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  #1  
Old 07-17-2013
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What Is A Boat Really Worth?

In our "continuing education" we've learned yet another valuable lesson. Owners and brokers have a very different idea of the value of a boat than lenders and surveyors. And in more cases than not, the latter has a value sometimes approaching 40% or more less than asking price.

We saw this but getting the information direct from the horse's mouth confirmed it. And with a little more hunting we've found selling prices are more in line with lender values.

If you're a cash buyer, you can pay anything you want for a boat. If you're a seller, you can ask anything you want for your boat. If you're a broker, you're hoping both the above will get together and complete the sale.

But once you get lenders and surveyors into the mix, things change and it's usually the seller who's not happy. At least that's what we're learning in conversations with lenders and surveyors we've had recently.

I suppose inflated asking prices are due in part because there is no system in place where brokers take known sale figures and advise the prospective seller what a good number would be if they want to sell their boat reasonably soon like they often do in real estate. Maybe that's why the average boat is on the market almost a year before it sells.

In a nut shell, what the lenders and surveyors have said is the value of a boat continues to decline as it ages until eventually it has no value to the lender. If a boat is valued at 25% its original asking price, the upgrades an owner does will be depreciated at pretty much the same amount. They could also have no value to the lender. So a $20K repower may only be worth $5K to the lender, even right after work is completed. On older boats it may have no value at all.

One lender said if the owner wants to pour money into improving the condition of their boat, that's fine, just don't believe it will automatically increase the value of your boat. At least not in the lender's eyes. They are only concerned with actual value in a given market, as in "If the borrower defaults, what price do we need to be at to sell the boat in a reasonable amount of time?" They don't get emotionally involved. It's strictly numbers and they know them well.

Surveyors may attach value to major upgrades but the overall value seems to be more in line with the lender's value estimates.

The more we learned, the more I realized the saying, "A boat is a hole in the water into which one throws money" is not just a saying. It's a fact. And that fact may be why so many boats fall into disrepair. The love is gone and there's no financial advantage to keeping the boat up. Just dump it as fast as you can.

When we started our search 6-8 weeks ago, I was gathering values from BoatUS and NADA for boats we were interested in. One boat was valued dramatically lower by NADA than BoatUS. I told the broker that. He said BoatUS had more realistic prices because they also do lending. It made sense so I started using BoatUS values to determine the real value of boats in the hunt.

Recent conversations with lenders proved just the opposite. All lenders we talked to said they use NADA prices to value boats. And the surveyors tended to agree with the lenders regarding boat value. Seldom did either agree with the seller value. Still, there are exceptions.

So who is right?

If you're obtaining a loan and you aren't willing or able to come up with a down payment that will bridge the gap between owner/broker perceived value and lender value, you have no other choice than to move on if the seller won't come down to lender value.

If you have the cash, you can pay whatever you want.
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Old 07-17-2013
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Re: What Is A Boat Really Worth?

I think soldboats.com is a more accurate source of realistic prices than Nada and Boat US.

If it is a relatively common boat, a yacht broker should be able to provide you with sales data from soldboats.com.

A boat is an unnecessary luxury item, if you cannot afford to pay cash for it, chances are that you cannot afford to own it, IMHO.

I am not saying that you should pay cash, just that you should be able to. It may make more financial sense to finance part of the purchase.

Last edited by jorgenl; 07-17-2013 at 11:17 AM.
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Old 07-17-2013
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Nice post! Thanks for the wisdom you have passed along.
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Old 07-17-2013
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Re: What Is A Boat Really Worth?

welcome to big ticket purchases, via financing. It is really not any different than buying a house, collector car, vacation home, etc. and Cash is King, YOU make the decision.

NADA and Buc are useless for any boat purchase NOT on a trailer or unless you want a Bayliner.

Don't mess with a bank that does not have a marine lending department. They will shoe horn the boat purchase in to one of their existing "products". They could care less what you or a surveyor says the boat is worth. They need the boat in "their" book.

Banks are much more stringent now, than they were just a few years ago. ie 750 or higher FICO, ability to pay the note back, and a downpayment of at least 20%. They also are hesitant to lock in these fantastic (for the purchaser/buyer) low interest rates for 20-30 years, as they will go back up.

Cash IS king, but it should not encourage you to pay more for the boat than it is worth. Boats with great names (hinckley, swan, shannon, etc) may (and many have, even when adjusted for inflation) increase in value/worth, but the rest are "depreciating assets" no matter what you, the new buyer or the old buyer or the original owner have or will put in to it, to make it yours. That $20K of two year old electronics now has a ZERO value and is obsolete on its face.

