Drastic reduction in secondhand boat prices ?

[jonic]

Sorry. Just wrong in the case of second hand boats. As I suggested earlier but you don't seem to want to see it, prices are set by markets. That is informed by previous transactions of similar products in a similar context. You can either look on markets as an abstract concept or see them in daily operation where people meet to trade. The result is the same - the transaction only takes place where both buyer and seller are satisfied.

It is information that makes all this work, which is why I suggested that having a structured market where information is shared makes the market more efficient. In the examples you are describing - at the individual transaction level it is lack of information that hampers the process. If there was no visible market an individual seller would have no idea how to price his boat - he would, indeed as you suggest just have to pluck a figure out of the air as his only basis for establishing its value is the price he paid for it, which may have little connection with its current value.

However with an open market he can look at other asking and selling prices as a guide to what he might ask. Inevitably because the product is not homogeneous prices tend to be in a range, but if he wants to attract buyers his price has to be in that same range. One advantage of using a broker in this context is that he does have access to better information such as selling prices so should be able to help the seller set his asking price more accurately. Whether he takes that advice is another matter as John will tell you.

Your cost plus model of pricing is commonly used - and often criticised - for new products. It is usually used because it is difficult to get accurate market pricing information for many products. However, where a market already exists it is more common to work the other way and start from the market price and see if you can produce the product at a profit, given the selling price is fixed.

None of what I have just written is intended to be patronising, nor have I made it up. It is all based on well established theory and research into how markets work. What you are seeing in the individual cases you describe is individual buyers and sellers failing to reach agreement on the price. There are all sorts of reasons why a seller may not accept the market price, some of them rational but often not. Frustrating for the potential buyer, but it is the seller's right to reject offers even if it is irrational. Equally a buyer may be irrational in not being prepared to pay the asking price. Neither are right or wrong - they just failed to reach an agreement.

As a long ago student of Economics, in very the dim and distant past, I am inclined to agree with Tranona.

 

[jonic]

I and a number of other colleagues have a theory that the market we understand so well, is now so misunderstood by certain sectors because of the proliferation of the reality TV property programs.

Some amateur negotiator is filmed sipping a pint of beer in a pub garden while "negotiating" a house purchase on a mobile phone. It's all bolshy aggression and gamesmanship followed by grinning and much back slapping when the deal is agreed.

However the housing market is of course a totally different asset class who's market is driven by need. It also has a pricing structure that is primarily based on the availability and cost of credit at a particular point in the banking Ponzi Scheme. Sorry I meant to say economic cycle.

We think it is these shows that have led to an increase in conversations like the one below. (And have you noticed how many of the episodes have a voiceover at the end saying "sadly things changed and Mr and Mrs so and so are still looking")



Buyer: Hello I'm calling about the xxxx at £75,000. I think it's overpriced but I'll come and see it if the owner will go to £60,000

Broker: Hello and thanks for calling. She is a lovely boat but the last three of similar age sold for between £69,000 and £77,000

Buyer: No I don't believe that, I'll go to £60,000 max as that is all I have anyway.

Broker: But you haven't inspected the vessel.

Buyer: (Now very indignant) I don't need to, that's a good offer and a boat is only worth what someone is willing to pay for it.

Broker: Absolutely right and I have a real time live feed of what people are willing to pay for it, plus I talk to other brokerage houses on a daily basis about values too.

Buyer: I'm not going to argue with you, put it to the owner.

Broker: He won't be interested and you'll just upset him. Yacht sales is all about goodwill if we are going to strike an accord.

Buyer: No it's over priced and he needs to wake up and think of the cost of moorings and insurance.

Broker: To himself in his head! (I know full well it's not over priced, perhaps it's just you that are underfunded?)

Broker: I'll give the owner a call then sir.

Buyer: Ok but let him know I'm looking at some others too and they look better than yours.

Broker: Excellent, I'll give you a call back.

Broker: Good afternoon Mr Owner I have had a totally speculative offer, boat unseen, of £60,000 against your £75,000 xxxxx

Owner: Tell him to xxxx xx

Broker: Good afternoon Mr Buyer. The owner thanks you for his offer but it is not what he is looking for. Shall we meet at the boat so you can see her and make a more realistic offer.

