We were ROFR'd

jarta · Apr 14, 2011

nodge, ... I guess you actually are serious about this. :shrug:

Let me know when you get a taker and your ROFR plan is successful. ... eom

glypnirsgirl · Apr 15, 2011

If the ROFR problem for the seller is a matter of the time it takes to fund and close the contract, it appears to me that a simpler method is simply to add a deadline for closing to the sales contract. "Time is of the essence in the closing of this contract. In the event that the contract fails to close and fund on or before #/##/####, then in that event the contract is void."

Hmm, just figured out that that does not work, because then Starwood has the right to exercise ROFR on the next contract to come along.

Contract law is definitely not my forte.

elaine

crewtoo · Apr 15, 2011

Exactly.

tombo said:
Around Christmas when they sold for $7500, they sold for $7500 and ROFR wouldn't have changed that one bit. If a seller finds a buyer willing to pay a price that he will accept, then a sale is made. If the seller could have found a buyer for $15,000 they would not have sold the week for $7500. Starwood would not have made an offer of $7500 for the week or even $1 for te week. Starwood does not make offers on weeks offered for sale by owners, Starwood decides if they need the inventory when they review all of the current ALREADY AGREED UPON SALE PRICES submitted to them. If it is cheap enough and they need the inventory they steal it, if not they don't. ROFR does not keep values higher, it keeps Starwood and other developers with a cheap supply of inventory if and only if Starwood decides they want itfor the exact price it already sold for.

ROFR does not keep prices high, it simply changes who owns the week for the identical price it already sold for. The OP purchased the week for $8097. The developer stold the week for the identical $8097, not one penny more. The seller received $8097, not one penny more. If a week sells for $1000 it sells for $1000. All that ROFR changes is who ends up owning the week for the $1000 the seller agree to sell it for.

If the developerwould put a minimum sale price (exampleany unit selling for under $14,000 will be ROFR's byt the resort) that they would exercise ROFR EVERY TIME, then it would actually increase sale prices to that minimum. As long as they steal a week here and there when they need some inventory it doesn't help prop up prices at all.

Yes on occassion a buyer might increase their bid to try and get the developer to not steal it from them, but why would anyone pay more than they have to to buy ANYTHING? Would you look at a used car, a house, a TV and pay more than the seller asked? That makes no sense. On other occassions a buyer will lose a bid to ROFR and simply refuse to bid anymore for any weeks at any price, especially in this economy where timeshares are selling for all time lows. In this example ROFR actually lowers prices by lowering demand. Reduced demand lowers prices, simple econ 101. Most weeks simply sell for whatever price a seller is willing to accept from a buyer, and ROFR does nothing to change that equation.

Examplary Logic

siesta · Apr 15, 2011

Fredm said:
Nodge.

Where is the seller in your equation?

I can understand a buyer wanting to thwart the ROFR process in some creative way. But, why would the seller go along?
The seller just wants it sold, and closed as soon as possible.
They would care less if Starwood became the buyer.

At the very least, your suggestions would tie up the closing, and prevent Starwood from updating its owner records. More likely, the seller would not get paid, their listing would be off the market, and the seller would get nothing for their trouble.

the only way I see a seller going along is if they had a vested interested in who the property goes to, for example: a family member that isn't immediate family, or a friend. The seller will get the same $$ either way, so might as well let their friends or family get it instead of starwood.

This "scheme" runs parrallel to what we touched upon in another thread, regarding people simply fudging the sales agreement. Your response was to the extent of "why would a seller be inclined to participate in that", again the former is a possible reason for why someone would partake in that fraud.

