Why use a Broker ? Boatshed Brokers in the USA chat to Neil
WHY USE A BROKER?
NC: So we’re here at Boatshed Seattle and Waterline Boats talking about why you would use a broker. I suppose the question is from a person selling the boat or from a person buying the boat, what do we see as the advantages of using a broker?
RD: Well, I think speaking about people that are using a broker to buy a boat, if it’s a boat that’s of a low, low enough price that they see locally advertised, it’s not really a boat that they would need a broker to involve themselves with. Once they’re looking at a higher price, a higher value purchase, I think that it becomes more stressful and it’s full of complex issues and even choices that are involved. A broker would help with the valuation of that boat to begin with, with an opinion on how well priced the boat is. A broker is someone that will negotiate for you. I always say that the boats sell themselves, a buyer knows what they truly want and don’t want. But where the broker comes in, in the sense of being handy is that they’re going to take that emotion out of the negotiating.
NC: Now you’re mentioning really buyers’ brokers.
NC: Over the years we’ve seen a reduction in the number of buyers who were essentially bringing their own broker. Very often they may be bringing legal support or other types of advice. What about when you’re selling a boat, Roger, the advantages of using someone? You can advertise a boat privately in a variety of different venues. Why do I need a broker do you think to help sell the boat?
RD: We have a system within the company here when we evaluate a listing, it’s usually one of three directions we can go on advising what that seller is trying to sell the boat for:
Level 1: I’ve got to get rid of this boat, what price should I put on it to make it turn quickly?
Level 2: I don’t want to give the boat away, I don’t mind waiting a little bit for it, let’s make it a little higher but I’ll be willing to negotiate. That’s the second seller description.
Level 3: The third description is this boat is worth $200,000 and I’m not going to budge on that one.
Category three we pretty much try to shy away from because that boat’s not going to sell and then we become the bad guys. I had a personal friend that listed a boat for me and swore up and down that the boat was going to be $180,000 and I kept telling him that it’s really not going to. Finally after many months of it not selling, he got mad at me and said, “Well you haven’t even had an offer on it,” and he pulled the listing. It went back on the market six months later with another broker in the area for $50,000 less and it sold for $10,000 less than that figure. So it’s that third category that we try to stay away from because we’re never going to make them happy and sell it.
The big thing that I have to look at is when I list a boat I try to be as candid and probably is to make the person as uncomfortable as possible as to what the boat is really going to sell for and make it clear that yes, we can start out at a higher figure but you need to expect if we don’t get some activity in so many days (it could be 30, it could be 60, it could be 90, it depends on the comfort zone), that we start reducing the price. Of course now I’m going to jump over to Boatshed as one of the reasons Boatshed is so good is we can tell all those people that turned us down and stopped looking at the boat months ago because we’ve got their name and their email address and we can send them a quick note that says, “Hey, Charlie, by the way, the owner just finally decided to reduce the price, it’s now down to this price, you ought to take a look again.” Now we can move away from Boatshed but that’s one of the reasons Boatshed has its strengths and I use that in listing a boat.
BL: It’s also something that we try to make sellers aware of the fact that in terms of looking at price reductions from where they start but there’s a bit of a rule of thumb that it’s about point zero five of a percent per day of the boat value that it costs you to own that boat as you go month in and month out waiting maybe to sell it. You’ve got the cost of the slip, there’s maintenance costs and so forth that are being incurred while we’re waiting to sell it. So it’s a bit of a balance to look at whether you should reduce the cost.
NC: So what you’re saying is probably about point zero five of a percent of the boat value is the cost of ownership ?
BL: Per day.
NC: Per day.
NC: That’d probably frighten a few boatowners. Roger, you talked about these three types of people: someone really who’s looking to sell their boat as quickly as possible; someone who is not in a rush but is probably more attuned that they do need to sell the boat; and then the people who, by your own admission, have clearly what appears to be an unrealistic impression of what the boat is worth. How when you first meet people, accepting the principle of everyone’s boat is the best boat in the world, how do you start to work with a client or with someone selling a boat to ascertain that information?
RD: Well you just go back to the old system, just like in real estate and anything else, what have similar products sold for? What’s going on with previously sold boats? We go back and look at the listing in the last one, two, three years of data on previously sold boats and listings for which the information is readily available.
Now the person will look at that and say, “Oh well, I want $100,000 for my boat and you’re telling me that they’ve been selling for $80,000, well mine’s a better boat, mine’s definitely worth more than $20,000 but I willing to go for $100,000.” So you have to overcome that by explaining to them that you could have the greatest stuff in the world but the basic boat is still the basic boat: it’s the age; it’s the engine; what the engines are; how many hours are on them. Surprisingly people get excited about a diesel engine with very low hours. In fact, a diesel engine with very low hours is not as good a value as a diesel engine that’s had at least a hundred hours a year run on it.
