The Pros and Cons of Right of First Refusal

February 28, 2023

Understanding ROFR and How it Impacts Timeshare Sales

If you purchased your timeshare from a resort, there may be a clause included in your sales contract called a right of first refusal (ROFR). We’re going to explain the pros and cons of right of first refusal, as well as what it is, and how it impacts your ability to sell your timeshare on the resale market.

What is a Timeshare Right of First Refusal?

A right of first refusal clause in a timeshare sales contract comes into play if you’re looking to sell your timeshare and get an offer from a buyer. This clause grants the resort or developer the right to purchase your timeshare for the same price.

A right of first refusal essentially gives the resort or developer a first chance at your timeshare property before you can follow through with a purchase from a third party.

Under this clause, the resort or developer has the opportunity to become the buyer of your timeshare, or waive the right of first refusal, allowing you to move forward with the interested buyer.

Why Does the Right of First Refusal Even Exist?

The existence of a right of first refusal clause is solely to protect the resort’s or developer’s financial interests. Because timeshares on the resale market are sold at far cheaper prices than they sell for through the resort, purchasing a timeshare back allows the developer to sell it to another buyer at the standard price.

Enacting the right of first refusal allows developers to recoup timeshare units at cheaper prices and sell them for a significant markup.

Resorts or developers do not always exercise their right of first refusal. It depends largely on the quality of your ownership and whether they are confident they can make a profit by reselling your property or points.

How Does the Right of First Refusal Process Work?

You can put your timeshare on the resale market at any time.If your resort has a right of first refusal policy, when you receive an offer and agree on a sale price, you must submit your sales contract through the ROFR process before you can proceed with any third-party transaction.

In your initial contract, the resort or developer would have determined the amount of time they have to review the right of first refusal – typically between 30 and 45 days.

If the resort or developer decides to act on its right of first refusal, they can reacquire your timeshare. If the resort or developer decides to waive the right of first refusal (or does not respond in the designated time period), you will be able to proceed with your third-party offer on the resale market.

What Are the Pros and Cons of Right of First Refusal?

Let’s start with the “pros”.

If the resort or developer does step in as the buyer for your timeshare property, you as the seller would walk away with compensation from the resort.

Further, the resort or developer would, in most cases, buy your timeshare back from you for the same price you would have received from your interested buyer on the resale market.

Now, the cons.

If you’ve received an offer on the resale market, going through the right of first refusal process with your resort or developer could slow down the sales process and even result in the buyer rescinding their offer.

Additionally, since resorts and developers have up to 45 days to respond to the right of first refusal, as the seller you will still be responsible during that time for maintenance and any other fees. What may have been a quick and easy sale on the resale market suddenly is a drawn-out process that potentially costs you more money.