A good independent surveyor will provide a "value"...usually based on replacement of the boat under survey, with something else or something similar, or a sliding depreciation value based on condition and what other boats have sold for recently and in his location.

Marine lenders will use soldboats, auctions, repo's and "real" numbers as well as loans they have taken back or modified or called to value your new baby, but they are willing to listen and discuss value...ie see above about name. That is, a 20 year old hinckley 42 for $100K will get their attention much more so than a boat like my 20 year old Hunter P42 at $100K. Condition will get their attention as well. They simply have to make the auditors/underwriters happy that should the boat come back, the loss will be mitigated by a bank sale.

The boat is only "worth" what a ready willing capable buyer will pay for your overpriced tub.
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Old 07-17-2013
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Re: What Is A Boat Really Worth?

Quote:
Originally Posted by JulieMor View Post
In our "continuing education" we've learned yet another valuable lesson.

The more we learned, the more I realized the saying, "A boat is a hole in the water into which one throws money" is not just a saying. It's a fact. And that fact may be why so many boats fall into disrepair. The love is gone and there's no financial advantage to keeping the boat up. Just dump it as fast as you can.

Oh hey, all the advice you've been given here is just "folksy sayings and anecdotes". Ok, now you've had professional lenders and surveyors confirm what everyone here has been telling you. Feel better?

You keep approaching this from a house/car viewpoint. You are trying to find a boat that a lender will finance, and that you think will retain it's value for resale, years later.

I'll reiterate what someone else has said in this thread: Society views boats as "toys". In the current economic environment, toys have little value, especially at-risk toys, like yachts, motorcycles and vintage automobiles. As such, lenders aren't enticed to lend large amounts of money for disposable items that have little value, and will have no value a few years down the road. A highly polished turd, is still a turd as far as a bank is concerned.

When the economy was flush, I bought and fixed up vintage automobiles and sold them for a profit when I was tired of them or when I accumulated too many. When the economy turned to crap, I took a beating on all the remaining toys I sold. I lost money.

I paid cash for a solid boat that didn't "need" anything (but I have lots of wants), with the understanding that it is virtually worthless to anyone but me.

It's a good thing I love her, because we'll be stuck with each other for a long time.
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Old 07-17-2013
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Re: What Is A Boat Really Worth?

Hey,

It's the broker's JOB to know how the much the boat is worth! He should have access to selling prices on yachtworld, plus everything else. It doesn't do ANYONE any good to try and sell a boat that's worth 60K for 100K because that deal will never happen. The bank won't loan the money, the survey will show a value that's less, etc, etc. The owner will just get frustrated and should be looking for a new broker.

Of course there are bad brokers (too many IMHO) but there are also good brokers too.

I haven't been seriously looking for a boat for over 5 years but I have hard time believing that boats are all selling for 60% of asking price. I look at yachtworld all the time, and the boats I am interested in (C&C 110, Tartan 3500, Sabre 362, plus a few others) usually are listed for comparable prices and seem to take 6 months or so to sell. Some are listed for more and take longer I guess until the owner drops the price, but I have hard time believing that they are selling for 60%. I have offered 75-80% of asking price on a boat and been rejected.

My statements are based on relatively common production type boats. Of course, it's much harder / impossible to set prices on rare boats.

Barry
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Old 07-17-2013
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Re: What Is A Boat Really Worth?

The boats are listed in the same price range because all the brokers are relying on the same pricing database.

IMO, most boats are priced way way too high. Many are advertised with improvments like new sails or motor, or with history's like Freshwater only. My personal favorite useless price inflator " Winning race history." Ok, unless the boat is coming with the winning skipper and he's going to buy me new sails every year I guess the boat is what it is, and that is just another boat.

Improvements may enhance a boat's sellabilty but few enhance it's value. Honestly i expect the boat to have an engine that works. Just like, if you buy my house, you expect the roof will not leak. That i just paid 15k to make sure of that, that's my problem. Though the new roof makes my house more attractive than one without a new roof, it doesn't increase its value.

Unwanted boats are alligators eating someone's wallet. The bleeding doesn't stop until ownership changes hands. Of course the sellers want to max out what they get for the boat when they sell. But the longer they hold on, the less they will net. These folks are at a disadvantage.

OTOH, your job as a buyer is to pay as little as possible. Listen to the surveyors, they know what these boats are really worth.

