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Old 26-02-2013, 12:54   #1
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How to Calculate an Offer Price

Hi,

I am trying to determine the appropriate way to calculate an offer price on a boat. I am currently looking at a boat type of which there are quite a few on the market up and down the east coast, all of them late 70's mid 80's.

On yachtworld, the prices range from mid-30's up to over 100's for the same model boat.

Some are well equipped and others not well equipped. Some have teak decks, some fiberglass. Some have new rigging, some do not. etc.

Do I take the lowest priced boat as a starting point, then credit the amount based on the condition of each of the boats systems?

For example, if the lowest priced boat (A) is 35K but it has leaky teak decks but the other boat (B) has a nice solid fiberglass deck, do I add the cost it would take to bring 'A' up to 'B' to arrive at a price I would offer on 'B'? Or am I over thinking things? Do I just take B's price and take 15% off the asking price and then only if subject to inspection?

Also, do you think it is a good policy (or not) to refuse credit towards any electronic (working or not) system over 1 or 2 years?
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Old 26-02-2013, 13:13   #2
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Re: How to calculate an offer price

I wouldn't take the lowest priced boat as a starting point because chances are, it is so much cheaper than the others because it is in sad shape. I think a more reasonable approach is to use the midprice as a starting point and go up from there based on condition.

If the lower priced boat is listed as being discounted for having "leaking decks" you better believe that is the LEAST of the problems. You of course need a survey before making such a large purchase- either with a surveyor or DIY if you have the skill set necessary. 15% off the starting price might be a great offer, might be too generous,it might be an insulting one. It all depends on how accurately the seller has priced the listing for. Bottom line is you have to do your homework and not only know what a fair price is for the particular year and model you are looking at but also what else you could get for your money on the market.

If I were a seller and I had 2 year old correctly installed, working electronics and a buyer refused to give credit for the equipment, I would either toss his offer as ridiculous or strip the equipment off before the sale.
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Old 26-02-2013, 13:17   #3
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Re: How to calculate an offer price

That range of values is too broad for a simple answer. What are you looking at?

RE electronics, ask yourself, are you OK if the owner removes them with no credit to you if you are going to assign them no value? If your answer is no then you might want to rethink that.
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Old 26-02-2013, 14:28   #4
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Re: How to calculate an offer price

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Originally Posted by zboss View Post
Or am I over thinking things?
Yes, you are over thinking things. You're trying to apply a formula to something that doesn't fit formulas.

Any boat from the 70's or 80's will be worth less than the sum of all its parts. Trying to set a value, than add or subtract based on what it has or does not have just doesn't work (although it's a tempting exercise), because some of that equipment may or may not be meaningful to you, but may or may not be meaningful to other buyers also.

You can't just say a piece of electronic equipment is worthless after a year. It may be outdated, but if it still works it still has value. To most people, anyway. If it's not worth anything to you after one year, than see the paragraph above this one.

Using asking prices on the internet of boat X and boat Y to gauge the value of boat Z is always a futile task if you have not personally evaluated the condition and equipment of the three boats.

You must go see the boats, judge their condition, determine which equipment is important to you, and when you find the boat that speaks to you then make an offer based on what the boat is worth to you, compared to what you can buy another one for.

I would rather have a boat in great condition with a new engine and no other equipment than a boat completely outfitted for cruising with a rusty heap of an engine and spongy decks, worn out sails and rigging. Others may consider having all the equipment and ready to go as more important. Those two boats may have the same asking price, but one has all the equipment. Does that make it a better deal?

There are too many variables to apply a strict formula. One example is the differing skills of different buyers. A buyer who is comfortable painting the deck of a boat will value a boat in need of that job differently than someone who must pay a yard for that task. Don't get bogged down in a spreadsheet mentality, your heart plays as big a role in finding the right boat and determining the value as the brain.
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Old 26-02-2013, 14:45   #5
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Re: How to calculate an offer price

Do not just take 15% off an asking price and use that as justification for your offer. That makes no sense and is generally annoying. I had a client do that awhile ago. They said all boats are selling for X% off (I think they said 20%), so I am offering such and such. The seller and I told them politely no. The next day they came back at a reasonable offer and now have a yacht they love.

Figure out the boat is worth based on comparables. Focus on the differences in value of big items (gensets, A/C, engines, rigs). Offer lower than ask and try to meet in the middle ( half way between offer and ask ). Try to make things go smoothly. One of your best assets post-sale might be goodwill and friendship within the parties involved.
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Old 26-02-2013, 14:47   #6
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Re: How to calculate an offer price

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I am trying to determine the appropriate way to calculate an offer price on a boat.
You offer the price that the boat is worth to YOU, while remaining willing to walk away for the "deal"!

Seems you already understand the "market value" of the boat far as model goes. But it still comes down to what it is worth to YOU!
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Old 26-02-2013, 15:01   #7
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Re: How to calculate an offer price

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I would rather have a boat in great condition with a new engine and no other equipment than a boat completely outfitted for cruising with a rusty heap of an engine and spongy decks, worn out sails and rigging. Others may consider having all the equipment and ready to go as more important. Those two boats may have the same asking price, but one has all the equipment. Does that make it a better deal?
I had not yet formed an opinion on the electronics, which is why I was asking. I have owned boats before but none with any electronics other than a handheld VHF and basic gauges. Certainly not one with radar and chartplotter. My latest powerboat had all its gauges stolen at night. I never replaced them and its been just fine because I have local water knowledge. they stole the cover to my outboard so I replaced it with a used on of another color. Now that I look local, no one bothers me!

I am looking for a boat with good bones (as you say above) but for better or worse, my experience with my boats has led me to assume that everything I see needs to be replaced or fixed (now or soon, sometimes over and over) until proven otherwise. Hence, my reaction to electronics. I've never had to replace a cleat.

