Contaminating the pool

With the current boat sales market being in a slump, some sellers are all too eager to offer deep discounts.  For years, most brokers had access to the N.A.D.A. Appraisal Guide which sets parameters for the valuation of used boats. Although these guides did not take into consideration the real value of boats at any given time, they at least gave a range of expected values based on historical data.

NADA Price Guide

As with any data of this sort, one must apply a bit of common sense when dealing with it. The appraisal guides were originally done for cars and one 1972 Mustang is pretty much like any other 1972 Mustang except for wear and tear. This is far from the case with boats. Boats have options, boats have accessories, boats have different engines, boats have different layouts, boats have different electronics — I believe you get my drift. It is hard to compare two boats from the same manufacturer without taking all this into consideration.

For years we have been studying the boats we sell and explaining to the uneducated why our values do not follow these guides — especially with higher end boats. It just doesn’t fly. And we were successful at educating buyers about what to expect from boat to boat as far as value goes. And along came the current financial situation.

Here’s what we know

The current economy does not effectively change the value of a boat, only what one is willing to spend procuring that boat. In the end guides such as N.A.D.A will factor this slump into the guides which will skew the data and the boat average prices of the boats will be lower. Once again, the value of the boats will not change — only the public’s perception of the value.  We will be back to educating buyers and sellers on why the guide prices and now the market prices are not accurate.

Here’s how it happened

The bottom line is panic. The owner’s dreams have been shattered when the economy starts to go south and he is strapped with a mortgage that he may not be able to pay right now or in some indeterminate time in the future. His immediate reaction is to list the boat and get out of the mortgage. With this mindset, he is susceptible to fall prey to what are commonly known as the “bottom feeders”.  When given enough time on the market with no offers, the seller begins to feel desperate and will take a low end offer thinking that is the best he will be able to do.

This type of reasoning is contaminating the pool — or setting standards that other sellers need to live up to in order to sell their boats. When a buyer boasts that he got a steal on a particular boat, other buyers will be looking for similar deals and will be holding out for them. That makes it even harder for sellers with good boats to get a decent price on their boats.  When a boat that in all rights should sell for $400,000 sells for $300,000 because the seller is desperate, a new standard price is being set. After a couple of these deals get made, word gets around, either on the web, through brokers or from mouth to mouth, and the new value of a $4K boat is now $3K.

As you can see it does not take a whole lot of desperate sellers to destroy the market place. It has taken years and years to build a market and months to tear one asunder.  When the dust settles, it will take years to rebuild it again.

How can we stop the spiral?

We don’t recommend succumbing to pressure.  People who sell their boats to avoid mortgage payments will only need to replace them later – at the current market value at the time of replacement – hopefully, for the industry, at a realistic value.  Where does that leave the seller?  Losing more than he would have had he kept the boat in the first place.  We have an obligation as brokers to tender all offers on boat sales, but we also have an obligation to the seller to offer sage advice. Our advice in most cases is to hold on for a real buyer to come along. We have had some boats that were over priced, due actually to the seller’s lack of a true commitment to a sale or to their perception of value, and we would recommend to them at this time to adjust their prices  to realistic value.

Some brokers see only the commission in the sale and are far too eager to allow the contamination to continue. They are exacerbating the problem by only seeing only how it effects them in the short term – a smaller commission check is better than no check at all.

As an industry, however, we have to look at the long term effects. When boats are no longer profitable everyone suffers. Manufacturers will make less boats and make the prices higher to compensate for the lack of volume.  Boat yards will have less work and also have to raise their prices to compensate for the lack of volume. Marinas will need to charge more for dockage. The “bottom feeders” who thought they were getting a deal will be paying more in the long run for maintenance, slips and repairs because the industry as a whole was devalued.

Don’t make decisions you may later regret.  Only you know the true value of your boat and if you let that knowledge become questionable as a result of doubt you will not be the only loser.

Viewed 651 times by 263 viewers

Leave a Reply