On the subject of surveyors, they are worth their weight in gold. However, just like the rest of us, they gotta eat. Surveyors who kill deals by giving honest value assessments tend to be very skinny. Honesty has a price. And that price is having none of the local brokers recommend your service. For that reason, if you can, it is smart to use an out of the area surveyor. Someone the local brokers can't hold sway over. He owes nothing to the locals and can give you an honest assessment without thinking about whether he's hurting his business.
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Last edited by TJC45; 07-17-2013 at 12:08 PM.
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Old 07-17-2013
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Re: What Is A Boat Really Worth?

Quote:
Originally Posted by JulieMor View Post
I suppose inflated asking prices are due in part because there is no system in place where brokers take known sale figures and advise the prospective seller what a good number would be if they want to sell their boat reasonably soon like they often do in real estate.
There's more to it than that.

You simply cannot establish a value for boats the way that you can for houses. Boats have no "land value" that exists independent of the value of the structure. Boats move around. In real estate location is key, and it is very unusual to find a $6-million mansion next door to a $6,000 mobile home. In a marina, this is actually pretty common.

Of course, condition matters with a home, just like with a boat, but only a very small percentage of boats have someone living in them, compared to homes. And when no one is "home" for months at a time, the condition of a boat can go downhill very quickly.

Beyond that, every broker I've ever chatted with has stories about owners who simply refuse to believe what the real value of their boat is, and demand that it be listed at an unrealistic price.

Quote:
Originally Posted by JulieMor View Post
So a $20K repower may only be worth $5K to the lender, even right after work is completed. On older boats it may have no value at all.
True, but this is actually one way in which boats and homes are somewhat similar. Spend $20k creating an elegant outdoor barbecue area, or putting in built-in shelves and converting a bedroom into a library, and it is almost certain that you will not add $20k to the sales price you can get for your home. What you will actually add will depend to a large extent on the features that other homes in your neighborhood have. The point being, that some upgrades add a lot of value, and some add almost nothing. Some sellers think they should be able to recoup the full value of everything they've done to the boat or the house, and they end up over-pricing as a result.

Quote:
Originally Posted by JulieMor View Post
If you have the cash, you can pay whatever you want.
That's always been true, but the real point here is that a boat is a disposable luxury item that can depreciate to be worth less than zero. And I do mean that quite literally. There are boats out there that cannot be given away, because the cost of disposing of them is going to be greater than any scrap value that can be recovered from them. This almost NEVER happens with real estate. As mentioned above, the land almost ALWAYS retains some value, even if the home itself is good for nothing but tearing down. And the reality is that real estate usually goes up in value over time while a boat almost NEVER does.

Because of this, you simply cannot expect to buy a boat the way you do a home. It's easy to get a 90% loan on a home. You can even get zero-down loans on homes sometimes. Or an interest-only loan. Try getting any of those things on a boat!

Good luck finding what you want. Really. But if you approach boat-buying with the idea that it is a lot like buying a house or a car, you are in for a lot of surprises--most of them probably unpleasant.
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Last edited by denverd0n; 07-17-2013 at 12:05 PM.
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Old 07-17-2013
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Re: What Is A Boat Really Worth?

In general one can say that statistically (according to soldboats.com):

90% of all boats sell for 90% of (last) asking price.

Some boats sell for way less. Some boats sell for asking price (yes - it still does happen).
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Old 07-17-2013
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Re: What Is A Boat Really Worth?

Buying a boat (or anything else) is a bit like participating in a buy me now/make offer eBay auction.

You can pay the BUY ME NOW price (what the seller wants).

Or you can try to get it at an OR MAKE OFFER price which likely reflects a low ball offer by the buyer.

And you can negotiate the MAKE OFFER price with the seller.

But in the end you will pay what the item IS WORTH TO YOU.

If an object's worth to you is based on its extrinsic value you need the details of a survey and resale insight.

Extrinsic value is what the bank worries about. If a borrower defaults they don't want to take a loss.

Banks don't give loans based on intrinsic value (how much you love the boat).

OTOH banks loan to people and if they think you are a good risk they will loan based on your ability to pay them and their evaluation as to whether you think it is important to repay them.

Years ago I bought a boat with a loan. Had a hard time finding a loan because it was a big loan for my economic status. I called a bank who had the slogan "Member of FDIC and the Human Race" in their Yellow Pages ad. A VP answered the phone and invited me down to talk to him and after a five minute discussion me he told me he would approve the loan. A lot of money at Carter-era interest rates but he knew I would repay based on the interview. And the boat was extrinsically worth it as well.

Thirty years later I still own that boat and extrinsically it is worth about what I paid for it (of course the dollar ain't what it used to be).
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