Buyer: No. He'll come back to me and anyway I'm going to look at better cheaper ones.

Broker: Ok no problem, can I take a few details.

Buyer: No, there is no point. I'll give you a call.

3 weeks later...

Buyer: Hello, I called you a few weeks ago about the xxxx. I have found a bit more money now and could go to £65,000

Broker: Sorry it's sold and we have taken a deposit.

Buyer: How much did it sell for?

Broker: £73,000

Buyer: Blimey, that's way over the top. They must have really liked it.

Broker: They did.

 

[Resolution]

And the Mona Lisa ... well, few square feet of canvas, bit of linseed oil, some colouring. Can't be more than twenty quid in that.

I am constantly amazed at the way art has become a store of value for the rich. Anyone know what level of commissions are normal in the art world? Especially at auctions?

 

[zzyyxx]

Buyer: Hello I'm calling about the xxxx at £75,000. I think it's overpriced but I'll come and see it if the owner will go to £60,000

Broker: Hello and thanks for calling. She is a lovely boat but the last three of similar age sold for between £69,000 and £77,000
(...)
Broker: £73,000

Isn't the problem that it did still go for below the asking price so the question becomes how far below will they go?

You're criticising the admittedly bolshy "buyer" for not knowing the price boats sell for but he's explicitly excluded from knowing that information which is only available to brokers. He's left with one option to test the market, and that's to start aggressively and slacken off until people are starting to flex a bit.

 

[jonic]

Isn't the problem that it did still go for below the asking price so the question becomes how far below will they go?

You're criticising the admittedly bolshy "buyer" for not knowing the price boats sell for but he's explicitly excluded from knowing that information which is only available to brokers. He's left with one option to test the market, and that's to start aggressively and slacken off until people are starting to flex a bit.

Yes but he is immediately given the knowledge - I'll even PDF it to him.

It's nothing to do with lack of knowledge it's a tactic that some feel compelled to follow. Even when it is going totally against them.

Fortunately for my type of boat it is not prevalent. But I know one sector where it is.

 

[Tranona]

Isn't the problem that it did still go for below the asking price so the question becomes how far below will they go?

But the boats were selling in the range of £69-77k, typical percentage range. You cannot set a precise price because individual boats differ. The boat was offered within the range and sold for 3% less than the asking price. Difficult to get more accurate than that.

 

[jonic]

But the boats were selling in the range of £60-77k, typical percentage range. You cannot set a precise price because individual boats differ. The boat was offered within the range and sold for 3% less than the asking price. Difficult to get more accurate than that.

I am sure it was a slip of the finger Tranona but the range was £69-77k

 

[Sans Bateau]

We sell product mainly B2B. About 5% to retail. B2B customers are far more realistic in what they are prepared to pay for a set product. Retail customers always expect to be able to 'do a deal', pay less than the going rate. (retail customers are a pain in the arse). This is represented very well in Jonics post.

 

[zzyyxx]

Yes but he is immediately given the knowledge - I'll even PDF it to him.

As the sellers representative you're no the best person to trust though.
I'm not having a dig, it's just an observation that where people don't know the market (and most don't) they have to test it.

The boat was offered within the range and sold for 3% less than the asking price.

Is 3% typical though? People on here have suggested extremes of 20% before which would knock 15.5 off a 77 boat, or not far off the 60k Jonic has used as an exaggerated figure to make his point.

 

[jwilson]

Jonic - you are right - happens all the time. It is amusing when you know the other cheaper boat he is holding the one you are selling up against for comparison is a real dog with knackered teak decks and a very suspect engine.

 

[Tranona]

I am sure it was a slip of the finger Tranona but the range was £69-77k

Sorry. Big fingers - now corrected.

 

[Tranona]

Is 3% typical though? People on here have suggested extremes of 20% before which would knock 15.5 off a 77 boat, or not far off the 60k Jonic has used as an exaggerated figure to make his point.

It is (or should be) if the original asking price is based on a good understanding of the market. That is the whole point that John is making. If you set the asking price in the right range, the price achieved should be close.

