PURCHASE NEGOTIATIONS

[Ex-Calif]

In a free market economy the buyer and seller reach an agreeable sum for the transaction to take place. However, it's all about getting it in writing.

We drew up a purchase agreement. It was based on a visual viewing of the boat.

We stated the sellling price and the downpayment of good faith
We stated that there would be a survey done and the amount of time we had to complete that
We stated there would be a sea trial of up to 12 hours over 2 days on the water including an extended period of motoring - the owner could be there or not at his option
We stated that if the survey turned up anything major we would ask for a price adjustment - the seller has no obligation to accept and the deal is over at that point and the deposit is returned
There were a couple of other contingencies as well explaining what constituted defaults by either seller or buyer and what the remedies were
There was also an exhaustive list of what was on the boat and included in the deal

If you PM me with an address I will be happy to send along our purchase agreement.

[shadow]

I agree with most everyone. Knowledge is power and you should educate yourself with everything about that boat and the average market value for that boat and very similar models. To bad there isn't a blue book on boats like there are for cars. Anyway, everything is negotiable but be amicable during the process. It is a stressful process for everyone involved. No need to compound the problems with greed.

Good luck with your search and purchase.. We will be in your spot before long, fingers crossed. hopefully, we will be buying new, but even then, problems may arise when unpacked.

[Pblais]

To bad there isn't a blue book on boats like there are for cars.

There is but boats don't follow like cars. Boats lie in the water and neglect can be a serious issue.

[scotte]

nadaguides.com has used boat prices, but good luck in getting those prices to match with reality... The boat market is really nothing like the house or car market - it's it's own thing...

[Boracay]

When I was seriously looking at boats one of the big problems was that no one would tell me a final selling price.

I eventually developed my own method.

I would track boats. Many never sold and I assumed that those were way overpriced. I used a working figure of at least 50% over market value for those boats.

For the boats that sold I estimated that they sold at a discount of from 10% to 33% of the asking price.

After a while this became a consistent pattern.

The real difficulty in pricing a boat is that the number of buyers is very small, so sales take a long time. In my case I waited until I estimated that the competition had all brought and then I could buy.

A major part of this process is being able to work out what repairs/upgrades/maintenance are needed to bring the boat up to desirable status. These can then be deducted from the price of a desirable boat in good condition (known, because it sold quickly) to give a "fair" value.

The hardest part (for me) in buying a boat is to take a good look then walk away for a couple of months until the seller becomes realistic.

[GordMay]

Originally Posted by Ex-Calif

In a free market economy the buyer and seller reach an agreeable sum for the transaction to take place. However, it's all about getting it in writing.
... We stated that if the survey turned up anything major we would ask for a price adjustment - the seller has no obligation to accept and the deal is over at that point and the deposit is returned...

To be assured that your deposit will be returned, in the event of a negotiation deadlock, the deposit must be held in “escrow”.

[Pblais]

I would track boats. Many never sold and I assumed that those were way overpriced. I used a working figure of at least 50% over market value for those boats.

For the boats that sold I estimated that they sold at a discount of from 10% to 33% of the asking price.

Seems sort of silly since you never find out if any of your assumptions were right. Why make these assumptions? What is it you are really doing? Boats don't sell because there was no buyer that made an offer that could be closed. It's always that simple. Boats in the end sell for what is agreed upon. How the two parties get from asking price to closing price and conditions is always an unknown to you as a buyer on the outside watching the market. Your assumptions are just pretend. Watching what boats actually do sell and looking at asking prices is useful, but you can't translate them into sale prices. Knowing what is out there is an indicator.

If you are a broker then you can get the past final sale prices from yachtworld. It's part of the service you pay for as a broker. Any broker can give you real actual sale prices (mine always did) but they can't give you what other considerations came with the deal. If the seller added a new dodger as a condition it's not reflected in the sale price yet it clearly is deducted from the sale price since the buyer didn't pay for it or pay extra.

Some boats don't sell because they are over priced. Some don't sell because not all boats are right for all buyers. It's not just price. Sometimes you offer less than the listed price but there are no hidden rules that you always offer xx% less because buyers always markup yy%. You need to do the homework before the offer to find out what the boat is worth and worth to you.

A buyer is only looking for one boat and they generally want a special boat. It can take long time to find them as a buyer and as a seller looking for that person. Buyers are picky and some just like looking at boats not actually paying for them. It's a hobby with many people, not unlike looking at homes.

The hardest part (for me) in buying a boat is to take a good look then walk away for a couple of months until the seller becomes realistic.

You never walk away from a boat you still want. You walk away with the idea you are moving on and never coming back. The seller isn't going to call you 3 months later and beg you to buy the boat.

The concept of waiting a few months for the seller to get real just means they are looking a new buyer not thinking about your lack of an offer. You write offers with earnest money when you want to negotiate to buy a boat. You don't sit around and talk about what you might do. Writing a formal contract offer with a cashiers check atached changes the landscape greatly. It means you came to deal right now not talk about a deal in a few months. Sellers want real buyers so you have to act like one.

Pig headed buyers or sellers do not tend to get smarter in a few months. It's not how people really are. When you can't negotiate the deal it's time to move on and start over clean. If your goal is to buy a boat then it's a waste of time to wait for a seller you walked away from over a boat you only were just thinking about buying.

[Boracay]

My comments were offered from the perspective of a buyer who started with no knowledge. They are not a "road map" to a cost efficient purchase.

I did not consider any of the boats that I looked at to be a bargain on initial inspection.

