If ROFR is exercised, who gets paid and how much?

[brianfox]

I'm having an interesting discussion with a TUGger on a private conversation, and I don't think either one of us knows the correct answer.

Scenario:
Seller uses Redweek to sell their Marriott TS week.
Buyer agrees to terms and purchase agreement is signed.
Closing company is the one Redweek uses. Let's call it ABC.
Purchase agreement states:
Redweek gets a commission on the sale
Buyer to pay Closing costs ($500) to ABC
Buyer to pay Marriott Transfer fees ($95 ROFR fee and $25 Transfer fee)

Marriott swoops in and exercises ROFR.

In my opinion:
Marriott becomes the Buyer and is bound to the terms of purchase agreement.
Redweek still gets their commission
Marriott pays ABC $500 (whether Marriott closes internally or ABC remains closing company)
Marriott eats the ROFR and Transfer fees
Original Buyer get any deposits back and walks away with $0 out of pocket.

Regarding the disposition of the Closing company ABC, I've seen some TUGgers say that it's possible that if Marriott exercises ROFR, ABC can be pushed out of the deal and Marriott uses their internal closing department.
If this happens, does ABC get any money?
I would think that if the purchase agreement explicitly states that in the event of ROFR Marriott is on the hook for closing costs, then ABC gets paid by Marriott. I can't imagine a legal department dumb enough to draw up a PA whereby they get pushed aside and get nothing.

The TUGger I am having the discussion with notes a Closing company he has worked with that has a policy stating: if ROFR is exercised, then the BUYER THAT GOT SQUEEZED OUT OF THE DEAL must pay that closing company $50, presumably because they would not get any other money in the event of an ROFR. That sounds utterly crazy to me.

 

[ronparise]

As a real estate agent, I was always taught that the first place you look for an answer to a contract question is to the contract itself

So i agree with you, if Marriott exercises their right to rofr then Marriott steps into the buyers position and if the contract says the buyer that's been replaced gets all their deposit back except for $50 then that's what's gonna happen

 

[dioxide45]

That has been my experience. Most closing agents charge a non refundable deposit for closing costs. More so if they are responsible for submitting ROFR. If exercised the closing company and buyer are out and. If the seller was responsible for the closing costs, then they would have paid that $50 and would be out that instead of the buyer. If the closing company isn't closing the deal, they shouldn't get the full closing costs but should be covered for work performed, which ends up being the $50 in the scenario above.

 

[Jpollo]

Dioxide, by exercising ROFR isn't Marriott responsible for all the closing costs and work performed, including the $50 deposit?

Not a whole lot of money, but it would be helpful to know when deciding between closing companies and ones refunds all $$ and other has a small charge.

Thanks.

 

[Jpollo]

I contacted three popular closing companies to get their policy should Marriott exercise ROFR. I asked from the perspective of the buyer.

RedWeek (First American Title): All deposits 100% refunded
TRCS: All deposits 100% refunded
LT Transfers: Retain $50 for their work and time. Not paid by Marriott.

Note: LT Transfers is a lower cost closing company and does not provide escrow services in Hawaii.

 

[taterhed]

The answer you seek is easy: submit the contract for $50 higher. Then the 50 is paid ROFR or not.

 

[dioxide45]

The answer you seek is easy: submit the contract for $50 higher. Then the 50 is paid ROFR or not.

The problem with this is that the $50 goes to the seller and it may be the buyer that paid the $50 deposit. No guaranty the seller will pay the buyer.

 

[taterhed]

The problem with this is that the $50 goes to the seller and it may be the buyer that paid the $50 deposit. No guaranty the seller will pay the buyer.

I shortened my post too much. Increase the offer by $50 and pay the $50 direct to closer... It's complicated, but who really cares about $50? Most timeshare bar tabs are MUCH higher than $50. A sale is a sale is a sale. If $50 matters to you (as buyer) then write the contract to rebate you $50 before you give your credit card/final check to the closer. There are ways......

 

[echino]

I was in the same situation. We agreed that the seller pays the first $50, and increased purchase price by $50. So the buyer is not out anything in case of ROFR, and the seller gets $50 back in any situation.

 

[sanecitizen98]

I was in the same situation. We agreed that the seller pays the first $50, and increased purchase price by $50. So the buyer is not out anything in case of ROFR, and the seller gets $50 back in any situation.

