Market value vs replacment cost - SailNet Community

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  #1  
Old 12-01-2006
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Market value vs replacment cost

Hello all.

Ijust got a copy of a survey on a boat that I am interested in buying. The thing is that market value is very low compared to asking price , about 27,000 usd difference. The boat looks to be in very good condition and well equipped as well as being competively priced when compared against other boats of the same vintage. However the sellers are unwilling to move much off their asking price. How much stock should one put in the market price , and how does a surveyor come to such a figure , when by his own statements the boat is very well equipped and maintained?

Currently negotiating the price so any insight would be valuable .

KC
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Old 12-02-2006
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Your insurance company, most likely, will go by market value. It's a buyer's market. Don't let the emotions sweep you up. The boat I bought was originally listed at 179k, then 154k and I bought it for less (which was actually a great deal). Other similar boats on the market were going for about 150k. With the number of boats on the market today, I'd keep looking. The longer the boat is on the market, the more motivated the seller will be. I worked with a broker and asked him to find me boats that had been on the market for 8+ months.
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Old 12-02-2006
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There could be a few different reasons for the difference in asking price and market value. Some folks feel they should get back some of what they have put into a boat. Others may have the boat up for sale, but aren't really comitted to selling it yet. So they price it high, thinking if it does sell, at least they'll get top dollar for it. Or perhaps they need X amount out of it for something else. These are just some possible reasons, and may not be the case in this instance.

You don't say if you commisioned the survey, or if it's merely a copy of a previous one, though it sounds like a copy. To seriously negotiate, you need your own survey. One where you have been present and have gone over the results with the surveyor. Using a copy, even from another prospective buyer, just isn't the same. And if it's a copy from the seller, the survey may have only been for insurance purposes and not as thorough as it could be.

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Old 12-02-2006
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A surveyor will base his/her decision on market value upon searches for similar boat/similar location/similar condition actual selling price. It's not always possible to find a statistically valid number of boats of similar condition, age, location, etc so the surveyor will often provide a best estimate of market value based on these critierion. Surveyors also are privy to actual selling prices of boats which can be significantly different than the selling prices you see listed on various lists and URLs.

If you could look "across the board", you may be surprised to see how much lower actual selling prices are compared with asking prices. Hence, either or both of you may be working under a false pretense of value and you would be well-served to talk to the surveyor to get a better feel how he/she arrived at that figure.
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Old 12-02-2006
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Make your offer based on what you're willing to pay.

One example, for a well-used retired racing boat:

Asking Price $12,000
Sold for $8,000

Surveyor's Reported Estimate of New Replacement Cost $145,000
Surveyor's Reported Estimate of Market Value $20,000

Surveyor knew the agreed upon price and asked buyer what Market Value should be in his report. Buyer suggested a figure and surveyor concurred. Surveyor thought the seller set their asking price too low -- they should have started at $20 or $22K, and let the boat go for maybe $16K....

This of course is the opposite problem to what you're dealing with (seller setting asking price too high), but I guess the point is that it is a buyer's market and there are a lot of boats out there...
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Old 12-02-2006
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Thanks for the posts. I agree the best thing to do is to call the surveyor, and I have but have not heard back yet . Idon't know if the survey was insurance purposes or not. the seller has put quite a lot of $ into it, over 130,000. the orice seems close based on my reviews of similar type boats for the last 2 years. Buy the surveyors own comments the boat is well equipped and maintained , suitable for coastal and offshore voyaging. The surveyor is apparently a well respected and knowledgable individual.

Something is just doesn't seem right
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Old 12-02-2006
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If this is an old (2yrs?) survey, and the owner has upgraded this could change things quite a bit.

You'll need a current survey anyway, and it should reflect any recent improvements. I doubt you would want to use the same surveyor again.....

Also, if $130K has been put into the boat recently, then perhaps the $27K difference you speak of is not a huge percentage of the price?? That may change the significance of the difference.
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Old 12-02-2006
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You might have a bigger issue

Quote:
Originally Posted by kmclarke
Thanks for the posts. I agree the best thing to do is to call the surveyor, and I have but have not heard back yet . Idon't know if the survey was insurance purposes or not. the seller has put quite a lot of $ into it, over 130,000. the orice seems close based on my reviews of similar type boats for the last 2 years. Buy the surveyors own comments the boat is well equipped and maintained , suitable for coastal and offshore voyaging. The surveyor is apparently a well respected and knowledgable individual.

Something is just doesn't seem right
What I'd sugges you find out DEFINITIVELY is whether this was an insurance survey or a condition and value/purchase survey - there is a BIG difference, the former being no where near as thorough and should not be depended upon when making a pruchase decision.
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Old 12-02-2006
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I would not put much weight on a surveyor's estimate of market value - I suspect most surveyors would do an exercise such as run the selling prices of similar models over the past year off yachtworld.com and average the results. Coming up with a accurate market value for a boat is a complicated and timely exercise due to the large number of variables that deserve to be considered and are different for every boat. Working off some market average in particular under-values the best boats, and over-values the worst!

Our insurance company set the market value of our boat at the purchase price - after a few years of upgrades, we had to provide them with yard bills in order to get the market value increased. For a subsequent insurance vlaue survey, the surveyor asked us what value we wanted the boat insured at, and went with that - i don't know what he would ahve said if we wanted a big jump in valus - i assume he would have questioned us.

When I bought my last boat, i made a schedule for price adjustments for pluses and minuses, versus the average "market value" to get some some adjusted value for a specific boat. For example, a boat with a new 35 Hp diesel would get +$10,000, one with a diesel with 4,000 hours would get -$10,000...You should take your negotiating from that calculation - bye the bye, I think it works out much better to pay above "market value" for well upgraded and equipped boat, than to look for a deal.

Last edited by sailingfool; 12-02-2006 at 10:11 PM.
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Old 12-04-2006
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Quote:
Originally Posted by kmclarke
Hello all.

Ijust got a copy of a survey on a boat that I am interested in buying. The thing is that market value is very low compared to asking price , about 27,000 usd difference. The boat looks to be in very good condition and well equipped as well as being competively priced when compared against other boats of the same vintage. However the sellers are unwilling to move much off their asking price. How much stock should one put in the market price , and how does a surveyor come to such a figure , when by his own statements the boat is very well equipped and maintained?

Currently negotiating the price so any insight would be valuable .

KC
Market price is just that...it has nothing to do with how much someone may be asking for their boat. The sellers may be upside down on their financing or have put way too much money in the boat and will never get it out of it. If their price is inflated, the boat will not sell until someone comes along that is willing or stupid enough to pay their price. If they're $27,000 over average market value, that must be one special boat.
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