After that my wife and I really want a good mattress (subjective), great sun and bug protection, a newer cold box and fridge unit, and a VHF. Solar, Amps, davits, and music would be nice too.
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Old 26-02-2013, 15:16   #8
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Re: How to calculate an offer price

Look at the boat and get a feel for the owner. We low balled ours at 60% asking price, came up $500 and got the boat. It's a boat, you probably don't need it at all and the seller may just need to get rid of it. You can always offer more money if they say no.

Low ball offers are not always bad for a seller. When we sold our last house we were low balled by the buyer to the tune of 40% and agreed to 30% off asking price. We showed up at the close with a check to pay the difference to the bank and were happy to be rid of it. I love the guy for buying that house, just happy to be rid of the burden.
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Old 26-02-2013, 15:59   #9
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Re: How to Calculate an Offer Price

The askings, as printed out by prospective sellers, can be seen as already reflecting the pros and cons of each particular boat. I do not understand why some boat buyers assume boat market is a single price market while it obviously is not: boats are not standardized goods and the market is not centralized. Same boat can be priced differently (e.g. when sold in Alaska or Florida).

It is not a single price market. Swallow it.

Now if you look at a particular boat, ask yourself if she has what you want. If you think she is priced too high, haggle. If you think she is priced too low, grab&go.

If you are really that technically oriented, place all available boats of a type in a spreadsheet and run a simple linear regression, eliminate outliers, bid for the items close to the regression line.

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Old 26-02-2013, 17:00   #10
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Re: How to Calculate an Offer Price

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Originally Posted by barnakiel View Post
Now if you look at a particular boat, ask yourself if she has what you want. If you think she is priced too high, haggle. If you think she is priced too low, grab&go.

If you are really that technically oriented, place all available boats of a type in a spreadsheet and run a simple linear regression, eliminate outliers, bid for the items close to the regression line.

b.
Awesome, thanks - that makes sense.
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Old 27-02-2013, 04:56   #11
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Re: How to Calculate an Offer Price

Agree with others, it's not a formulaic calculation.

As to electronics... I can say our suite was about $25K worth of various mostly-networked and partly-redundant stuff including radar, AIS, etc. from two respected makers... and it's about 3 years old. It all works as new, software and charts are all updated, it's not obsolete... but it's also not Wi-Fi and not touch screen (and I don't consider the latter a perfect virtue, anyway).

Could I demonstrate it all works fine? Yep, easily. Even so, the current value is obviously not $25K. Would I even consider an offer that values it at $0? Nope, laughing.

Somewhere in between, depending on the valuation and offer for the whole boat. Holistic thinking, etc.

Note key points: Stuff works (demonstrated), components are compatible and networked, updated software and charts, manuals provided, good manufacturer's support, etc.

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Old 27-02-2013, 07:36   #12
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Re: How to Calculate an Offer Price

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Could I demonstrate it all works fine? Yep, easily. Even so, the current value is obviously not $25K. Would I even consider an offer that values it at $0? Nope, laughing.

Somewhere in between, depending on the valuation and offer for the whole boat. Holistic thinking, etc.

Note key points: Stuff works (demonstrated), components are compatible and networked, updated software and charts, manuals provided, good manufacturer's support, etc.

-Chris
Electronics - if they are not longer serviceable because of deprecation by the manufacturer - are worth a lot less than a piece of electronics in fully functional form.

Regardless, based on the pricing I have seen most owners don't seem to be pricing in that electronics anyhow. Using the linear regression I was able to identify several boat which are selling at a discount, even with comparable "on-paper" features and "stated" condition.

For those boats that do have extra wizbangs, it appears that they have already significantly depreciated features anyhow, with almost no boats falling outside 1 deviation.
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Old 27-02-2013, 07:42   #13
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Re: How to Calculate an Offer Price

i bought this boat fro the electronix and hull..... po blew engine, and i lowered the offered price by 15000 dollars, us....he had some damage to interior and i removed another xxxx dollars---the leaky decks were xxxx dollars removed. sin ce i bought this boat i learned i did realllly good....they dont make em like this one any more, sad to say.
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Old 27-02-2013, 08:16   #14
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Re: How to Calculate an Offer Price

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If you are really that technically oriented, place all available boats of a type in a spreadsheet and run a simple linear regression, eliminate outliers, bid for the items close to the regression line.
I'm sure this sounds completely crazy to some people, but that's almost exactly what I did when I bought my last large boat. I'm a statistician by training, and a database administrator by profession. Converting things to numbers just makes sense to me, so for me this was a simple, logical way to compare various boats.
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Old 27-02-2013, 09:07   #15
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Re: How to Calculate an Offer Price

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I'm sure this sounds completely crazy to some people, but that's almost exactly what I did when I bought my last large boat. I'm a statistician by training, and a database administrator by profession. Converting things to numbers just makes sense to me, so for me this was a simple, logical way to compare various boats.
I don't think that sounds crazy at all... the internet and technology has commoditized most markets. The next generation- the 20 somethings - are going to expect to go online and buy a boat just like the buy a house.

I don't thing anyone believes the boat market is a "single market" but it parallels real estate pretty closely. I certainly would not compare the prices of west coast boats to east coast boats if I expect to cruise the east coast but I would compare markets within 1 week of motoring of each other (or something like that).

Right or wrong, using a regression analysis to pick out boats based on valuation is probably a good starting point. Then, like zeehag pointed out, you start deducting costs for wet decks and such. If the owner is in love with their boat or can't see past that love then that is something I am frankly not skilled enough to change. So, that is where I would expect my buyers broker to shine.
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