By Tom Pilkington
Yes, Virginia, there are simultaneous multiple offers on brokerage boats! Most clients think that yacht brokers revel in bidding wars, simultaneous deadlines, and final bids. However, this is not usually the case. To understand the underlying reason why brokers are starting to see simultaneous offers on boats again, I’d like to use the early to mid 1990s as an example. During the Luxury Tax Years, from 1991 to 1993, boat building came to a standstill. Without new boats coming into the market, most boats that were sold were brokerage or used boats. It was truly a buyer’s market, with more boats on the market than buyers. When the economy heated up again, real estate and boat sales soon followed. There were fewer boats left on the brokerage market and without an influx of new boats, from 1990 to 1995, used boat availability was limited, or, as we say in the industry, picked over. Yacht brokerages had fewer listings, and the ‘good ones’ often had multiple offers by anxious buyers.
What is going on now in the boat brokerage market is similar to what happened in the 1990s. In 2008, not only did life as we knew it during the boom years end, the boating industry came to another screeching halt. Boat manufacturers shut their doors and no new boats were sold. And, although minimal, the few boats that were sold were brokerage boats. Yes, it was truly a buyer’s market again! The pages of Internet boat listings grew, as did the number of boaters trying to sell or dump their vessels. Many sellers owed more on their boats than they could ever hope to sell them for, a predicament known as being upside down. Often buyers were in a position of choosing the boat they wanted, making low offers and then waiting to see who bites. To say the least, urgency did not exist.
Although the recovery of the past few years has not been as robust as the previous ones, boats are selling and people are buying boats again. Boat manufacturing has increased, rates are low, and I have yet to meet anyone who has gotten any younger since 2008! Just like the era of the 1990s, brokerage boats have been selling, very few new boats have been built for the past eight years, and, yes, once again, we are seeing signs of scarcity in the used boat market.
Many of our customers at Prestige Yacht Sales are surprised there are not ‘tons’ of boats to look at once we mutually decide on their criteria. I recently spent two afternoons looking at boats with clients. They were shocked when they realized that in a short time they had seen all the boats in their price range that complemented their lifestyle. With fewer boats on the market, it is up to the buyer’s broker to discuss with clients the urgency in making an offer once they see the right boat. When acting as the selling broker (the broker that has the listing), and I am aware of a lot of activity on a listing, I always give the ‘darned if I do, darned if I don’t’ speech. If I tell clients or brokers there is activity and most probably an offer coming soon on one of my listings, they usually don’t believe me. If I don’t warn them and the boat goes under contract, then I get the “Why didn’t you tell me?” response!
As you can see, in this market, receiving two or more offers on a boat at the same time is really not too unusual. The question then becomes, does the Yacht Brokers Association of America (YBAA) have guidelines for their Certified Professional Yacht Brokers (CPYB) to follow to ensure fair and reasonable procedure? The short answer is, yes.
It is important to mention that in the event a broker receives multiple offers on a boat, it is ultimately up to the owner of the boat to decide the manner in which he or she wants to respond. All CPYB brokers use The Guide, which was developed to prepare brokers in all aspects of the profession. The CPYB Guide endorses the following procedures, but they are not the only fair procedures that may be followed.
The owner can instruct the listing broker to present a counteroffer to each prospective buyer (or buyer’s broker) with the understanding that he will accept the first offer to meet his price.
This procedure has the advantage of motivating all buyers to be the first to meet the counter, without the fear they might pay more than the lowest price for which the yacht can be purchased.
The procedure that is also CPYB endorsed and that I recommend and advise my clients to use is the following:
Request from the buyers (or buyer’s broker) to request by a specific deadline one final, best offer. The owner, after receiving all offers by the specified time, can simply accept the best offer.
The distinct advantage to this approach is that buyers don’t feel like they are in a bidding war, and usually don’t withdraw from the negotiations. On the seller’s behalf, there is the chance that the final selling price will be higher than his counter would have been.
Buyers beware. Next time your broker urges you to get that offer in, there is a reason for his sense of urgency. If you see the boat that fits your lifestyle and your budget, the time to make an offer is now. There may not be another one on the market until next season!
Tom Pilkington is a principal at Prestige Yacht Sales, with offices in Norwalk, Essex, and Mystic, CT. Tom started his boating career as VP of Yacht Haven Marine Center in Stamford CT. On weekends Tom and his wife Jennifer can often be seen boating with their two Springer Spaniels on Long Island Sound.