FAQs About Selling a Boat
"How to Buy, Own & Sell a Boat Without Going Broke", by Schneider and Woodwell, 1990, published by ProStar Publications, Los Angeles, CA 90034. ISBN 0-930030-55-9. This well-written comprehensive guide works through the entire selling process clearly and in detail.
What's the boat market like these days?
With the national and Bay area economies struggling given a soft housing market and turmoil in the financial markets, buyers are much more wary of big-ticket discretionary purchases like boats than they were two or three years ago. Prices have declined, especially on the power boat side, and there are noticeably fewer buyers. The buyers who are out there are more tentative, more choosey and more likely to make "low ball" offers than in years past.
We're especially seeing weakness in $200-300k vessels, power boats in particular as noted above, that in the past would have quickly sold as liveaboards, as well as "project boats" of all types. But having said this all this, things are NOTICEABLY better this year than last year, so hopefully we're seeing light at the end of the tunnel!
Why use a yacht broker to sell your boat?
Once you've decided to sell your boat, you must make the decision of whether to sell the boat yourself or work through a broker. Selling a boat is like selling a house, in that some owners elect to sell on their own but most opt to use a broker. Yacht brokers are analogous to real estate agents in that they do not take actual possession of the property, but serve as agents to bring buyers and sellers together.
Yacht brokers earn a commission (10% is standard) when your boat is sold. As no income is earned until the boat sells, a broker's goal is to find a buyer in a timely manner. They accomplish this by advertising the vessel, qualifying prospective buyers, showing them appropriate boats and working them through the mechanics of buying the boat. Most brokers also have a list of clients looking for a particular type of vessel, and it's not unusual for the broker to sell the boat before advertising goes to press.
Central or open listing?
If you elect to use a broker, the next choice you'll need to make is whether to sign a central or an open listing. A central listing means that the broker has the right to advertise, market and show the boat, and that all other brokers correspond with the central broker in terms of showing or making an offer. If another broker sells the boat, the commission is split with the central agent. This ensures that he will be compensated for advertising and marketing costs, as well as offering incentive for other brokers to sell the boat.
Note the central listing does not preclude other brokers from selling the boat, only from advertising it. If another broker sells the boat, he will receive half of the commission, with the listing agent receiving the balance. Thus, other brokers have incentive to bring in buyers, and the central listing agent has incentive to aggressively advertise the boat.
The other option is to sign an open listing, which means that other brokers can advertise the boat, and whoever sells the vessel receives full commission. If the owner sells the boat himself, no commission is paid the broker.
Obviously, brokers prefer a central listing. Unless the boat is very clean and very popular, brokers will be reluctant to invest as much in marketing a boat if other brokers are representing the same vessel. There are several sources that most prospective buyers look to (Yachts for Sale, California Yachts, Latitude 38, www.yachtworld.com), and having numerous brokers advertising the same boat in the same location probably won't result in a faster sale.
How do you choose the right broker?
Most sellers rely heavily on references from fellow boaters, and, with a couple of caveats, this is the best method of selecting a knowledgeable, proactive, honest broker. In California, all brokers are required to be licensed by the Department of Boating and Waterways, and you can call and make sure no complaints have been made against a particular broker.
It's also critical that your boat be in close physical proximity to the listing broker. Getting prospective buyers aboard the boat is critical in selling it, and this is greatly expedited when she's conveniently located. So, either sign with a broker close to the marina in which your boat lies, or with a broker that has a show dock that will accommodate your boat.
You should make sure the brokers you're considering are on line with either YachtWorld or BUC. YachtWorld is an internet-based service that represents close to 90% of all the brokerage-listed boats in the country; it is available to anyone at www.yachtworld.com. BUC is a multiple listing service but is only available to brokers.
It's now critically important for the listing broker to have a web page of some sort that will allow buyers to virtually "walk through" the boat. This provides a real advantage over brokers not offering this option. Most buyers of boats are well educated and computer literate, and we're finding that most potential buyers have access to the web at their home or office.
Log on and browse the candidate's sites--are they logically laid out and easy to navigate? Do photos accompany all the listings? Do the photos do justice to the boats? Are the photo captions well written? Finally, send the brokerage an e-mail question--do they get back to you in a timely manner?