Does anyone know why economical places like LT Transfers don't handle escrow transactions involving Hawaii timeshare? I just planned to use an economical escrow agent in my hometown. Would Maui Marriott object to see this in the agreement?

 

[taterhed]

This has been answered before: https://tugbbs.com/forums/index.php...closing-companies-for-mvc-hawaii-week.259304/

Hawaii requires specific license for escrow....

LT and TRCS will do Hawaii transfers with a 'payment arrangement' --basically, the money doesn't get transferred until the deal is done.

I can personally vouch for TRCS: Karina provides excellent service and the price is very good.

 

[dioxide45]

LT and TRCS will do Hawaii transfers with a 'payment arrangement' --basically, the money doesn't get transferred until the deal is done.

I read that they don't do that anymore. In reality, isn't that just what escrow is?

 

[taterhed]

Well, TRCS does do closings and handles the payment.

A formal escrow 'account' requires additional regulation/approvals from what I understand--specifically for Hawaii--and others in general.

The system works well for me.

 

[dioxide45]

Well, TRCS does do closings and handles the payment.

A formal escrow 'account' requires additional regulation/approvals from what I understand--specifically for Hawaii--and others in general.

The system works well for me.

I should have specified, I was referring specifically to LTT.

 

[Saintsfanfl]

I should have specified, I was referring specifically to LTT.

The default service that LTT provides is a handling of the money but not in escrow. It is basically a check that the buyer sends in to LTT that they then hold onto until closing. The problem for the seller is there is no guarantee that this payment will clear. What I do instead in this situation is handle my own contract and receive the cleared funds before I even start the process with LTT.

 

[Saintsfanfl]

I'm having an interesting discussion with a TUGger on a private conversation, and I don't think either one of us knows the correct answer.

Scenario:
Seller uses Redweek to sell their Marriott TS week.
Buyer agrees to terms and purchase agreement is signed.
Closing company is the one Redweek uses. Let's call it ABC.
Purchase agreement states:
Redweek gets a commission on the sale
Buyer to pay Closing costs ($500) to ABC
Buyer to pay Marriott Transfer fees ($95 ROFR fee and $25 Transfer fee)

Marriott swoops in and exercises ROFR.

In my opinion:
Marriott becomes the Buyer and is bound to the terms of purchase agreement.
Redweek still gets their commission
Marriott pays ABC $500 (whether Marriott closes internally or ABC remains closing company)
Marriott eats the ROFR and Transfer fees
Original Buyer get any deposits back and walks away with $0 out of pocket.

Regarding the disposition of the Closing company ABC, I've seen some TUGgers say that it's possible that if Marriott exercises ROFR, ABC can be pushed out of the deal and Marriott uses their internal closing department.
If this happens, does ABC get any money?
I would think that if the purchase agreement explicitly states that in the event of ROFR Marriott is on the hook for closing costs, then ABC gets paid by Marriott. I can't imagine a legal department dumb enough to draw up a PA whereby they get pushed aside and get nothing.

The TUGger I am having the discussion with notes a Closing company he has worked with that has a policy stating: if ROFR is exercised, then the BUYER THAT GOT SQUEEZED OUT OF THE DEAL must pay that closing company $50, presumably because they would not get any other money in the event of an ROFR. That sounds utterly crazy to me.

The closing company doesn't get squat because the sale is cancelled. No closing, no closing fees. Marriott's terms of ROFR does not bind them to using a certain closing company and closing fees are not contractually guaranteed anyway. They must be earned or reimbursables substantiated.

Marriott doesn't eat the ROFR and transfer fee because there is no ROFR and transfer fee when they exercise ROFR.

Even if the contract states the seller is to pay the closing costs, this doesn't happen when ROFR is exercised. Marriott simply pays the seller the amount stated as the gross sale. This is why I usually add the closing costs into the sale price and then pay all the closing costs myself. If Marriott exercises then I get a higher amount than I otherwise would have.

Buybacks are handled differently with the buyer paying a fixed closing cost fee that is usually $500 that reduces the net proceeds. ROFR does not have this fee.

I cannot answer on sales commissions. I have heard of Marriott paying them but most mass resellers will already have their commission in hand from the seller or profit from a trade-in so if Marriott exercises they are already paid. Other higher priced traditional brokers I imagine are getting paid by Marriott but they have a contract that meets on the tests of a proper real estate purchase. Some of these other contracts aren't even considered legal real estate contracts in some places.