TUGBrian · Apr 15, 2011

Had a feeling you couldnt resist...hopefully in your time off you can learn how to play well with others.

cleaned up this thread and reopened it, hopefully itll remain on topic.

mstoyanov · Apr 15, 2011

tombo,

A single ROFR does not create a visible price increase because market participants are quite a lot but regular ROFR exercise increase the price simply because there are less units available for roughly the same amount of buyers.
Clear example can be seen with prices of Hilton Timeshare on EBay in the last year (and I keep track of all Hilton that goes on EBay since I plan to buy several more) - in the 3 months after Hilton started exercising regular ROFR final prices on Hilton properties increased by almost 50% across the board (ones in Orlando slightly less than 50%, while the ones in Las Vegas more like 75%). Even the Flamingo that doesn't have ROFR saw prices increased since it is perfect substitute for other 2 HGVC properties in Las Vegas.

Just because you and me remember lower EBay prices "pre-ROFR period" and are not willing to bid more that does not mean that there are no buyers willing to do so.
Me and you are simply deciding not to participate in market since new (lower) supply intersect demand curve at higher prices than what we are willing to pay but this is perfectly normal for any market. There are always participants on the market willing to pay more than equilibrium price and well as participants willing to pay less than equilibrium price.
Equilibrium price is the one at which number of willing sellers is exactly equal to the number of willing buyers.
So there is nothing "Mythical" that REGULAR EXERCISE of ROFR rise prices.
And keep attention - it is not the mere existence of the ROFR that rise prices, it is the regular exercise of that right.

tombo said:
Around Christmas when they sold for $7500, they sold for $7500 and ROFR wouldn't have changed that one bit. If a seller finds a buyer willing to pay a price that he will accept, then a sale is made. If the seller could have found a buyer for $15,000 they would not have sold the week for $7500. Starwood would not have made an offer of $7500 for the week or even $1 for te week. Starwood does not make offers on weeks offered for sale by owners, Starwood decides if they need the inventory when they review all of the current ALREADY AGREED UPON SALE PRICES submitted to them. If it is cheap enough and they need the inventory they steal it, if not they don't. ROFR does not keep values higher, it keeps Starwood and other developers with a cheap supply of inventory if and only if Starwood decides they want itfor the exact price it already sold for.

ROFR does not keep prices high, it simply changes who owns the week for the identical price it already sold for. The OP purchased the week for $8097. The developer stold the week for the identical $8097, not one penny more. The seller received $8097, not one penny more. If a week sells for $1000 it sells for $1000. All that ROFR changes is who ends up owning the week for the $1000 the seller agree to sell it for.

If the developerwould put a minimum sale price (exampleany unit selling for under $14,000 will be ROFR's byt the resort) that they would exercise ROFR EVERY TIME, then it would actually increase sale prices to that minimum. As long as they steal a week here and there when they need some inventory it doesn't help prop up prices at all.

Yes on occassion a buyer might increase their bid to try and get the developer to not steal it from them, but why would anyone pay more than they have to to buy ANYTHING? Would you look at a used car, a house, a TV and pay more than the seller asked? That makes no sense. On other occassions a buyer will lose a bid to ROFR and simply refuse to bid anymore for any weeks at any price, especially in this economy where timeshares are selling for all time lows. In this example ROFR actually lowers prices by lowering demand. Reduced demand lowers prices, simple econ 101. Most weeks simply sell for whatever price a seller is willing to accept from a buyer, and ROFR does nothing to change that equation.

mstoyanov · Apr 15, 2011

Fredm,

There can be a logical reason for seller to willingly submit higher ROFR price.
Here is theoretical example why both seller and buyer may benefit from such "fake" ROFR:
Lets just say that informed buyer and informed seller agree to transfer annual 2BR WKORV at $10k and both seller and buyer knows that probability this price to pass ROFR is 0%. Informed buyer then offer to the informed seller to submit "fake" ROFR at $15k. What buyer gains - he gains from probability such ROFR to pass to go from 0% to 50%. What seller gains - he gains 50% chance to sell his property at $15k instead of negotiated $10k so AVG expected price for seller becomes $12.5K

Seller has no benefit to submit "fake" price only at very high levels when expected probability of ROFR to be exercised is 0%. In the cases where probability is >0% seller benefits from higher reported price due to the chance that he can end up selling the timeshare at higher price.

Fredm said:
Where is the seller in your equation?