Once you've identified candidates, drop in unannounced to their offices. The offices should be professional in appearance, with the brokers themselves friendly and helpful. Appearance isn't everything, but put yourself in a potential buyer's shoes and ask yourself what you'd think, given your experience at each office.
Having done the homework above, sign with the broker you're most comfortable with. At the signing, let the broker know your expectations--do you want a call every time they show the boat? Brokers don't provide this level of detail without being requested. What about terms at the brokers show dock if applicable? Most brokers split the cost of carrying your boat at their docks, but make sure both parties are in agreement on the split.
When is the best time to sell a boat?
Unlike the sale of jet skis or ski boats, sales of larger boats remain fairly stable throughout the year; there is very little seasonality in buying of yachts over about 27 feet. This makes sense, given that the weather in Northern California is fairly stable year-round and that there are usually larger issues driving the buying and selling of these boats than the season.
Having said this, winter--specifically between late December and mid-February--is generally slower, in terms of numbers of people looking at boats, than other times of the year. Note that traffic might be lighter, but prices are not effected.
The best advice is to list the boat once you've decided to sell it and have decided whether to do so yourself or utilize the services of a broker. There's no need to "wait until the spring"--the market remains active year around here in the Bat area.
How do you determine the "right" asking price?
Pegging the right asking price is probably the single most important factor in selling the boat: price the boat too high and she won't sell, too low and you leave money on the table. Getting the price right based on age, condition and desirability is more an art than a science, and the broker you choose should add valuable insight here.
He or she will usually begin by consulting either YachtWorld or the BUC Used Boat Price Guide. YachtWorld is an internet-based site where broker-listed yachts are displyed, usually including full specifications and numerous color photos. As the vast majority of brokers have their listings posted on this site, it provides a quick, accurate overview on asking prices (actual "sold for" prices are also available but only to brokers, another benefit of working with a broker).
BUC has historically been the functional equivalent of the Kelly Blue Book in the auto world, and includes the expected selling price range ("retail low" and "retail high") for most years and types of boats. However, YachtWorld's information is more up-to-date and most people find their site easier to navigate.
While YachtWorld or BUC is a good place to start, brokers also offer insight based on their experience as to what your particular boat will command based on condition, model, recent selling price of sisterships, etc. This is especially critical with classics, custom one-offs or boats with limited production runs--there won't always be comparable vessels on either YachtWorld or BUC.
It's very important to be realistic about the price you can expect for your boat. Sellers often "just want to get my money out of the boat". This may or may not be realistic; usually it's not. Most yachts more than about 10 years old don't depreciate if they are well-maintained; however, it is almost always unrealistic to expect them to INCREASE in value, especially in the current market. This generally holds true regardless of how much you spent on upgrades and is especially true if you weren't meticulous in maintenance!
Most investments in such items as stabilizers, bow thrusters, electronics, redecorating, new isinglass enclosures, etc, will only return at best about 15-20% of the original investment, and to get even that, the investment needs to have been made no longer than three to five years ago. An additional rule of thumb: the more you add to your boat, the less you'll get back for each new piece or system added.
While boats in bristol condition do command a premium, more than 20% above the average asking price for a similar vessel is rare. What will happen is that a clean, well-equipped vessel correctly priced will sell more quickly than the average comparable boat, but not usually at a huge price premium.
A corollary to this is that a boat priced above market will languish unsold, sometimes indefinately, until the price is brought in line--it's our very clear experience that a boat priced unrealistically high will remain unsold literally for years. So, while it makes sense to initially list a desirable boat in bristol condition at a premium, if she's still on the market six months later, it's time for a price adjustment!
How long does a listing agreement remain in effect?
Generally, six to 12 months is standard. This is negotiable, but most brokers won't take a listing for less than six months. It's time-consuming and expensive to prepare the print and on-line materials for a listing, and this must usually be done before the broker can even begin to market the vessel. It often takes a number of weeks to begin to build up a head of steam on a new listing, and this is especially true in an economy that's not hitting on all cylinders at present.
What can the seller do to expedite the sale?
As noted above, the most important thing the seller can do is price the boat realistically. Beyond that, it's critical that the boat show well.
You can't underestimate the importance of a sparkling boat! Purchasing a yacht is largely an emotional decision (who actually NEEDS a boat?!) and first impressions are important. Anything you can do to bolster this first impression will result in a faster sale at a better price.
