don't understand the disdain for ROFR.

It's one of the things that makes DVC better than other timeshares. It helps keep your resale value elevated.

This is simply not true at all.

When the Pandemic hit and Disney stepped back from ROFR, our contracts didn't lose that much value because DVC prospects weren't the ones losing jobs. Disney restarted ROFR because the value was still there and potential buyers had free money to spend and they wanted to be the ones to take it.

Our resale value stays elevated as long as people are interested in paying high prices to stay onsite at WDW. Correlation does not imply causation.

 

[RamblinWreck]

This is simply not true at all.

When the Pandemic hit and Disney stepped back from ROFR, our contracts didn't lose that much value because DVC prospects weren't the ones losing jobs. Disney restarted ROFR because the value was still there and potential buyers had free money to spend and they wanted to be the ones to take it.

Our resale value stays elevated as long as people are interested in paying high prices to stay onsite at WDW. Correlation does not imply causation.

That’s a very brief period of time

Resale prices tend to hover around the artificial price floor created by ROFR over time. It’s not a coincidence. They absolutely would go lower without it.

 

[bumbershoot]

This is simply not true at all.

When the Pandemic hit and Disney stepped back from ROFR, our contracts didn't lose that much value because DVC prospects weren't the ones losing jobs. Disney restarted ROFR because the value was still there and potential buyers had free money to spend and they wanted to be the ones to take it.

Our resale value stays elevated as long as people are interested in paying high prices to stay onsite at WDW. Correlation does not imply causation.

Just because they might have stepped back didn't mean it was gone. If ROFR ended 100% and forever (not Disney "forever" where they add a new slogan and bring it back), prices would sink.

 

[Yinn]

Just because they might have stepped back didn't mean it was gone. If ROFR ended 100% and forever (not Disney "forever" where they add a new slogan and bring it back), prices would sink.

I think even then it wouldn't drop to $1 like some other time shares. ROFR is only one piece of support, it just happens to be one of the strongest ones. DVC is strong because it's got multiple pieces of support. Direct prices, hotel prices, are all supports for DVC pricing. And that's aside from the currently non-existent member perks that get thrown on. And a responsible management company that keeps dues reasonable.

Just ask ourselves...at what price would we step in and buy more DVC? I know at $1/pt, I'd buy...all of them. At $10/pt, I'd still buy...as much as my bank account would allow me. It would take $20-$30/pt for a single trip breakeven compared to a hotel stay.

Then there's the discount factor. If you could save 50% compared to buying direct, there would still be a lot of takers. Those are all supports. ROFR just happens to be more of an on-demand support rather than a - let the market evolve support.

 

[chalee94]

Resale prices tend to hover around the artificial price floor created by ROFR over time. It’s not a coincidence. They absolutely would go lower without it.

I've been watching prices for over 15 years. Through the Great Recession when ROFR was gone for basically 18 months except for a few contracts at BCV, I think. Disney saw the unemployment numbers (which did hit DVC owners and potential buyers at that point) and also that gas prices were setting records. Demand dropped like a rock and Disney did not maintain ROFR to "prop up resale values" - they already had more DVC inventory than they could sell. So demand falling off a cliff resulted in DVC dropping ROFR and lower demand also led to lower DVC resale prices (although still a relatively small drop in timeshare terms except for some fire sales that got through which typically wouldn't have - I think one OKW contract was reported as going for $25 per point.)

Based on the data they see, Disney typically has a better sense of DVC demand than we do. They can set ROFR pricing based on their ability to move direct contracts. They can drop out if demand falters and they don't want to get stuck with inventory that they can't quickly turn over. That's part of why the Pandemic was interesting - Disney got it wrong, but quickly got back in the game when they saw that demand for DVC was still very strong. Demand drives prices higher which drives ROFR - not the other way around.

In a small sense, there is a tiny effect. If I think OKW is worth $84 per point, I might offer $86 per point if I know that will get it through ROFR. Sure - pay a tiny bit extra to avoid the hassle of starting over. But if OKW resales are asking $110 or more and I think OKW is worth $84 per point, then I will drop out of the market and spend money elsewhere. (I'm sure this can happen because it's where I am - resale prices are way too close to direct prices and for me, the value isn't close to being there at this point.)

But you are making the case that, without ROFR, the same buyers would only be willing to pay $84 per point, even though they'd pony up $110 per point if ROFR puts that purchase at risk. That doesn't make any logical sense. If all economic conditions are equal except for ROFR, a buyer is either willing to pay $110 or not. If the sellers hold the line and ask for $110, that's how it's going to be. That's what we saw at the start of the Pandemic. Demand remained strong even though Disney dropped ROFR. Buyers who simply had to get DVC points didn't suddenly say, I'm going to walk away from this transaction until it hits $84 - they still paid what it took to get the points they wanted. It didn't matter if there was no risk of ROFR since they were willing to pay the asking price.

