DVC Right of First Refusal (ROFR): June ’17 Report10 Comments
In the month of June, Disney exercised their right of first refusal (ROFR) on 4 of 163 contracts sold through the DVC Resale Market, representing 2.5% of the contracts sold. This lowers the year-to-date (YTD) buy back rate to 8.4%. June represented a 4th straight month in the buy back rate declining, but 2017 still has a ways to go to approach the 2016 buy back rate of 4.4%. In June, 97.5% of contracts were waived by Disney, bringing the YTD waiver rate to 91.6%.
The biggest change seen in June was a steep drop in the buy back rate. The buy back rate in June was over 70% lower than the YTD buy back rate prior to June. The graph below shows a high correlation with buy back rate and price in 2017. Whenever price has dropped, the buy back rate increased (i.e., February and May), and whenever the price increased the buy back rate dropped (i.e., March, April and June). Moreover, the long term trend shows as prices have gradually increased in 2017 the buy back rate has gradually dropped. Generally, the correlation of price and buy back rate would be expected and so far this year, the month to month correlation of price and buy back rate has been 100%. Following this correlation, it shouldn’t be a surprise to see a steeper drop in the buy back rate for June with the sharper increase in prices experienced in June. While seeing higher prices may not be the news buyers want to see, they can take some relief in much lower buy back rates as a result.
What is Right of First Refusal?
For those new to the concept of Right of First Refusal, it is the option Disney Vacation Club has to purchase any resale contract after a sales price has been agreed upon, and the contract has been executed. Each contract must be forwarded to DVC for review. DVC may take up to 30 days to review the contract. At their discretion, Disney may step in and purchase the property themselves at the terms agreed upon by the Seller and original Buyer. DVC then becomes the Buyer, and the purchase is complete. Once DVC is the buyer there is not an opportunity to come back with a better offer in hopes of still purchasing the contract.
Resorts Bought Back in 2017
Please refer to the graph below for the total amount of buy backs at each DVC resort for contracts sold through the DVC Resale Market.
Details and Data
In June, the only two resorts bought back were Old Key West and Vero Beach. Old Key West was 3 out of 4 of the buy backs, and consistently remains one of the most commonly bought back resorts. No Hilton Head contracts were bought back in June, ending the heavy buy back of Hilton Head seen in May. Details on the specific contracts bought back are below.
|Resort||$/Point||Pts. on Contract||Price||Closing Costs Paid by||’17 Dues Paid by||Use Year||Point Availability|
|Old Key West||$70||300||$21,000||Buyer||Seller||Oct.||0 pts.’17 + 5 pts. ’18|
|Old Key West||$77||240||$18,480||Buyer||Buyer||Dec||262 pts.’17 + 240 pts.’18|
|Old Key West||$86||150||$12,900||Buyer||Buyer||Sep||253 pts.’17 + 150 pts.’18|
|Vero Beach||$66||100||$6,600||Buyer||Pro-Rate||Sep||27 pts.’17 + 100 pts.’18|
Resort Buy Back Rates
There were 2 different DVC resorts bought back in June for contracts sold by DVC Resale Market. The table below shows the percentage of buy backs for those 2 resorts.
|Resort||Buy Backs||Number Sold||Percentage Bought Back|
|Old Key West||3||20||15%|