I can understand a buyer wanting to thwart the ROFR process in some creative way. But, why would the seller go along?
The seller just wants it sold, and closed as soon as possible.
They would care less if Starwood became the buyer.

At the very least, your suggestions would tie up the closing, and prevent Starwood from updating its owner records. More likely, the seller would not get paid, their listing would be off the market, and the seller would get nothing for their trouble.

Fredm · Apr 15, 2011

mstoyanov said:
Fredm,

There can be a logical reason for seller to willingly submit higher ROFR price.
Here is theoretical example why both seller and buyer may benefit from such "fake" ROFR:
Lets just say that informed buyer and informed seller agree to transfer annual 2BR WKORV at $10k and both seller and buyer knows that probability this price to pass ROFR is 0%. Informed buyer then offer to the informed seller to submit "fake" ROFR at $15k. What buyer gains - he gains from probability such ROFR to pass to go from 0% to 50%. What seller gains - he gains 50% chance to sell his property at $15k instead of negotiated $10k so AVG expected price for seller becomes $12.5K

Seller has no benefit to submit "fake" price only at very high levels when expected probability of ROFR to be exercised is 0%. In the cases where probability is >0% seller benefits from higher reported price due to the chance that he can end up selling the timeshare at higher price.

Never mind.
This is going off in an entirely different direction.
I was responding to nodge, who was hypothetically proposing to add non-cash components to the terms of the sale contract.

What you are suggesting is simple fraud. In that case the contracts don't apply in the first place. The seller and buyer would have to trust each other to transact the 'real" agreement outside escrow.

A legitimate escrow company and broker would not touch it.

mstoyanov · Apr 15, 2011

FredM,

I understand that this is fraud but I was pointing that there is a real reason why seller may be willing to go along with fictitious offer.
I do not condone fraud but was simply showing that there is motivation for the seller to do something like this.
And I am also sure that no reputable escrow company will want to touch it.

Fredm said:
Never mind.
This is going off in an entirely different direction.
I was responding to nodge, who was hypothetically proposing to add non-cash components to the terms of the sale contract.

What you are suggesting is simple fraud. In that case the contracts don't apply in the first place. The seller and buyer would have to trust each other to transact the 'real" agreement outside escrow.

A legitimate escrow company and broker would not touch it.

Fredm · Apr 16, 2011

mstoyanov said:
FredM,

I understand that this is fraud but I was pointing that there is a real reason why seller may be willing to go along with fictitious offer.

Sure, there may be a corner case that can be imagined. But, you are over thinking this.

In every REAL situation I can think of, the subterfuge benefits the seller. The seller is the initiator of the fraud, not simply "going along" with it. That is, the seller submits a fraudulent inflated contract hoping that the inflated price IS exercised. Then the buyer is out in the cold, and the seller gets more than the actual sale price a buyer is willing to pay and the seller is willing to accept.
The buyers signature on the inflated purchase contract makes them a party to the fraud (so, why would they go along?). Or, the seller fraudulently signed the buyers name to the inflated contract.

In the example being discussed (proposed by nodge), the buyer is placing non-cash compensation terms into the agreement. They only obfuscate the real deal, and provide no benefit to the seller. Indeed, it works to the sellers detriment. So, the seller has no motivation to go along.

I suggest that there are legal, and binding, ways to approach an ROFR exercise without the deception. In some instances this may mean that the buyer will pay more. But, that would be their decision. The seller then benefits from a higher sale price whether the ROFR is exercised or not. This is what "informed buyers and informed sellers" (to use your phrase) do in my experience.
If the buyer is not willing to up the offer, the seller has a sale on the original terms with a substitute buyer. So, the honest seller is happy nonetheless.

