Photo credit: chuttersnap
Part 5 of 6: Young & Salty “How to Buy a Boat” series
When thinking about boat values and the price an owner is asking, consider it from all angles.
We always take the list price with a few grains of salt. From talking to yacht broker friends and from our own experiences, boats almost never sell for the list price. It is a starting point for negotiations and it is usually set high because the culture in sailing is to offer 70-80% of the list price. We have encountered boats for which we would have paid the list price, but before we could even make an offer, they were sold. If there is a good deal out there it doesn’t last long.
If we are interested in the boat we usually ask for a yacht survey to see what the most recent surveyor valued the boat at. Often the surveyor will separate hull value from add-ons like, electronics that lose their value very quickly. We have also found that sellers use old surveys to determine valuation, in some case surveys that are ten years old. These surveys are not helpful in determining how much the boat is worth.
We also check other similar boats in the local area (yacht brokers, Craigslist, Kijiji) to see what they are listed at. If our local area is Vancouver, we consider local to be anywhere within a 500 mile radius. We assume that most boats will sell for 70-80% of their list price. Then we do a search on Yachtworld and Sailboat Listings of the exact year and model of the boat in which we are interested. However, in some places, like Mexico, boats will be much cheaper than an area like the Pacific Northwest. So searching in other areas has limited applicability for buying a boat locally. (see <searching for a boat>)
In assessing the economics of a particular boat we have as gone as far as making depreciation curves. We want to know how much we will be able to realistically sell the boat for in a few years’ time. We look on Yachtworld primarily, but use as many sources as possible, to gather data for a particular manufacturer. For example, if we are looking at a 41’ Beneteau, we search for all Beneteaus in the 40-43’ range. We put the age and price of every boat into an excel document and plot them on a scatter-plot graph. Then we add a trendline (usually polynomial, order 2) to fit the data. This will give us an idea of what the price of the boat is doing over time and we can project where the price will be going in the next few years. If we are planning to sell in a few years we would want to be near the beginning of a low slope segment of the trendline. Sometimes the trendline is skewed by overly-idealistic sellers or junk boats, which we consider outliers and often strike from the data.
We are as guilty as everyone in setting emotional prices for our boats. We put in so much money and hard work and we form such a relationship with the boat that we value the boat higher than the market does. It takes time and a few low ball offers to wear down the emotional seller to a more rational price point. Sometimes, the seller sets an idealistic price and won’t budge because they don’t really want to sell. We have encountered this a few times and it is usually pretty clear. Sometimes we are just too early and we know the seller will get worn down over time, but it’s time we just don’t have and so we move onto the next one.
The corollary to emotional pricing is emotional buying. Sometimes we fall in love with a boat; something about the interior layout or the lines or the color of the hull, even the name can have a profound influence. We can’t help but let our emotions in to the decision making process, but we have found that they should be reserved for the final decision. In order to minimize our emotions we try to quantify everything in terms of numbers and put it in an excel sheet.
Value by the numbers
We start with the list price and then detail everything that we have found that will need work, upgrade or replacement, immediately and over the next few years and assign a material cost and labor cost to each item (see <conducting your own yacht survey>). We don’t add normal maintenance costs because that would skew the value and be unfair to the seller, unless the seller hasn’t been maintaining the boat and we would be playing catch up. It takes some research to determine the costs of each item, but the costs once derived can be applied to other boats as well.
We add all of the upgrade costs to the list price for a total, which is usually dismayingly high. Then we use our depreciation curve to project a price for which we can sell the boat in a few years. We always lose money in this equation, but boats are not investments. Once all the numbers are in excel we play around with different scenarios. Often we often multiply the upgrade costs by 1.25 as we’ve found we are usually optimistic about price and time. We also reduce the list price to a price for which we think we might be able to buy the boat. We have found that comparing boats using only numbers in excel gives us a much better perspective on their true values. (see <link to making an offer>)