ROFR probably does provide some help for sellers in determining how much they can ask to avoid leaving too much on the table. But again, Disney generally has better data to know where the demand curve is and use that to establish general ROFR levels. Even if "resale prices tend to hover around the ROFR line", it's not because buyers who would act rationally and walk away at $110 without ROFR are inexplicably willing to pay a big premium to get the same contract through ROFR (assuming it's under the same economic circumstances). A buyer who is willing to pay $110 is willing to pay $110 - but sure, ROFR might help more sellers to know to ask for that much.

ROFR is primarily about annoying buyers into purchasing direct and allowing Disney to profit by taking advantage of sellers who set their prices way below the demand curve. But demand drives prices.

 

[achinforsomebacon]

Here is the actual language. From RIV POS.

Thanks! I figured you'd have this handy. Given the number of contracts that go through ROFR, I would think this has come up before, even if it's just an owner regretting selling and deciding they want to keep the contract. I wonder how DVD has handled that.

I also wonder what happens if ROFR is exercised, but the transfer isn't completed in time. Does the seller keep it? Does the original buyer get the chance to come back in and buy it?

 

[Sandisw]

Thanks! I figured you'd have this handy. Given the number of contracts that go through ROFR, I would think this has come up before, even if it's just an owner regretting selling and deciding they want to keep the contract. I wonder how DVD has handled that.

I also wonder what happens if ROFR is exercised, but the transfer isn't completed in time. Does the seller keep it? Does the original buyer get the chance to come back in and buy it?

I would doubt Disney ever fails to transfer it on time.

However, the seller can always chose to cancel the contract after the official closing date like the buyer can.

In that case, they own it and can do what they want, including trying to sell it again.

The original buyer would have no leg up unless the seller asked the broker to check to see if they were still interested if the seller still wants to sell.

But can’t believe many sellers who have contracts taken back out because it’s Disney and then try to immediately sell. Even the OP has indicated it’s not the plan.

 

[Yinn]

ROFR probably does provide some help for sellers in determining how much they can ask to avoid leaving too much on the table. But again, Disney generally has better data to know where the demand curve is and use that to establish general ROFR levels. Even if "resale prices tend to hover around the ROFR line", it's not because buyers who would act rationally and walk away at $110 without ROFR are inexplicably willing to pay a big premium to get the same contract through ROFR (assuming it's under the same economic circumstances). A buyer who is willing to pay $110 is willing to pay $110 - but sure, ROFR might help more sellers to know to ask for that much.

Just to add, even without ROFR this is technically possible. There are instances of people going back to Disney and asking them to buy the contract back. My guide told me this initially and I doubted it but this past year I inquired as to what Disney would pay me if I were to sell them my CCV and purchased a RIV. The answer? $140/pt - which is more than 10% below the ROFR numbers.

That did influence my pricing. I needed to sell it with a broker for $154/pt just to cover the commission and end up with the same amount of dollars in my pocket...with far more hassle. So from there, factor in a couple of $/pt to cover negotiations and a couple of $/pt to make it worth doing it this way and I decided to list it at $170/pt. There were several resale brokers who balked at my request to list it at that. When I finally found one who would, it took less than 24 hours before I got an offer at $165/pt.

So to your point, my decision at that number was driven by what Disney is willing to give me. Even if ROFR disappeared, there's a price point where someone (Disney or not) is willing to buy it.

At $165/pt, that's a 27% savings over direct. Disney offering me $140/pt and selling it at $225/pt is a 62% margin. At a certain price point it's cheaper for Disney to buy back points than it is to build new. Just because there's no ROFR doesn't mean Disney doesn't have the ability to still repurchase and/or purchase on the free market.

 

[chalee94]

Just to add, even without ROFR this is technically possible. There are instances of people going back to Disney and asking them to buy the contract back. My guide told me this initially and I doubted it but this past year I inquired as to what Disney would pay me if I were to sell them my CCV and purchased a RIV. The answer? $140/pt - which is more than 10% below the ROFR numbers.

That's s decent value for a trade-in. Not technically apples to apples, though, since your example involves trading in for a new purchase. Historically for a seller who was not looking to purchase a new resort, they only offered around 50% of direct pricing for resorts with high demand or else they just give you the website for a reseller. (Maybe that has changed but I haven't heard anything.)