Of course, as with many things in life, some folks just can't help themselves.
They will try to find an angle even if doing it honestly is easier.
It is sociopath behavior. Unfortunately, there is no drought of it.
If that is what you are saying, I agree with you.

mstoyanov · Apr 16, 2011

Fredm,

What I meant by "informed buyer" and "informed seller" means buyer and seller that know about ROFR process and are informed at what levels there is 0% probability and at what levels there is 50% probability ROFR to pass.
All this was simply a theoretical example to show there exist a real motivation of why both seller and buyer may try to submit fake ROFR.
As for how they can arrange that - this is not something that I am interested in since I do not condone fraud. But such possibility exist especially in a case when buyer and seller are not total strangers to each other (relatives, friends and so on) and to dismiss such possibility is simply not looking at every possible angle.

As for nodge suggestion I agree that this will only complicate the transaction so seller who has no relation to the buyer will probably refuse to agree to such condition.

Fredm said:
Sure, there may be a corner case that can be imagined. But, you are over thinking this.

In every REAL situation I can think of, the subterfuge benefits the seller. The seller is the initiator of the fraud, not simply "going along" with it. That is, the seller submits a fraudulent inflated contract hoping that the inflated price IS exercised. Then the buyer is out in the cold, and the seller gets more than the actual sale price a buyer is willing to pay and the seller is willing to accept.
The buyers signature on the inflated purchase contract makes them a party to the fraud (so, why would they go along?). Or, the seller fraudulently signed the buyers name to the inflated contract.

In the example being discussed (proposed by nodge), the buyer is placing non-cash compensation terms into the agreement. They only obfuscate the real deal, and provide no benefit to the seller. Indeed, it works to the sellers detriment. So, the seller has no motivation to go along.

I suggest that there are legal, and binding, ways to approach an ROFR exercise without the deception. In some instances this may mean that the buyer will pay more. But, that would be their decision. The seller then benefits from a higher sale price whether the ROFR is exercised or not. This is what "informed buyers and informed sellers" (to use your phrase) do in my experience.
If the buyer is not willing to up the offer, the seller has a sale on the original terms with a substitute buyer. So, the honest seller is happy nonetheless.

Of course, as with many things in life, some folks just can't help themselves.
They will try to find an angle even if doing it honestly is easier.
It is sociopath behavior. Unfortunately, there is no drought of it.
If that is what you are saying, I agree with you.

aeroflygirl · Apr 17, 2011

ROFR Question

What if they seller and buyer agree to the exchange of timeshares for a given amount of money. Example: seller agrees to sell WKORV for $4,000 plus two 2BR EOY summer weeks at Lakeside Terrace. Lakeside Terrace is not in active sales, so what if Starwood was not able to meet the conditions of the sale?

Fredm · Apr 17, 2011

aeroflygirl said:
What if they seller and buyer agree to the exchange of timeshares for a given amount of money. Example: seller agrees to sell WKORV for $4,000 plus two 2BR EOY summer weeks at Lakeside Terrace. Lakeside Terrace is not in active sales, so what if Starwood was not able to meet the conditions of the sale?

I actually brokered a similar transaction. It involved a trade of Mountain Vista, plus cash. It went off OK.

Edited to add:

Note this was an actual transaction. Not the superfluous addition of a non-cash item. Both deeds were transferred as part of the process.

nodge · Apr 17, 2011

Fredm said:
I actually brokered a similar transaction. It involved a trade of Mountain Vista, plus cash. It went off OK.

Edited to add:

Note this was an actual transaction. Not the superfluous addition of a non-cash item. Both deeds were transferred as part of the process.

See. One can indeed include non-cash terms in a ROFR property transfer without the sky falling and without messing with SVO's right to "run with the land."

Moreover, I'm pretty sure that there is no box on the purchase contract to check for "superfluous addition of non-cash item." AND, even if there were, SVO still wouldn't have a right to just ignore those terms and exercise its ROFR anyway, especially if the non-cash term was at least sort of reasonable (and I bet if we all used our collective noodles instead of beating each other up over simply presenting a new idea, we could think up a bunch of 'em).

There are other problems with my "non-cash rider" theory, that we've already discussed. But, those are along the lines of non-related buyers and sellers not going for it. Theoretically, it is totally doable once this negative perception issue is resolved.

