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Go Back   SailNet Community > On Board > Boat Review and Purchase Forum
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  #61  
Old 08-03-2006
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Smile My own words on the purchase process

Dear Lyle,

I feel that I should clarify somewhat since you seem to be left with a different understanding than I intended in my postings and you are quoting me now. My advice was not to offer 95%, rather, it was to determine the market value before survey and then structure your offer process such that you end up at that market value. Typically that market value will end up at 5-15% less than the seller's asking price. I'll explain why that happens next.

Now the market value should be derived from recent comparable sales, the subject vessel condition, and market conditions such as low supply of the vessel in question. The market value does not necessarily have anything to do with the seller's asking price. Fortunately, sellers working with professional brokers tend to have a reasonable asking price with some negotiating room and that is why the contracted sale price usually ends up at 5-15% less than the seller's asking price. If the buyer is more motivated than the seller then you may even see a full price offer. There are other reasons that can cause that too. On the other hand a seller that is uninformed in some way may be expecting twice a much as a boat is obviously worth to a professional broker or surveyor.

While there are general trends in these matters, you cannot easily apply them to a particular transaction since there are so many variables. One needs to take in and judge all the variables when making an offer if one wants to end up at market value. A professional broker can be of great assistance with useful information and perspective in that process. When market value doesn't matter to someone, they just go for it !

On the matter of broker commissions, there are some other things that need to be considered other than just a higher contract price and commission. Many people are not aware that a successful broker builds up a strong business with repeat customers. People tend to buy a boat and then trade up as their boating skill, resources, and needs increase over time. Then towards the far end of a long boating career, those who stay in it do an inverse process as physical capabilities decrease and trade down to smaller, more manageable vessels. This repeat business will be severely at risk once a buyer determines that his last broker encouraged him to "just give the seller what he wants" and therefor pay over market value. The repeat business includes not only the next purchase, but selling the last boat too. That is too much future business to put at risk merely for what may average to 10% more commission on the current deal.

Another downward pressure on contracted prices is that these days most boats are purchased with loans. The loan process requires insurance. The insurance will not cover over market value, so the loan company won't loan as much as the buyer needs. To finish the deal the buyer has to dig into his pocket for more cash, fully knowing that he's paying too much. Fat chance and a risky position to put your buyer in. In the case of a full cash deal, the buyer will still need insurance to dock in most marinas (hey, it's the litigious USA) and again the insurance company will only insure up to market value so the buyer quickly finds out that he has overpaid for the boat.

Finally, what I said about a contract contingent survey and sea trial is only to ask for price concessions or repairs based on serious problems that come up. If serious problems don't occur then everyone should be satisfied with the contracted price. The kinds of defects that you listed there severely affect the market value of the vessel. Does anyone out there think it is not straight up to contract based on market value and ask for concessions or repairs based on serious defects that impact market value ?

Lyle, I can tell by the last line of your post that you are definitely motivated. Good luck on landing on a J-40 deck.

Quote:
Originally Posted by LyleRussell
The broker guy, CaptNero has an idea, make the owner a 95% offer contingent upon a survey, then beat him down when the survey shows it needs things. Engine -$6,000, Mast -$3000, Deck dried & resealed, -2000, Rudder bearings -5000, bottom job -$10,000. This technique might even get the price well below what I have already offered!!

The truth is, I don't like doing business that way. I believe that one should deal with folks straight up.

On Brokers, I think I am going to start a thread " Has you're broker labeled you a dreamer - What to do about it" So far I haven't had much luck finding one for the long haul.

Having said that, I have found another good sounding J-40. I am awaiting pictures and a spec sheet. If she still sounds good then a road trip will be in order. Whooaahh. Yeah I know what I said about J-40's being too big and expensive. Screwit, I have the bug very bad.

Last edited by captnnero; 08-03-2006 at 11:36 PM.
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Old 08-03-2006
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You'll know when the ball is in your court

Gene, I like what you said about what it is worth to you, the individual. One can do a bunch of figuring and form an opinion on value and strategy ahead of time. Then in the midst of the offer/counteroffer process the ball will end up in your court and you will finally know what the boat is worth to you, regardless of what you decided ahead of time. Only when the game is afoot will you really know.

The same is true for the seller. When the seller is considering the current offer along with any previous offer and contract history he will know how much the boat is really worth to him.

In the event that your gut leads you to paying more than market value, the problem comes in particularly if the boat needs to be sold in a year or two. Unless there is another buyer as over motivated as you were originally, you will be stuck with lowering your price more and basically making up the difference.

Quote:
Originally Posted by Gene T
Interesting that you want someone else to tell you what you should offer for a boat. We haven't seen it and it doesn't mean the same thing to us as it does to you! Personally I think the asking price is almost irrelevant. The real question is "what is the boat worth to you?" How will you feel if you pay a certain amount? Screwed, fair price, or a deal. How you choose to feel about it is the real question. So you have to figure out what the boat is worth to you, and you alone. I do depend on the broker for a indication of the urgency of sale and firmness of the price and comps.

So, where to start? Offer less than you are willing to pay. Then you can negotiate up to your price. How do you know what you're willing to pay? Research! Find comps, add or subtract value for the equipment and condition. Add an urgency factor, in the end it's only money. It won't matter in a 100 years anyway.

Last edited by captnnero; 08-04-2006 at 09:39 AM.
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Old 08-08-2006
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Thanx everyone for an excellent education.
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