At $165/pt, that's a 27% savings over direct. Disney offering me $140/pt and selling it at $225/pt is a 62% margin. At a certain price point it's cheaper for Disney to buy back points than it is to build new. Just because there's no ROFR doesn't mean Disney doesn't have the ability to still repurchase and/or purchase on the free market.

Yes. That's not the point though. (And I would expect that Disney typically gets a decent supply of inventory for "free" from foreclosures.)

If you were in a situation where you simply wanted to sell your contract and Disney (as is more typical) will not offer to buy it back, then you are stuck with what buyers are willing to pay. If your contract might be ROFRed around a given level but for some reason, you only have one buyer offering to pay $40 per pt below the estimated ROFR value, that is what you can sell it for. You could rent instead (and the prospective buyer could sit it out and pursue alternatives as well), but if you want to sell it, you need a bona fide offer and ROFR doesn't force anyone (rational) to pay a big premium. This is how Disney usually acquires points - and why they typically won't offer to repurchase points directly - because ROFR always gives them the option but not the obligation to jump in and take advantage of good deals.

But when posters conflate "ROFR" with "keeps prices higher", it gives people the wrong idea...especially since we have seen Disney drop ROFR multiple times when it looks like demand might be collapsing. ROFR does not protect resale prices. ROFR benefits Disney by giving them options, but it's not what is driving prices higher over the past year - prices are higher because buyers are willing to pay them whether ROFR is in play or not.

 

[velocistar237]

OP checking in...it's been over three weeks since we were notified that Disney was exercising ROFR and we haven't heard a peep from Disney. Our contract states "This contract shall be closed 09/05/2021 unless extended by the Title Company for administrative reasons." So that means that if no one from Disney reaches out to us by 9/5 then the contract simply expires and everyone walks away, right? That's only a little more than two weeks from now.

 

[stwaldman]

OP checking in...it's been over three weeks since we were notified that Disney was exercising ROFR and we haven't heard a peep from Disney. Our contract states "This contract shall be closed 09/05/2021 unless extended by the Title Company for administrative reasons." So that means that if no one from Disney reaches out to us by 9/5 then the contract simply expires and everyone walks away, right? That's only a little more than two weeks from now.

Even if that time passes, the parties still could execute the contract if they wanted to, but it would likely give you the right to walk away without penalty or seek action to force the buyer to execute (not using proper legal terminology, but that would be the gist).

 

[stwaldman]

Even if that time passes, the parties still could execute the contract if they wanted to, but it would likely give you the right to walk away without penalty or seek action to force the buyer to execute (not using proper legal terminology, but that would be the gist).

My contract also had the clause about possibly extending for administrative reasons and cited a delay in receiving paperwork as a cause, so probably worth checking in with them to see if that's bring exercised at all.

 

[Sandisw]

OP checking in...it's been over three weeks since we were notified that Disney was exercising ROFR and we haven't heard a peep from Disney. Our contract states "This contract shall be closed 09/05/2021 unless extended by the Title Company for administrative reasons." So that means that if no one from Disney reaches out to us by 9/5 then the contract simply expires and everyone walks away, right? That's only a little more than two weeks from now.

That is correct. While it does say it can be extended, a buyer..:which is now Disney…doesn’t get to make that decision on their own.

Id reach out again to the title company and tell them you will cancel the sale if you don’t close in time..if that’s what you’d do.

It puts them on notice and then they can contact Disney like they would any other buyer who was dragging their feet.

 

[Jwaire]

Disney got it wrong, but quickly got back in the game when they saw that demand for DVC was still very strong.

Let's keep in mind, Disney also thought their parks division was in trouble and they had to secure a large credit line from financial institutions before ROFR restarted.

Disney, corporate, has amassed a lot of additional debt under Iger from Star Wars, Marvel and Fox. This combined with the debt already carried from the Eisner era, put Disney in a tough spot. Parks are heavy expense for the company. They were slashing and cutting every division including DVC at the time.

It's not like they waited to see what would happen. They didn't have the cash (or employees for that matter) to do anything about it.

 

[esulerzy]

Selling my SSR contract and Disney exercised ROFR. Any update on a timeline of when I'll hear from them? They exercised ROFR on October. 28th and the contract states it must close on or before 12/13/2021.

 

[BWV Dreamin]

Sellers need to take the emotion out of this transaction. Seller got full price. In this case, pretty much a solid sale with Disney. Buyers can back out at the last minute. Wont happen in this case.

 

[RoseGold]

OP checking in...it's been over three weeks since we were notified that Disney was exercising ROFR and we haven't heard a peep from Disney. Our contract states "This contract shall be closed 09/05/2021 unless extended by the Title Company for administrative reasons." So that means that if no one from Disney reaches out to us by 9/5 then the contract simply expires and everyone walks away, right? That's only a little more than two weeks from now.