-nodge

Fredm · Apr 17, 2011

nodge said:
See. One can indeed include non-cash terms in a ROFR property transfer without the sky falling and without messing with SVO's right to "run with the land."

Moreover, I'm pretty sure that there is no box on the purchase contract to check for "superfluous addition of non-cash item." AND, even if there were, SVO still wouldn't have a right to just ignore those terms and exercise its ROFR anyway, especially if the non-cash term was at least sort of reasonable (and I bet if we all used our collective noodles instead of beating each other up over simply presenting a new idea, we could think up a bunch of 'em).

-nodge

I don't think there is a need to use our collective noodles.
Either the transaction is legit, or it is a contrived attempt to "beat" the ROFR. If "collective noodles" are needed, then it's pretty much a give away as to intent.
If this ever got to the point of being contested (which remains to be seen), that would be the issue, IMO.

If it is legit, the terms will appear reasonable to all. A deed trade (reciprocal signed deeds) with cash kicker falls into this category.

LisaH · Apr 17, 2011

Interesting...I also bought a Hyatt week with "superfluous addition of non-cash item" included in the contract. It went through without triggering Hyatt's ROFR. That was a few years ago, before timeshare resale market collapsing.

SDKath · Apr 17, 2011

Fredm said:
I don't think there is a need to use our collective noodles.
Either the transaction is legit, or it is a contrived attempt to "beat" the ROFR. If "collective noodles" are needed, then it's pretty much a give away as to intent.
If this ever got to the point of being contested (which remains to be seen), that would be the issue, IMO.

If it is legit, the terms will appear reasonable to all. A deed trade (reciprocal signed deeds) with cash kicker falls into this category.

What if you "swap" timeshares. Person X sells you WKORV for $10,000 and their WMH timeshare, for example. The assumed value would be about $5000 for WMH, let's say. So you end up "paying" $15,000 for your WKORV but the actual cash exchanged is $10,000 only. Could that get ROFR'd?

katherine

Fredm · Apr 17, 2011

SDKath said:
What if you "swap" timeshares. Person X sells you WKORV for $10,000 and their WMH timeshare, for example. The assumed value would be about $5000 for WMH, let's say. So you end up "paying" $15,000 for your WKORV but the actual cash exchanged is $10,000 only. Could that get ROFR'd?

katherine

Could it? Sure. If Starwood wanted to meet those terms.
It is a deed swap with a cash kicker.

Would it? I don't know. Deed swaps make the matter much more complicated for them than a straight sale.
My guess is that they would not exercise where a legitimate deed swap is involved.

I think we need to remember that the exercise of an individual ROFR is not the be-all and end-all for Starwood.
At the end of the day, they can just move on to the next transaction overflowing their in-box.

I believe they will act against what appear to be a rash of contrived arrangements because it threatens their ability to generally enforce their reserved rights.

Ken555 · Apr 17, 2011

Just for fun, what if a buyer offered cash plus one or two 5-night stays at cat 4 Starwood property? It's almost the same as bonus points that Starwood offers. If the price is low enough, I wonder if SVN would exercise it's right to buy even with the right to use 80,000 StarPoints (or equivalent).

Fredm · Apr 17, 2011

Ken555 said:
Just for fun, what if a buyer offered cash plus one or two 5-night stays at cat 4 Starwood property? It's almost the same as bonus points that Starwood offers. If the price is low enough, I wonder if SVN would exercise it's right to buy even with the right to use 80,000 StarPoints (or equivalent).

My opinion:

It would have no effect, as a practical matter. Starwood would view it the same as it views the use-year issue. They would value the HOA dues in the ROFR decision.

nodge · Apr 18, 2011

Fredm said:
I don't think there is a need to use our collective noodles.
Either the transaction is legit, or it is a contrived attempt to "beat" the ROFR. If "collective noodles" are needed, then it's pretty much a give away as to intent.

OK Grasshopper . . . how about this?

