|Topic Review (Newest First)|
|08-08-2006 07:16 PM|
|LyleRussell||Thanx everyone for an excellent education.|
|08-03-2006 11:16 PM|
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.
Originally Posted by Gene T
|08-03-2006 10:44 PM|
My own words on the purchase process
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.
Originally Posted by LyleRussell
|08-03-2006 10:24 PM|
I agree with PBeezer. You need to deal with the situation as you find it.
I always made offers in a price range that I thought was slightly less than fair for the condition of the vessel AS I COULD REASONABLY DETERMINE IT.
Inform your reluctant broker that your offer was just that, an offer, and request that he get a counter. Allow the seller to drag you up a bit (saving him face and getting him comfortable) but by no means bringing you to an uncomfortable point. Feel free if circumstances permit to counter more than once.
Asking for allowances after survey is not only an acceptable practice but a reasonable one. Those allowances do not generally include maintenence items (such as bottom paint, stiff seacocks, etc. Many times things turn up on survey that the seller is unaware of, and that he literally will be obligated to disclose after this point. He may be unable to sell the vessel without correcting the matter. So further negotiations are not only nessesary but of an advantage to both the buyer and sellar. (he does want to sell the boat you know).
Allowances can go in any direction as circumstances will dictate. You might want to say; Seller, take care of this and that And I will cover thus and so.
On my last personal vessel after survey, I listed the apprx cost and detail of each survey item and told the seller; I will take care of all the items except for one and for that I want you to give me an allowance of half the yard estimate. Do what you are comfortable with but remember: you arent doing yourself or the seller any favors by not trying to buy the boat.
|08-03-2006 10:02 PM|
Originally Posted by LyleRussell
But, remember, only you can determine what any boat is worth to you. If you'd rather pay more, so you don't have to dicker over price, that's your call.
|08-03-2006 09:41 PM|
Originally Posted by LyleRussell
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.
|08-03-2006 09:14 PM|
The deal is - if you've only selected one boat as a prospect, I guess you should plan on paying what the seller asks.
The nature of bargaining is that you have other options, and you're going to make a decision within a set timeframe. Without other options, you're victim to the sellers asking price.
Get back on the web, find other boats (j-boats preferably) and do some negotiating.
|08-03-2006 09:09 PM|
There are no formulas. Your offer needs to be an educated gut feeling, based on all the circumstances surrounding the boat.
A couple of years ago we were looking for another boat, using a broker. We had looked at many over several months, then he found one in Anacortes, WA, an hour south of the border. It was an estate sale that had been on the market for eleven months without an offer. Apparently the initial asking price was so high that nobody had even ventured an offer. The estate needed settlement shortly, and the asking price had just been lowered, so through our broker, we tendered a lowball offer that was about 60% of the initial ask and about 75% of the newly adjusted one.
The next morning, we received a fax accepting the offer, with the only amendment being that the sale did not include the dinghy. We quickly accepted the amended document, since we had made the offer subject to a visual inspection, a sea trial and a full survey. And to assist with the foreign exchange, the United States economy was foundering and the greenback was in near freefall. The Canadian dollar was 33% stronger in the US than it had been when we started our boat hunt.
By waiting and being patient, we saved nearly $200,000, which was more than enough to buy a dinghy.
|08-03-2006 08:41 PM|
Bollard I apologize for beating on you on your very first post. Feel free to beat on me. I have a good flame proof suit.
Also to everyone who has contributed I want to express my appreciation. I certainly have a better idea how to make an offer than I did before. I hope others have too.
|08-03-2006 08:37 PM|
OK Lets say for the moment I accept your premise that there are too many variables to apply a percentage.
Then where do I start at, when making an offer? Give me a hint.
Don't say to me that asking the broker is a solution. One, I haven't found one yet that I trust. I'm quite sure that they're out there but I haven't found one. Second a broker's motivation is to optimize his commission which is opposed to my goals. Again a broker needs to earn a living just like computer programmers do. I have no problem paying a fair comission. But note the word fair.
Repeating my whine. Where do I start at, when making an offer?
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