What happened? Did they pay on time? DVC seems to always be a slow payer..

 

[DVCcurious]

But you are making the case that, without ROFR, the same buyers would only be willing to pay $84 per point, even though they'd pony up $110 per point if ROFR puts that purchase at risk. That doesn't make any logical sense. If all economic conditions are equal except for ROFR, a buyer is either willing to pay $110 or not. If the sellers hold the line and ask for $110, that's how it's going to be.

I agree with you that a buyer who is willing to pay $84 will not all of a sudden be willing to pay $110 just because new buyers (ROFR) entered the market. What you're willing to pay is what you're willing to pay, it doesn't change.

I want to explain to the broad audience how a demand curve in economics works. First point: economically speaking the person in your example who is only willing to pay $84 that is their maximum, they aren't going to increase that amount because they can't get a contract. If they were willing to increase their amount then $84 is not really what they're "willing" to pay. Everyone talks about "supply and demand" but it's really demand that most economists worry about. The market will provide the supply at certain points along the demand curve, so there isn't really such a thing as a supply curve. For example, if there are only 2 DVC resales available and there are ten buyers bidding against each other and end up paying $500 per point then those contracts will sell for $500 per point and a lot of you will rush to sell your DVC to try to get $500 because you're getting such a "deal". That rush of sellers will increase supply and there won't be enough demand at $500 so your contracts will just sit there and not actually sell. You'll have to lower your price until you find where the demand is at the price you are willing to sell at.

Imagine a chart with a line going from the upper left to the lower right. The Y axis is price per point. The X axis is number of buyers. The line shows how many buyers are willing to buy points at a certain price. At $2000 per point there are 5 willing buyers but at $20 per point there are 5 million willing buyers.

What happens in reality is there is a supply of DVC contract on the market right now. The seller has made an offer to sell at a certain price point. You can look at the demand curve and know for certain how many of those contracts will sell at that price point. ROFR is part of the demand.

Let's use your example of $110 per point. At that price point there are X buyers willing to buy. DVC is part of those X buyers. If there aren't enough contracts available at $110 to meet the demand then all the contracts will sell out. If there is an over supply at $110 then contracts will be sitting for months on end without selling. DVC has a maximum number of points they can purchase at various price points (again, we're talking "maximum" any buyer can buy at a price point, Disney selling it's rights to Star Wars to buy more DVC contracts is included in this demand curve).

In 2013 I bought a VWL for $55 for 200 points. And there were lots of SSR sitting there for $60 per point. That's because there were many willing sellers but not enough buyers, so all the buyers at the $150, $120, and $90 price points had already purchased points. But there were still many sellers looking to unload their contracts and they were willing to go cheaper, so they dropped their price until the suppliers were willing to meet the demand at those lower price points. DVC had already maxed out it's ROFR at the $60 price point so they were unwilling to buy more points at that level. They probably would've exercised at $40, because DVC has a number of contracts they're willing to buy at every price point along the demand curve. The "DVC Floor" that keeps prices at a "normal" level only works if there is a "normal" supply level. If there is an economic shock and people run to sell their contracts at any price and there is a massive oversupply the DVC floor will keep dropping and dropping. DVC will have bought all they can along the demand curve and there will still be contracts sitting there.

A buyer who's willing to pay $84 will only purchase a contract once prices fall that far, meaning that the point when the oversupply has left so many contracts that there are sellers willing to sell at $84.

To use me as an example I am willing to purchase a non-2042 contract for any on-property DVC at $110 (weird that it matches your example, but that is my limit) per point. So I'm not buying. I'm not saying "well I'll only pay $110 but they're going for $140 so I guess I'll pay $140". No. I'm just sitting out until there are willing sellers at the $110 price point. that won't happen until there is much more supply on the market that the demand at the $150, $140, $130 etc price points has been satisfied and there are sellers willing to sell at a lower price point.

Could prices drop back to 2013 lows of $60 per point for SSR or $90 for BCV? Sure. You'd just have to have a situation where so many current DVC owners decided they were willing to sell at those low price points that all the higher price points had their demand met and there were still DVC owners willing to sell and willing to lower their prices until they could sell their contract. For example: 40% of the working population becomes unemployed over a 6 month period. You could imagine LOTS of DVC owners willing to sell at almost any price to keep a roof over their head.

Possible? Yes. Unlikely? Of course. But the 2008 crash was extremely unlikely (black swan). It doesn't mean something like that can't happen again.