This one is for all of you who have bought or sold a boat or have plans to do so in the future. The rest of you may not get much out of it, but might I suggest some other lovely posts such as I Am Serious, And Don’t Call Me Shirley, The Ocean Doesn’t Care, or Life’s True Purpose?
OK, off we go. Those of you who have been following along probably know that we currently own two boats. We love the smaller one, but it’s not really suitable for the type of cruising we’re preparing for. We need to sell it. While it is theoretically possible to do this on our own, we’re probably going to have to obtain the services of (insert ominous bass chord here – duh duh duhhhhhh) a broker. Why? Well, because Rhonda and I still both work full time and have numerous commitments on the weekends, and just don’t have the time or patience to deal with all the looky-loos, tire-kickers (rudder kickers?), penniless starry-eyed dreamers and waterfront shysters that boats attract. Better to leave that for the (duh duh duhhhh) broker to handle (OK, I’m done with the dramatic accent, but I want you to keep imagining it’s there whenever I say “broker”). We’ll pay their usurious 10% commission so that they can filter out the obviously unqualified buyers, show the boat a few times, and post an ad on Yachtworld for us, which we can’t do ourselves because we’re not brokers (did you do it in your head? Good.)
Surely they do more than that for 10% of the selling price? Why yes, yes they do. Another service they provide is to tell you what your boat is worth and should sell for. And that, ladies and gentlemen, is what we’re primarily here to talk about today. Because it’s that part of the process where I think many (lots? most? nearly all?) brokers do their clients a huge disservice. Let me do one of the things I love to do best, which is to illustrate by example.
What the heck is that? Yes, I know it’s a car, but what type?
I’ll bet you’ve never seen one of these before. I doubt there could be more than a handful left, because they tended to spontaneously turn to huge piles of rust while simultaneously catching fire. That, my friends, is a 1969 Rootes Sunbeam Arrow, an incredibly crappy little English sedan. I’m probably one of less than half a dozen people in the entire country who had one as his or her first car. I named it Herman. No idea why, it just seemed to be the appropriately dweebish name for an incredibly dweebish car. God I loved that thing.
So what would you think a car like that would be worth? I’m guessing $500 on a good day, provided it had new tires. But let’s suppose that somewhere, someone still has one that hasn’t oxidized into dust pan sweepings. They decide to sell it. I find out about it. I’m at a point in life where I have some disposable income, and this really rings nostalgic for me. I really want that old piece of crap, I mean, car. So, I offer a grand. Maybe twelve hundred if the light switches still work, and you don’t have to twist wires together under the dash to turn the headlights on (true story). Am I crazy? No, I’m just a member of an incredibly small group of people for whom this car has special meaning (so small we’d probably have trouble fielding a basketball team).
What in the world does any of this have to do with brokers and selling boats? Well, let’s just say that against all odds, another example of this fine piece of British automotive engineering existed, and that owner wants to sell it too. Not knowing what the car is worth, he checks www.soldcars.com (that site’s for sale btw, in case anyone has any good ideas for it), where he/she learns that the last example that came to market sold for $1,200. Ipso facto and as a result, the car is worth $1,200. Question answered! On the market it goes, priced at $1,450 so that after some dickering, the seller thinks he can get his $1,200.
Is the car worth that much? Absolutely not. But because someone somewhere at some time was willing to pay that much, bingo, they’re all worth that much now.
That’s what a broker does. When you obtain their services, one of the things they do is check a super secret site that only brokers can access called SoldBoats.com. It tells them how much other people have paid in the past for similar boats. But here’s the kicker – it makes no allowance for how long it took to get that price. So the broker says to you, “Oh, your boat is worth $XYZ, because one in similar condition sold for that amount last month.” So you price it there, believing that’s what it’s worth. Only it’s not. Because what the broker didn’t tell you is that it took over two years for the boat to sell. It just sat and sat and sat some more until finally, against all odds, someone like me, for whom that particular boat had some special significance, was willing to overpay to get their hands on it.
Personally, I think that’s a terrible way to sell something. Free markets assign value. Regardless of what you think something is worth, if you’ve had it for sale for six months, a year, eighteen months or more, and it hasn’t sold, then I can plainly see your problem, even if you can’t. You’re asking more that it’s worth, and most people, being fairly rational when it comes to money, won’t pay it. You’re holding out for that incredibly tiny sliver of purchasers who have enough cash and some reason to overlook the fact that they’re paying too much.
What’s so sad about this is that for the vast majority of us, boats have ongoing expenses that have to be paid. Payments on a note, monthly slip fees, insurance, maintenance and upkeep, maybe the occasional bottom cleaning, those costs just keep clicking along month after month. So let’s say that you do eventually get something near the price that you’re holding out for, the price that your broker told you it’s worth. His expertise is confirmed, because you did get close to his suggested price after all, and the data gets dutifully entered in SoldBoats so that the next sucker, er, seller, can make an informed decision. But when you back out the eighteen months of fees you incurred, you find you actually netted about what you’d have gotten if you’d priced the boat realistically and sold it in 90 days.