The most common reason boats are put up for sale is that they're not being used, and often it's been quite some time since anyone was even on board. Under these circumstances, the boat probably won't sell quickly or for anywhere near top dollar. What you need is a plan of action:
1. First, get all your stuff off the boat! Most boats collect an amazing assortment of foul weather gear, toys, dirty clothes, supplies and just plain junk over time. While empty homes look stark, boats have smaller spaces and built in furniture; they look best empty and uncluttered. So GET RID OF EVERYTHING! What you can't get rid of, hide! Then...
2. give her a good cleaning inside and out! Most sellers wouldn't dream of showing their house to prospective buyers without tidying and cleaning, and the same holds true with boats. Second only to setting a realistic asking price, this is the single most important thing you can do to ensure a quick sale for top dollar. Take extra care to...
3. make sure the head is clean and the toilet works. The holding tank should be empty and the toilet and lines filled with FRESH WATER with a bit of chlorine bleach added. You'd be surprised at how often this seemingly common-sense advice is overlooked and the dire consequences thereof! Also...
4. clean the bilges. The bilge is too often "out of sight, out of mind" to owners, but rest assured the surveyor and buyer will take notice.
5. Have you deferred maintenance for a couple--three years? More? Sorry, this is when your sins come home to roost! Deferred mainentance must now be addressed with a vengenance:
* Varnish the exterior brightwork, oil the interior teak, refinish the teak & holly sole. If you don't have the time or inclination to do this, have your broker coordinate the project for you.
* Keep the batteries charged so the engine(s) start for the sea trial. It's a good investment to replace starting battery(s) if they're more than a year or so old--dead batteries can kill the sale.
* Service the machinery (engines and generator) by changing the fluids (oil and water) and filters. Aside from the hull, machinery is the most expensive component of a boat; any problem here will seriously jeopardize a sale (so now's the time to replace that old starting battery!).
* Keep the bottom clean and zincs fresh. You should have a diver scrub the bottom and check zincs regularly while your boat is for sale. A significant beard on the bottom says the boat has been ignored, and this isn't the message you want to send.
* Remove all canvas, covers and accessible lines and wash in a commercial front-loading washing machine.
* Have all U.S. Coast Guard safety equipment up to date. This includes flares, fire extinguishers and life jackets, as well as bilge pumps and blowers.
While sellers are often reluctant to spend money on a boat they're selling, money spent preparing her for market is well spent; the investment is usually more than recouped in a higher selling price. Also, most of the cosmetic items above can be accomplished with nothing more than a few hours and some elbow grease!
How does the actual selling process work?
A bona fide offer is always made by the yacht broker to the seller in writing and accompanied by a 10% deposit (which goes into an escrow account). You can accept the offer, make a counteroffer or reject the offer outright.
The initial offer is usually below your asking price, and you'll make a counter. Negotiations continue, with the broker acting as go-between, until a mutually agreeable position is reached. The purchase offer is then counter-signed by the seller, resulting in a legally binding document. The seller is now legally obligated to sell the boat to the buyer at the agreed-upon price, and the onus shifts to the buyer: he is responsible for arranging and paying for sea trial and survey.
Based on results of sea trial and survey, the buyer can accept the boat at the initially agreed-upon price, renegotiate the selling price or withdraw the offer without penalty. It is rare for a deal to fall apart after sea trial and survey, but the buyer will often request survey allowance to correct items that affect the safety or functionality of the boat. Similarly, electronics and mechanical devices included on the listing sheet may reasonably be expected to be functional, and survey allowance sought if they're not.
For example, a "Raytheon 24 mile radar" is listed on the spec sheet, but the survey determines it to be inoperable. If a new radar is $3,000, a fair request might be for a $1,500 survey allowance. The seller wouldn't normally be expected to replace an old unit with new, unless unit was listed as new on the spec sheet.
Common sense usually prevails, and deals are not usually lost over minor survey issues. Even major unexpected problems are generally worked through.
Who's responsible for taxes?
The buyer is responsible for paying sales tax. This generally runs 7-8% of the selling price, is based on the rate prevailing in the county the boat is to be home ported in by the new owner and is assessed by the State Board of Equalization.
Buyer and seller split property tax on a prorated basis. Tax rates vary from county to county, but average about 1% of the selling price of the boat; the tax basis declines about 8% per year every year thereafter until the boat is sold again.
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