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Right of First Refusal: What You Need to Know

Right of First Refusal

November 26, 2018 – by Primo Management Group

Right of First Refusal

So, you want to sell your timeshare? Find out how the Right of First Refusal can affect the sale.

If you’re like so many timeshare owners across the country, you may be looking to sell your unwanted timeshare. Maybe you’ve had it with rising maintenance fees or are no longer able to make use of the property. So, you decide to sell to recoup at least some money and get out of your timeshare trap. But before you do anything, it’s a good idea to find out about the Right of First Refusal.

What Is the Right of First Refusal?

The Right of First Refusal (ROFR) is a clause in your timeshare contract that gives the resort the right to buy or decide not to buy your timeshare before anyone else can. So, let’s say you want to sell your timeshare. By some miracle, you find a buyer. However, before the sale can go through, you must give your resort the option to buy your timeshare at the same price. If they accept, the sale will proceed as it would have with your first buyer, only now the resort will be the buyer. If they refuse, then the sale goes through as it would have with the original buyer.

Why Is ROFR Even a Thing?

ROFR exists primarily to protect the interests of the resort. As you probably know, the resale market is flooded with timeshares at rock bottom prices. Want a $1 timeshare on eBay? No problem. If a consumer can buy a timeshare for $1, why would they ever want to buy a timeshare from the developer at full price? So, by exercising their ROFR, the resort can recoup the timeshare and sell it to someone else at the standard price. This protects their ability to make sales at the prices they set. It also gives them a way to get cheap inventory without building a whole new resort. If they buy your timeshare for $1,000 and resell (re-resell?) it at $15,000, that’s a pretty good day for them.

Do Resorts Always Exercise ROFR?

Not all resorts will exercise their rights. As with all things in the timeshare industry, there is substantial variation from contract to contract and location to location. Some companies do actively exercise their ROFR. Others don’t. During the recession, ROFR was rarely used. However, as the economy has recovered, so has the resorts’ ability to repurchase units. But a lot depends on if you have a highly-valued property or a highly sought-after week. The more “valuable” the resort perceives your timeshare to be, the more likely they are to exercise ROFR.

How Does This Affect You as a Seller?

ROFR affects sellers in two primary ways. First, it can slow down the sales process. Even if you do eventually sell the timeshare for the agreed-upon amount, the resort typically has a time window within which they can decide to exercise their rights. For example, Disney Vacation Club has up to 30 days. So, if that window is lengthy, you’ll have to continue to pay your fees and worry about getting out of your contract. Secondly, a savvy or wary buyer may be turned off by the specter of the ROFR. Maybe they’ve had deals fall through in the past and don’t want to risk another disappointment. Or maybe they, too, don’t want the delays the ROFR process can bring.

Right of First Refusal can complicate the timeshare resale process. If you are having difficulty with this or any other aspect of the sales process and need to get rid of your timeshare, we can help. Our consultation is free, so contact us today.

(Image Source: Pixabay)

 

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