So what is realistic pricing? OK, I’m speaking to the HunteBeneLina owners now. You know who you are. We own mass produced fiberglass boats and are damn proud of it. What I’m about to say may not be as applicable to an old Tartan or Sabre or some fancy-pants Morris, but there’s a lot more of us selling boats than there are of them. And here’s the way it works:
Boats are expensive. Most buyers are probably financing the purchase. Oh sure, there are those who have sold their house or inherited the family fortune or settled their personal injury lawsuit and have stupid amounts of money to burn. But the majority of buyers purchasing production sailboats are probably doing it with a loan. Loans come from banks. Banks are not stupid with money. They don’t let emotion and nostalgia cloud their judgment when establishing value. They don’t care one bit how graceful the lines, how shiny the brightwork, how good you look behind the wheel. They look at NADA and BUCValu. They enter the year, make and model, and look at the result. Maybe, if you have a really good relationship with your banker, they might consider the condition, but generally they’re just going to take the lowest number. That’s what they call their loan value. Which they’ll then loan you 75% to 90% of depending on their down payment requirements. That’s it. That’s what the boat is worth. Anything above that, and you’re going to have to make it up out of your pocket. You’re going to have to be willing to overpay.
So why won’t a broker tell you this? Why won’t they give you a price that you can reasonably expect to sell the boat at within a reasonable timeframe? Because they don’t care. There’s not a lot of upside for them if you’re willing to price the boat to sell. Remember that 10% commission I mentioned? The more you can make on your boat, the more money they can make. But they’re not the ones incurring those monthly costs I mentioned. It’s your bank account that’s bleeding, not theirs. As long as the boat eventually sells, they’d much prefer to make the larger commission. It’s your problem that it took two years. They insulate themselves by maintaining a portfolio of listings, so that something sells every month, regardless of how long it sat on the market.
I can already hear the indignation from many of you proud owners out there who have their babies on the market. “I wouldn’t sell my boat for the NADA value! I’d be giving it away, and I won’t do that.”
No you wouldn’t. You’d be selling it, rather than holding out for months or years waiting for someone to come along who will overpay. I’ve been watching the market for about four years now while we patiently waited for what we call our “island boat” to appear for sale. Here’s what I learned. Most boats get listed for anywhere from 25% to 100% above what BUCValu says they’re worth. When I’d contact the owner and point this out, they’d get indignant, because their broker told them what the boat is worth. Those boats just sit on the market month after month. Then there will be a price reduction. Then more months on the market. The another, larger reduction. “Motivated Seller” appears on the listing. Maybe another reduction after that. Finally, a year and a half, maybe two years later, the boat finally sells. For just about the NADA value. The seller ends up netting less money out of the sale due to all the ongoing expenses of maintaining the boat than if they’d just put a “sell it in 90 days” price on it to begin with.
Occasionally, I’d see a boat I’d be interested in, and feel it was fairly priced. I’d look up the value, and find out it was right in the sweet spot of what a bank would say its worth. I’d give the broker a call, and there’d already be several offers. The next week, the ad would say “Sale Pending,” and three weeks later, it would be gone. Now I don’t know about you, but that’s how I’d prefer to sell our boat.
So let’s review. When the time comes to buy or sell a boat, you have an excellent resource to turn to in NADA and BUCValu. You can carry on all day long about how that’s not the real value of the boat, but that doesn’t change the fact that that’s all the bank is going to consider it worth, that’s all they’ll lend against, and most people will need a loan to buy it. So by insisting that your boat is worth so much more than the bank says it is, you’ve made a deliberate choice to restrict the potential market to just those people who are willing and able to overpay. Now it’s your boat, and it’s your right to do that if you choose, But that’s a pretty small market. Which is why a lot of boats just sit for a long, long time. And the broker isn’t going to take you by your lapels, give you a good shake, and say “hey dummy, you’re asking too much,” because there’s nothing in it for them unless yours is the only boat he/she has listed and has a mortgage payment due.
I don’t mean any of this to be disparaging to brokers. Running some ads for you and insulating you from most of the petty annoyances of buying and selling can be an important service, although I could do a whole ‘nuther post about whether it’s a service that’s worth a 10% commission. But I do deeply believe that a really good, honest, ethical, I represent you and not just me broker would give you options. Option A would be “here’s the price that maybe someday you might find someone who would possibly pay if you wait long enough,” and option B would be “and here’s the price if you actually want to sell it.” How interesting it would be to see what price the broker recommended if their commission was calculated on a downward sliding scale, reducing 1% for every month the boat sat unsold. I strongly suspect their advice would instantly become much more pragmatic.
Be honest with yourself. This is not your boat. Don’t price it as if it is.
OK, I’m done. Feel free to have at it if you wish. Just let me point out that we write this blog for our amusement, not yours. So while you may not like everything I’ve said today, I hope you’ll at least agree that the opinion is well expressed.
Now we have a boat to list. After this, I hope we can find a broker! I definitely know what price we’ll be asking…