Sale Price...Fix in Sterling or Euros

Nautorius

Nautorius

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Hi All,

I have another offer (number 3 in a year) so do not know if it will go through. The gent is french and has made offer in Euros. He accepts he will pay Sterling Equivalent but at todays exchange rate it is painful. So do I fix it at todays rate for Sterling equivalent or fix it in Euros and hope sterling appreciates a little. Deal will not be completed until Mid/Late February.

Regards

Paul /forums/images/graemlins/smile.gif
 
??

Exchange rates have moved in your favour, not to your detriment, if you have been offered a euro sale. Do the sums and you'll probably jump at it.
 
To answer the question about when to fix, managing the euro exchange rate is critical to my business, and we took a view that it was worth hedging forward at 1.32 euro to the pound last week (we like strong euro, weak pound). There was, and still is, good reason for the sterling devaluation, but i'd be surprised if it has much further to drop, and equally surprised if it rallied significantly.

That said, if I could forecast these things any more accurately than my 2 yr old son could, then i'd have a bigger boat and i'd spend more time on it!
 
whether the offer in euros in painful or not isnt anything to do with the exchange rate.. its just where his offer is, surely?
Up to you whether you accept you have the exchange risk... you could just as easily say you ll accept whatever the GBP equivalent is on completion, and give him the risk? That would seem fairer to me as its unlikely you will withdraw , but he might.. meaning that you cant hedge the risk in case he pulls out.. but he doesnt need to exchange until he completes..
Maybe agree to split the difference in any change in rates after all, it could go either way..might get worse for him too.
 
Agree with houghn. If it was painful today, then it sure as hell would have been a lot more painful a month ago before Sterling dived against the Euro and you definitely don't want Sterling to appreciate because it means either you'll get less Pounds or he'll end up paying more Euros
What you want is for Sterling to depreciate further. If anyone knew for sure whether that was going to happen, they would be answering your post from their superyacht in the Caribbean /forums/images/graemlins/smile.gif. FWIW and that's not v much, I think Sterling has probably reached the bottom in the short term but then what do I know? If I was you, I'd fix the price in Sterling
 
Hi Paul,


I think it may be prudent to make the deal as easy as possible for the other buyer (er only buyer ? ).

I would leave it entirely up to him, he will have enough to worry about and I wouldnt want want to give him an excuse to pull out.

The currency is unlikely really to move enough to worry about.


Cheers

Pete /forums/images/graemlins/smile.gif
 
Careful now, think of all those gorgeous Italian yachts that were so very attractive at SIBS, weak sterling er, no thanks /forums/images/graemlins/grin.gif mind you if you were a super dooper boat dealer you would have forwad contracted all your euros for stock last October ......... /forums/images/graemlins/grin.gif /forums/images/graemlins/grin.gif smug git /forums/images/graemlins/shocked.gif
 
Unless you have a need for Euros, stick to Pounds and let the buyer deal with the risk. He can buy a forward contract to fix his rate and therefore cost in Euros. No reason why you should hedge the risk as if he pulls out, you lose the cost of the forward. I bought my last boat in DM (before the Euro) and fixed my Sterling cost with a forward bought at what I thought was the best rate between the time I signed the contract and when I had to pay.
 
Personally i would prefare to price in euros would take alot of risk out of the contracts but for some reason UK market at my end seems to prefare everything priced in sterling, we did try and price in euros in the early years but we found people were not comparing like for like and would often quote the euro price back to us thinking it was sterling, silly I know but i guess for some going around a show and loads of numbers floating about its easy to mix up the euros from sterling.
 
I agree with Pete, to sell the boat you have to sacrifice probably more of your asking price then just a curruncy rate for a few months.
Take away the problem of the currency rate from the byer, it will help the sale, open a bank acount in euro's and consider what you would do with the money if this could be payed in euro's. If it is another boat, I am sure you can pay a part of it in euro's. (sellers are more likely to accept these conditions remember) UK people probably dont' realise that there is quite some business done in euros today ;-)
 
Bit of mixing up of issues here. If one is in business selling (and possibly making) boats then one has a choice of insisting on your own currency or pricing in the potential customer's currency and taking the risk which can be hedged - or indeed "unhedged" and taking the "swings and roundabouts" view. Many builders need foreign currency to buy materials and pay expenses so they run foreign currency accounts and (should) know how to minimise their currency risk.

For an individual transaction between two private individuals, in my view the seller should set the currency for the transaction as he wants to fix exactly what he is getting. If he sets the price in Euros, but needs to turn it into pounds then he either has to take the risk or sell the proceeds forward which has a cost, plus if the buyer pulls out he still has to deliver the Euros to fulfil his currency contract. If he sets the price in the currency he needs, the buyer then has to deal with the risk. An alternative is to agree an exchange rate and then share the risk. If the rate moves to the advantage of the seller he shares 50/50 his gain and vice versa. This is very common in business and could work in a private transactions by making it part of the contract.
 
When i bought my last two boats ,both purchased in the uk (and me from euroland)and at the sterling price agreed on the day i paid a deposit and then had the requiset time to pony up the remainder.
It was up to me to shop around and buy sterling at the best ratei could,it was my loss or gain dependant on the rate and the vendor still got what was agreed on the day of deposit,as it turned out i gained on exchange rate and he still got the agreed price in sterlo.
 
Ive bought a few items in the UK, 2 boats and a trailer. I deal in Euro. The price we agreed on at all times was UK Pounds. Like above it was up to me to get a good conversion deal which I thought was fair enough... I wouldn't like to be getting paid in Sterling considering I use Euro
 
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