[Pelagic]

There is an old adage that “You never get what you deserve…you get what you negotiate!”
Very good advice being given in this thread and if I were to summarise my own priorities and procedure when I found the large cruising boat I wanted:
1. Make a serious deposited offer (in escrow with a reliable brokerage house) that is subject to detail inspection, survey and sea trials. This will hold the boat for 30 days while you do your due diligence. It shows you are serious and not wasting anybodies time.
2. Most importantly! Do your own very detailed survey of the boat and its bilges before you incur the costs of surveyor and travel lift. Follow a check list and at the same time form a first hand opinion of the boats previous management, ergonomics and repair history. Ask to read any previous surveys if the boat has changed hands recently. This detail should form the index of every question you may have for your own surveyor/professionals to examine on your behalf. (Example: oil analysis or compression check of engine)
3. Insist that along with the boat’s selling Inventory, the Owner provides a complete detailed list of what is NOT being included in the sale that is aboard at time of inspection. (You should be making your own Detailed Inventory when doing your inspection.) They may argue with this but hold firm and don’t accept vagueness like “personal items”.
4. Prior to survey, make a detailed list of major concerns and budget the cost of repairs of worst case scenario. (Include cosmetics like a paint job if it is needed). This will cool your love affair and give you the basis to reconsider and re-negotiate your original offer prior to incurring additional costs. My advice is to be quite firm and fatalistic about what you feel this boat is worth to you.
5. If you reach a new agreement and the structural survey shows no surprises, provide another detailed check list of items to be tested during “sea trials”. This is probably your most important scrutiny so insist that this is done at your convenience and bring along technical support and equipment to test all the systems. Many systems can be better tested during “dock trials” so do those first. Underway, following your list, put the boat through her paces making checks of things like steering structure by doing figure 8’s astern while monitoring supports, emergency stops, maximum continuous rating…etc . The trials should take all day and more if you feel it is necessary.
6. At this point, you should personally know this boat and decide what its real value is to you.
7. Always be prepared to withdraw your offer and never feel obliged to continue, if your gut is telling you otherwise.
In other words, be in control of what is probably the most significant personal purchase outside of a home that any of us will make.

Good Luck!

[jackiepitts]

We ended up re-negotiating the original offering price of our boat after a bad rigging survey. Unfortunately we had already done the hull and engine/generator survey before having a rigger go up the masts (I would definately recommend that the small surveys be done first).
There was major wood rot in both the main and mizzen and 5 spreaders would have to be re-built. We had wanted the owner to split the cost of repair (estimated at 13K) but he said no way. So we gave him a offer that was quite a bit below the original offer and he relucantly accepted.
After all was said and done the 13K job turned into 24K but the boat was ours by then.
In my opinion small things should be let go but look long and hard at anything major that shows up in the survey and re-negotiate or walk.

Jackie

[S/V Illusion]

Originally Posted by Pelagic

5. If you reach a new agreement and the structural survey shows no surprises, provide another detailed check list of items to be tested during “sea trials”. This is probably your most important scrutiny so insist that this is done at your convenience and bring along technical support and equipment to test all the systems. Many systems can be better tested during “dock trials” so do those first. Underway, following your list, put the boat through her paces making checks of things like steering structure by doing figure 8’s astern while monitoring supports, emergency stops, maximum continuous rating…etc . The trials should take all day and more if you feel it is necessary.

I was going to say this is a great summary of the process until I got to your sea trial process - sounds more like a torture test to me. If I were the owner, I'd say no thank you to anyone who wanted to take days, or even one full day, doing a sea trial. A couple of hours in a solid breeze should be more than sufficient.

[Ex-Calif]

Originally Posted by GordMay

To be assured that your deposit will be returned, in the event of a negotiation deadlock, the deposit must be held in “escrow”.

Correct - However it is useful to point out that escrow is about risk tolerance. It is not a "legal" requirement.

Our downpayment was $1,500. We did not escrow the amount. We simply provided a cashier's check and asked the buyer to hold it until after the deal was done which he did. We knew the risk we weer assuming.

On a large purchase amount escrow is definitely an excellent idea.

[Pelagic]

Just to clarify the test during sea trials. They are not destructive! They are the standard tests that Lloyds or any other survey society would require in order to certify a vessel (including yachts), as being seaworthy.

These tests are Internationally accepted and a bit of research will give you tests that are valid for your own application.

In my opinion, any owner who is afraid to test the rated capacities (swl) of his equipment , always goes to sea with a question mark. I am not interested in owning that mindset, nor do I ever go to sea with the intent of running at maximum (except during controlled sea trials).

Each to their own.

[Ex-Calif]

Originally Posted by jackiepitts

So we gave him a offer that was quite a bit below the original offer and he relucantly accepted.
After all was said and done the 13K job turned into 24K but the boat was ours by then.
In my opinion small things should be let go but look long and hard at anything major that shows up in the survey and re-negotiate or walk.

This goes back to my saying, "Do you want to sail or work on a boat?"

The 4 "deal" breakers in my book are:

1/ Mast and rigging - cracked mast, rotted mast
2/ Hull/deck - significant osmosis, rot or soft spots
3/ Engine overhaul - low compression, burns oil, etc.
4/ Sails - May be ok if you can replace with used but a new suite of sails is expensive

Others may be ok with project boats. I am not. I am also convinced that unless you do 100% of the aork yourself and know what you are doing, you will never save money or get a "deal" on a project boat.

Take any repair quote from your surveyor with many grains of salt. I am constantly amazed by quotes in the boating world that are 100% off or more. It seems ridiculous to me.

One should press the mechanic for a gurantee or a max inflation of say 10%. If he isn't smart enough to quote a job accurately, he shouldbe out of business.

[Pblais]

On a large purchase amount escrow is definitely an excellent idea.

If you want to buy and sell directly without a broker there are escrow companies that will provide the service. You only need the service when the contract has been protracted and things seem to be at a standstill. Since you can never anticipate these situations escrow just can't be a bad idea.