Mr Smith who’s supplied most of the diesel engines for the Taiwanese-built boats and a lot of the Chinese boats made a comment about the Ford Lehman that it wasn’t really broken in until it did 5,000 hours. Well that’s a bit extreme but we always tell people, I’m looking at your boat sir, it’s a 20-year-old boat, it’s got X number of hours on it, I don’t really care how many hours are on the engine, I want to know what the maintenance has been, what’s been replaced. A major factor in selling a boat is what’s the history? I always say peripherals are the ones to go, if I know a good diesel engine can run 10,000 hours pretty easy but around 3,000 hours you start dealing with peripherals: water pumps; injectors; motor mounts.
NC: So getting that history is—
RD: Very important.
NC: —very, very important as a broker and the ability to be able to essentially interrogate an owner—
NC: —who sometimes has rose-coloured spectacles on and to be able to relay that information to a potential purchaser in a direct, and to analyse the important bits. Brad, you talked about the cost of ownership …
What do you think about where people have put significant amounts of money in? We talked about the value of boat, I can see that other boats like this have sold for $80,000 but where customers feel that they’ve invested in new navigation gear or new engine or whatever, how does that affect the re-sale?
BL: Okay. So you’re asking in terms of…
NC: If I’m selling a boat and I’ve put a new engine or new navigation gear in, how does that affect the value when the boat sells?
BL: That’s a tough one in the sense that most sellers will try and give you a list of things that they’ve done to the boat, most of which is actually maintenance-type items that should have been done anyway. The fact that they added a new chart plotter two or three years ago and they think that has great value but yet the boat is 25 years old, it stands to reason that whatever was an original navigation unit is so out-dated it should have been brought up-to-date. There’s not necessarily any special value to that but in their mind there is. Again, the rose-coloured glasses which translates into a seller thinking that they have a gold bar and yet buyers want to figure that the price they’re getting the boat is as good as what they could have gotten at a police auction.
BL: So we’ve got a big difference there and in many cases it’s for the broker to try and bridge that difference on these expectations.
NC: And that’s another advantage, isn’t it, in terms of you’ve got someone who wants the maximum amount for their boat and has some rose-tinted spectacles, the purchaser wants to satisfy them getting a fantastic deal. That disparity, is that something that brokers can solve to a degree and bring people closer together do you think?
RD: Directing at me? Trying to balance two boats that are probably within ten to 15 percent of the sale and asking price, you have to start looking at it. Obviously the first thing that any buyer looks at is price. So if the average price on a boat is $100,000 for the last two to three years that they’ve been selling somewhere in the mid- to high-90s and low to $105,000 to $110,000 in that range in there, they’re are all going to think that I ought to be able to get that boat for $90,000 or $95,000 because the range is there, those are older boats, those sales are behind us. Establishing what the comparison is, what value is that three-year-old plotter with radar? What does the other boat have? It’s got a ten-year-old plotter, well there’s value there, but how much? What’s the percentage that that helps increase in the boat? It’s got all new canvas, that’s a big deal if it’s got new canvas and the other one’s got old canvas. You end up looking at all of the individual items on the two boats if you’re down to two or three boats and deciding what has got the maintenance, again, back to maintenance. What has been improved and can I get that improved boat for the same price as I can get the unimproved one?
NC: I think what’s interesting in this discussion, by using the Boatshed platform to sell boats, is clearly that the amount of time that we spend with owners, not only taking the photographs and video, but all of that time essentially if you like interrogating the owner to get a grasp of all that information. What we’re saying is that it’s really, really important that we have that knowledge to be able to essentially recount to a potential purchaser.
RD: I was just going to add something, I think what it comes down to it is really talk to potential sellers in listing their boat. We have a reputation to uphold, both as an individual broker and Boatshed’s reputation, so after we’ve talked to the seller and we’ve looked at the boat and so forth, if the boat is not a very worthwhile vessel, significant issues with it, or if that price and this is someone not willing to budge at all, then it’s just not worth us taking the listing and we’ll just politely tell them they might want to try a competitor or, better than that, they might just want to try selling it themselves. So we feel confident in what we do have listed, that these are worthy boats to consider.
BL: Avoid the category 3.
NC: Yes, avoid the category 3 people.
RD: One little side note just jumping over to selling to the buyer, many times the husband and wife is the norm that you come into and I’ve used this on many people, including Sir Brad. When I sit down with people and talk about showing boats, usually in the conversation I start asking, “Well, what else have you looked at? What have you liked and disliked?” and usually what happens is I hear two different stories from husband and wife. So I always recommend when you get through looking at this boat or any other boat you’re looking at, you ought to go sit down some place and have a cup of coffee or a glass of wine or something. Each of you take a yellow pad and write down two columns: what you liked about that boat; and what you disliked about that boat, but don’t talk to each other. When you’re all through, compare notes, change things. I think most people are surprised as to what the other person was looking at or what they saw, what they liked and what they disliked and that makes it easier. The trouble with most brokers is, they don’t listen. So I like to get it right.
Roger, Brad, thank you very much for your time.