In May we discussed setting your expectations correctly when looking at an older boat. Again, for this discussion, “older” is a boat built in 2005 or before. (sounds so new! Jeez I am getting old!). A reader quickly came back with a question-what does that look like in actual numbers? Which prompts the question, which numbers? There are two sets of numbers, the buyer’s and seller’s
First, take a look at my favorite graph. You start with a new boat that gets its maximum price with an expectation of a minimum of repair costs. As time passes, our selling price goes down and as the potential for repair costs goes up. The key factor is the “potential”. This is an unknown and creates a concern that drives buyer’s numbers. Seller’s tend to not see the potential as much of a risk so they either discount it or ignore it completely. Ultimately, it is not that the numbers are complicated, but rather, the complication lies in who’s numbers you are looking at. For example, a survey notes that a cooling system needs to be serviced. A seller may think, “You just pop the ends off the heat exchanger and run a stick around in there and get the salt out, 2-3 hours tops”. The buyer is thinking, “Holy smokes, what if I find out the heat exchanger and gear cooler needs to be replaced, and maybe all the hoses!”. That is a much higher number, and this calculation is repeated for each item on a deficiency list. Buyers are planning on writing two checks, one for the purchase and one for the repairs. As the repair check gets larger, they want the purchase check to get smaller. Sellers are very eager to help buyers understand their numbers are wrong, but that has little impact. Sellers need to be aware that their numbers do not matter, only the buyer’s numbers do, regardless of which is more accurate.
Finally! We are down to one set of numbers-the buyers. So how do we understand them? That depends on the buyer’s tolerance for risk. When it comes to numbers, we all will try to quantify risk with a “worst case” number. For a simple item this might mean a buyer looks at a $100 item and adds half again to “be safe” and calls it $150.00. For a large, complicated repair a buyer could multiply 2, 3, times or higher just to “be safe” depending on how much risk they can tolerate. A large number of items on a deficiency list can rapidly drive a sales price down or cause a buyer to head for greener pastures.
As with so many things, even cold factual numbers turn out to be a jumble of buyer’s feelings about risk and a seller’s frustration with repair numbers they don’t agree with.
There is a solution-sellers need to make sure they bring their boat to market with the least amount of deferred maintenance possible. If you are going to “let the next owner handle that” (which I hear a lot!) then do not be surprised when your buyer starts adding up those ‘worst case” numbers and asking you to take it off your sales price. And buyers need to understand that if they assume the worst case for everything, their search for that 50’ trawler for cheap may result in them staying ashore.
Todd Powell Boats 