Negotiating prices with brokers

TakeFive · #1 11-08-2009

In our ongoing boat search, we have found another (third) boat that we really like. This reinforces our need to take our time, since there are a lot of really nice boats out there on the market.

However, I also need to calibrate my expectations around brokers' asking prices vs. what I might expect to actually pay. From what I have heard, I believe that there are two basic types of brokerage listings:

Broker represented listings, where a seller pays a commission to the broker at the time of sale, much like a realtor. The broker takes reasonable offers to the seller, and it's the seller's decision whether to accept the offer or not
Trade-ins, where the broker has sold another (often new) boat to a buyer, and has accepted his prior boat in trade

It is the latter example that I am particularly interested in. I can look up NADA book retail values, but cannot easily get the NADA wholesale values for comparison. (Please post a link if there is a place I can get this.) For those of you who are experienced at this, what is the typical markup for asking price that brokers use for trade-ins? And more importantly, what is the typical selling price vs. asking price? Or, put another way, what is the profit margin that a broker wants? I know he's out to make as much as he can, but he has already made some money on the sale he just made with the new boat and should be motivated to keep his inventory at a reasonable level to keep turning around new boats and accepting more trades. How does the current recessionary market affect all of these things?

Finally, everyone has told me to wait until the winter when prices come down. How much do they come down vs. where they are now? Do the price drops hit all parts of the market, just private sales, or just brokers?

I want to try to avoid discussing prices for specific boats, because such price talk can often lead to hard feelings among boat owners who want to see their boat continue to command a high price. But a generalized discussion like this could be very helpful to me as I prepare to negotiate with brokers on a possible boat.

Thanks,

Rick

starboardyacht · #2 11-08-2009

Very intelligent way to frame this question, however without getting specific how can you get your answer, other than the standard worn out reply (well maintained boats always sell higher)...

tommays · #3 11-08-2009

I am selling my J24 right now because i bought a Cal 29 and while i would drop the price a bit if somebody took the boat right now

I want to sell it BUT don't need to sell it and that's really the key issue as it can sit covered on the side of my house for nothing

And the value and condition of the sail inventory and outboard with 30 hours on it puts the boat in much better shape than most of its age

TakeFive · #4 11-08-2009

Quote:

Originally Posted by starboardyacht

Very intelligent way to frame this question, however without getting specific how can you get your answer, other than the standard worn out reply (well maintained boats always sell higher)...

I don't want to get specific about the make/model/year of the boat because I don't want to argue with proud owners about what their boats are worth (especially if their boats are not for sale).

I do want to talk about market conditions and the typical business practices of boat brokerages.

The perfect answer to my question would be "last month I bought a '96 BrandX ModelY in very clean condition. It was a trade-in. The broker was asking $27k, and the NADA (or perhaps BUC) retail book value was $22-24k. The broker told me he gave the seller $18k in trade, and sold it to me for $20k because the depressed market has him selling at 10% margin. He said that back in the "good old days" before the recession he was getting 25% margin, so he would have gotten $24k for the boat.

That's the kind of answer I am looking for. The make/model/year is not relevant, because NADA book value takes care of that. Condition is relevant because it accounts for which end of the NADA range is appropriate.

With this information I can learn where brokers typically price their boats relative to NADA wholesale value, and thus estimate NADA wholesale value. I can also estimate a fair profit margin for the broker in the current market conditions. From that information I can make a fair offer that will likely be accepted.

I do this for cars all the time. I am not experienced enough with boats to know the analogous sources of information or profit margins.

boatpoker · #5 11-08-2009

The most precise answer you can expect to your questions is...... It depends.
There are far too many variables for a one size fits all answer or anything close to it. Check out my article on boat valuations, it may show you what you are up against. http://www.pcmarinesurveys.com/Boat%20Values.htm

anemoneii · #6 11-08-2009

The last boat I bought from a broker, I offered 40% of the asking price and settled at 55% of the asking price and that was in a better economy then now. Boats are really hard to sell, they sit and sit longer, people ask too much for them. Get a bargin, then when you are ready to sell you won't mind passing that bargin quickly to somone else.

tager · #7 11-08-2009

Just low ball them, sure they will get offended, but who are you trying to keep as a business partner? Your yacht broker?

mstern · #8 11-08-2009

Doc: have you asked this broker about his "standard" margin, and his "standard" expected rate of return? I guess that the veracity of his response will be no better or worse than anyone else who responds here. I can report from my own experience in this same situation that I think the answer depends as much on the boat as anything else. I dealt with a broker who had a (for his business) small boat (27 or 28 feet). He had taken it in trade and was willing to let it go for less than BUC value because he didn't have the time or interest to market it.

TakeFive · #9 11-08-2009

Quote:

Originally Posted by mstern

Doc: have you asked this broker about his "standard" margin, and his "standard" expected rate of return? I guess that the veracity of his response will be no better or worse than anyone else who responds here. I can report from my own experience in this same situation that I think the answer depends as much on the boat as anything else. I dealt with a broker who had a (for his business) small boat (27 or 28 feet). He had taken it in trade and was willing to let it go for less than BUC value because he didn't have the time or interest to market it.

No, I have not asked the broker directly. I suppose I could do that. I just like to do some homework first to see what others might have done.

I tend to dislike the whole "lowball offer" thing. I much prefer to understand how the business works, go in understanding that he deserves to make some profit, and come up with a number that is reasonable as a first offer. While I don't want to be his business partner, I do think it is good to keep it a win-win situation since I may want to get good service from him later.

gr8trn · #10 11-08-2009

I am glad to hear that you are all about the win-win. So many are listening to too much WIIFM (What's In It For Me).
I am not sure the the NADA or BUC stuff is of real help.
Let's take the brokered boat first. You name it. If the seller wants to sell, and the boat is clean, the boat will sell. This is what offer sheets are for. Like you said, let the broker take the offer to the seller. It seems that the broker is in for about 10% commission on the sale. Of course, the House gets some, the Listing broker gets some and the Selling broker gets some.

As for the trade-in that is on sale at a brokerage, I have one example for you. Boat was traded in and the buyer was given a trade-in value of $74K. The boat went for around $89K in a matter of a few weeks. This was summer of this year. That boat according to NADA should have been $72K retail. There were several on Yachtworld listing from $105K to $85K. Of course fit and finish and extra goodies play a huge roll in all of this.

Sometimes you have to do things an you may not have all the info that you would like. If the boat you like is out there, find out what they are listing for, find out how they are decked out and maintained. Give it your best shot.

Hint: boats floating at a dealership in brokerage are more likely to be "on sale" that those FSBO and floating at their own slips and sitting in their own back yards or driveways.

Greg