The problem with boats is that many sellers (and buyers) are unrealistic, particularly in a thin market as we have now. Not only does potential supply exceed demand but the number of transactions is low so getting up to date sale prices is difficult. So sellers tend to base their price on out of date information and buyers think they can screw prices down because everybody says it is a "buyers market". Result is both parties fail to agree, so no sale.

 

[obmij]

I and a number of other colleagues have a theory that the market we understand so well, is now so misunderstood by certain sectors because of the proliferation of the reality TV property programs.

Some amateur negotiator is filmed sipping a pint of beer in a pub garden while "negotiating" a house purchase on a mobile phone. It's all bolshy aggression and gamesmanship followed by grinning and much back slapping when the deal is agreed.

However the housing market is of course a totally different asset class who's market is driven by need. It also has a pricing structure that is primarily based on the availability and cost of credit at a particular point in the banking Ponzi Scheme. Sorry I meant to say economic cycle.

We think it is these shows that have led to an increase in conversations like the one below. (And have you noticed how many of the episodes have a voiceover at the end saying "sadly things changed and Mr and Mrs so and so are still looking")



Buyer: Hello I'm calling about the xxxx at £75,000. I think it's overpriced but I'll come and see it if the owner will go to £60,000

Broker: Hello and thanks for calling. She is a lovely boat but the last three of similar age sold for between £69,000 and £77,000

Buyer: No I don't believe that, I'll go to £60,000 max as that is all I have anyway.

Broker: But you haven't inspected the vessel.

Buyer: (Now very indignant) I don't need to, that's a good offer and a boat is only worth what someone is willing to pay for it.

Broker: Absolutely right and I have a real time live feed of what people are willing to pay for it, plus I talk to other brokerage houses on a daily basis about values too.

Buyer: I'm not going to argue with you, put it to the owner.

Broker: He won't be interested and you'll just upset him. Yacht sales is all about goodwill if we are going to strike an accord.

Buyer: No it's over priced and he needs to wake up and think of the cost of moorings and insurance.

Broker: To himself in his head! (I know full well it's not over priced, perhaps it's just you that are underfunded?)

Broker: I'll give the owner a call then sir.

Buyer: Ok but let him know I'm looking at some others too and they look better than yours.

Broker: Excellent, I'll give you a call back.

Broker: Good afternoon Mr Owner I have had a totally speculative offer, boat unseen, of £60,000 against your £75,000 xxxxx

Owner: Tell him to xxxx xx

Broker: Good afternoon Mr Buyer. The owner thanks you for his offer but it is not what he is looking for. Shall we meet at the boat so you can see her and make a more realistic offer.

Buyer: No. He'll come back to me and anyway I'm going to look at better cheaper ones.

Broker: Ok no problem, can I take a few details.

Buyer: No, there is no point. I'll give you a call.

3 weeks later...

Buyer: Hello, I called you a few weeks ago about the xxxx. I have found a bit more money now and could go to £65,000

Broker: Sorry it's sold and we have taken a deposit.

Buyer: How much did it sell for?

Broker: £73,000

Buyer: Blimey, that's way over the top. They must have really liked it.

Broker: They did.

Conversations like this are almost entirely the fault of the brokerage industry. As a buyer I was encouraged to make low offers, both over the phone and in person. One marina based broker actually opened his sales pitch with words to the effect of 'ignore the prices, they're there for negotiation, no boat ever goes for it's asking price'

As it happened I looked at about 20 boats in person, made two offers one of which was accepted.

Problem could be easily solve by making soldboats data available to the general public

 

[zzyyxx]

It is (or should be) if the original asking price is based on a good understanding of the market.

This is kind of back to what I was saying, how do you know if it is?
People on here suggest significantly more than 3% below asking is fairly normal, although it's a small sample and those that paid high aren't going to boast about it.

As it happened I looked at about 20 boats in person, made two offers one of which was accepted.

Problem could be easily solve by making soldboats data available to the general public

Is it too personal for me to ask what sort of percentage range you were in relative to the asking price?

