First RIV resale contract sold for?

[Sandisw]

I recall a discussion somewhere on these boards a couple of years ago when someone tried to have Disney take it back and they $ they were offering would not have covered the amount owed on it.

At one point, I believe Disney’s offer was like $45/point.

 

[kboo]

At one point, I believe Disney’s offer was like $45/point.

Yes! I think I had heard around $50-ish. I'm glad for the confirmation. So, if someone owed on a mortgage, or even if they didn't, they'd be almost sure to get a better price on the resale market.

 

[Sandisw]

Yes! I think I had heard around $50-ish. I'm glad for the confirmation. So, if someone owed on a mortgage, or even if they didn't, they'd be almost sure to get a better price on the resale market.

Exactly! And as a seller, once you get a signed contract, it’s sold. It’s the buyer who loses out with ROFR. So offering a little below what market rate it should get one an offer!

 

[mustinjourney]

What I don't know is does DVC report the foreclosure, as a creditor they maintain that right, and can chose to do so at any point in time within the allowable reporting window. So I suspect that DVC ends up reporting the foreclosures because that part costs them no money, and really is good faith in the credit system. I would think also since they actually do foreclosures they likely don't just offer to take the properties back through signing over the deed (unless I suppose you owe next to nothing on the property). Also the usage of the Trustee Foreclosure (which is cheaper, I thought anyways) even seems to suggest further they simply don't retake the contracts. If DVC offered to take the properties back without repercussions it could create an unstable system between the creditor and debtor where debtors could tend to default at higher rates (i.e. buy DVC for 1-2 trips then default thus getting 1-2 trips cheap).

I don't know this for sure -- but I have a feeling that they likely prefer to go the foreclosure route b/c they can then the property back more cheaply while at the same time writing the "losses" off. For example, if someone still owes $40,000 on a 250 point direct contract (let's just assume it was $50,000). During foreclosure -- the contract sells for $25,000....to Disney's purchasing arm.

Disney financing writes the loss off for $15,000 and DVD gets to flip the points and make another $25000 selling it direct again.

If that is allowed, that's not a bad business plan.

 

[mustinjourney]

Exactly! And as a seller, once you get a signed contract, it’s sold. It’s the buyer who loses out with ROFR. So offering a little below what market rate it should get one an offer!

it's not sold until the contract closes. Buyers have been known to back out of deals.

Sure -- you had a contract and could try to enforce it....but it will cost more money to enforce the deal than to just relist and try again.

 

[Sandisw]

it's not sold until the contract closes. Buyers have been known to back out of deals.

Sure -- you had a contract and could try to enforce it....but it will cost more money to enforce the deal than to just relist and try again.

True...but the amount of times that a buyer pulls out is slim. I think I was trying to compare to selling to Disney. Offering below market would bring out buyers lookin*for a deal and willing to try and sneak it past ROFR.

 

[CraigInPA]

I don't know this for sure -- but I have a feeling that they likely prefer to go the foreclosure route b/c they can then the property back more cheaply while at the same time writing the "losses" off. For example, if someone still owes $40,000 on a 250 point direct contract (let's just assume it was $50,000). During foreclosure -- the contract sells for $25,000....to Disney's purchasing arm.

Disney financing writes the loss off for $15,000 and DVD gets to flip the points and make another $25000 selling it direct again.

If that is allowed, that's not a bad business plan.

You can't write down prospective losses.

DVC financing, in this example, has $10k of income. They re-gain the asset valued on the books at $40k through foreclosure. It is then re-sold for $50k, giving the selling arm $50k in income (but $40k of cost, yielding $10k in net margin).

 

[mustinjourney]

You can't write down prospective losses.

DVC financing, in this example, has $10k of income. They re-gain the asset valued on the books at $40k through foreclosure. It is then re-sold for $50k, giving the selling arm $50k in income (but $40k of cost, yielding $10k in net margin).

But the transactions would be done by different entities. Disney financing would not gain possession of the property b/c they wouldn't be the buyer.

Initial transaction -- DVD sells property to buyer and Disney Financial LLC pays DVD $$$. Buyer agrees to pay Disney Financial.

Buyer gets foreclosed upon and Disney Financial sells property in foreclosure to recoup their money.

DVD buys property in foreclosure and Disney Financial gets some of its money back, but still has a loss.

At this point, DVD has the property back in their possession and Disney Financial has a paper loss.

How would this be a prospective loss?

Disney financing LLC is the one taking the loss and disney sales LLC gets the profit.

Only thing I'm not sure about is whether this is considered an "arm's length transaction" or if there are any other specific rules preventing them from doing this.

 

[CraigInPA]

Because both entities are owned by the same parent, it's not an arms-length transaction. But, in your example, the $15k "loss" is offset by a $25k gain, resulting in the same net $10k profit. Rules about arms-length transactions are in place to prevent churning assets by selling them at a gain or loss to another related party to create revenue or profits or losses on paper.

The most spectacular example of churning was Enron, who moved all the loss generating projects to subsidiaries that they claimed not to control, thereby making Enron itself wildly profitable. Once Enron was forced to include all those subsidiaries in its financial statements, Enron was revealed as wildly unprofitable. The people involved in the fraud went to jail.

 

[skier_pete]

I think Riviera resale prices just dropped another $10 tonight.

 

[CarolMN]

I think Riviera resale prices just dropped another $10 tonight.

Let's hope it's a temporary setback.