Suppose a BUYER makes an offer to a seller that includes what could or could not be interpreted as a "superfluous addition of a non-cash item" (aka "a Chrysler Cordoba clause") depending on how creative he/she is in thinking up something to add to the deal. If THAT were to happen, the seller then has a choice . . . 1) take the deal as offered; 2) counter without the non-cash item clause; or 3) reject the offer and hope for another seller to come along.

If the seller goes with option 1, is that term really superfluous then? The buyer added it to beat the ROFR he/she is competing with; a totally legitimate and legal goal of a buyer who has no contractual obligation to SVO at that point; and the seller took the deal because the buyer wouldn't have made the offer had that term not been in there. That sounds like good ol' fashioned, bargained-for, enforceable, "consideration" to me.

I agree that if a seller had a choice, he or she would not seek a "superfluous addition of a non-cash item" in the deal. But it seems to me that a knowledgeable BUYER can force the seller to take a ride in the Cordoba.

-nodge

Fredm · Apr 18, 2011

Nodge, I also said "If it is legit, the terms will appear reasonable to all". Tangible value is not hard to identify.

Get a seller to sign an agreement with a "Cordoba clause" that has no tangible benefit to them, and see what happens.
Jarta is a property attorney of notable standing. He says Starwood has grounds to ignore them. I wouldn't know. But, his is a qualified, professionally informed opinion. If this discussion is about ways to legally thwart a developers preemption rights, why ignore a qualified opinion just because you don't like the way the message was delivered?
The conversation can become more productive when practical legal solutions are the ones under consideration. If he is right (and I have no reason to believe he is not), then your example is not a viable one.

My issue is a different one. Personally, I could care less about what a willing buyer and willing seller agree to. Starwood can take care of themselves.

Your point of view is from a buyer perspective. I understand that. Mine is from a transaction perspective.
Either the Cordoba clause has a tangible value to the seller, or it does not. If it does not, then it has the practical effect of potentially being detrimental to the seller. I won't bore you with real world examples of that statement. But, in the real world they exist.

If contract terms are genuine, I have no problem with it. If they are not, I do. Pretty simple.

There are legitimate ways to beat an ROFR. Ways that may not always be beneficial to the buyer only. They may or may not include an additional benefit to the seller. If successful, Starwood is thwarted. IF that is the objective, mission accomplished.
But, if the real objective is for the buyer to gain at a potential loss to the seller, then just say so. At least we will all know what we are talking about.

gregb · Apr 18, 2011

I agree with Fred completely.

Fredm said:
If contract terms are genuine, I have no problem with it. If they are not, I do. Pretty simple.

This thread is starting to sound like a bunch of "wanna be" lawyers arguing about how to put it to "the man". It kinds of reminds me about when engineers start analyzing contracts to figure out ways to justify why their product doesn't do what it was supposed to do.

Greg

(Full disclosure, I am an Engineer

)

esk444 · Apr 18, 2011

Fredm said:
Jarta is a property attorney of notable standing. He says Starwood has grounds to ignore them. I wouldn't know. But, his is a qualified, professionally informed opinion.

To me, he is just some unidentified dude on the internet. Just like me. Take any advice on the internet, especially legal advice, with a grain of salt.

DavidnRobin · Apr 18, 2011

I am just some unidentifiable dude on the internet as well - but at least with enough fortitude to post our photos and videos (or maybe they are frauds as well...? wait a minute - people have actually met us - so never mind... they goes that hypothesis...). Well, at least try and play nicely with others as much as possible.

The practical effort to bypass the ROFR is not worth the potential benefit unless the TS is worth 10s of 1000s of $s (beyond the benefit sticking it to 'The Man' - which is just silly) and the seller would get screwed by a ROFR by letting it get that far.

In Reality, expensive SVO VOIs (>$20K) are very rare. A potentially expensive SVO VOI is WSJ (Plat season) - and they do not have a ROFR (either does WKV). I doubt HRA has a ROFR either (but not sure..)

#NotIntendedToBeAFactualStatement

We were ROFR'd

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