 

[jonic]

As the sellers representative you're no the best person to trust though.
I'm not having a dig, it's just an observation that where people don't know the market (and most don't) they have to test it.


Is 3% typical though? People on here have suggested extremes of 20% before which would knock 15.5 off a 77 boat, or not far off the 60k Jonic has used as an exaggerated figure to make his point.

Exactly my point, The property programme has created the mindset of (totally unfounded) mistrust.

It has also used a different pricing model's dynamics.

Property will inflate at a ridiculous rate based on the cost and availability of credit.

An owner may buy his house for £300k and two years later interest rates drop or mortgages are easier to come by and suddenly it's "worth" £395k. A bid is put in by a new entrant to the market place at £375k, the TV people film the excruciating exchange and the negotiator thinks he is the worlds best negotiator as he got twenty grand off!

Some watching the programme are thinking I'm off down the marina to do the same.

Except the largely artificial inflation that allowed for the negotiation on the house never ever happened to the boat.

In fact it was quite the reverse.

It started life at £120k new, changed hands a few times over the years, losing the VAT and some depreciation along the way and settled (probably where it would then stay fairly constantly for around five years) at the £75,000 mark.

Our man watching telly doesn't know, care or understand the dynamic of the pricing so uses the negotiation "technique" he has watched from his sofa. When it doesn't work for him he posts on YBW complaining that no-one would accept his price and the boat was "overpriced".

 

[zzyyxx]

Our man watching telly doesn't know, care or understand the dynamic of the pricing so uses the negotiation "technique" he has watched from his sofa. When it doesn't work for him he posts on YBW complaining that no-one would accept his price and the boat was "overpriced".

More likely is that he's been buying cars all his life from second hand dealers who regularly expect negotiation on the price, even new cars go 10% below the list price.

 

[jonic]

Conversations like this are almost entirely the fault of the brokerage industry. As a buyer I was encouraged to make low offers, both over the phone and in person. One marina based broker actually opened his sales pitch with words to the effect of 'ignore the prices, they're there for negotiation, no boat ever goes for it's asking price'

As it happened I looked at about 20 boats in person, made two offers one of which was accepted.

Problem could be easily solve by making soldboats data available to the general public

If anyone did say that to you then they were either having trouble paying their rates and staff and needed sales at any cost, or were overvaluing and flattering the owners in order to sign up the listing ahead of other brokers. Then they would encourage low offers in order to lower the owners expectations.

Both reasons totally wrong and fortunately I and the groups I work with do not mix in those circles.

 

[Sans Bateau]

Those who criticise the brokerage industry should consider that no broker earns a penny until the boat is sold. He has an obligation to the vendor to get a good honest price. But if the price set by unrealistic expectations of the owner or a tatty boat, the boat will not sell. The broker must therefore get the seller to be realistic in his expectations to be able to make a living. Also if the broker is unrealistic in his assessment of the value of the boat, then either, its sells for too little (unhappy vendor) or it doesnt sell at all and the vendor moves to another broker. So with this considered, you really should trust the broker, he has a big interest in getting it right.

 

[doug748]

".............the negotiation "technique" he has watched from his sofa. When it doesn't work for him he posts on YBW complaining that no-one would accept his price and the boat was "overpriced". " Jonic



Just so.

Then they put the icing on the cake by saying: "I have been looking for the right boat for over two years!!"

 

[Lakesailor]

ISo sellers tend to base their price on out of date information and buyers think they can screw prices down because everybody says it is a "buyers market". Result is both parties fail to agree, so no sale.

Our man watching telly doesn't know, care or understand the dynamic of the pricing

Erm. Isn't this merely the expression of the boat being more than the market will bear? The buyer is basing his offer on what he thinks he wants to pay. If the vendor wants more than that there be no sale. isn't that market forces?

It's no good saying that it's all the fault of the telly that someone expects to pay less than what you think he should pay.
The plain fact is he has the money and he wants to spend it on something he feels comfortable paying for.

The fact that others will pay more doesn't mean that he is wrong. Merely that at that moment there is a buyer who will pay more. Tomorrow there may not be.

Take the boat to auction and find the true value.