How To Make An Offer On A Used Boat

Boat negotiation doesn’t have to be a battle. Old-fashioned ideas like “the first person to speak loses” and other things that we may have heard about negotiating are generally no longer relevant. The best deal leaves both the buyer and the seller happy.

It used to be widely accepted that in a typical market a seller would probably price their boat about 10% higher than what they expected to get for it to make room for the negotiation process. However, when working with buyers in the role of buyer’s broker, I typically tell the buyer there’s no such thing as a bad first offer.

Preparing For The Offer

A seller can say no to a lowball offer – or may surprise you and say yes because they’re ready to move on. This can catch a buyer by surprise. So before you make that offer, make sure you’re ready to move ahead: Do you have a place to keep the boat? Have you gotten a quote for insurance? Is your cash in place or financing tentatively secured?

Remember, your offer is a binding contract. And a lot of things need to happen between when you make that offer and when you close on the boat. Although most Purchase and Sale Agreements (PSAs) – which are signed by all parties when an offer is accepted – allow the buyer to back out and keep the deposit under certain conditions, such as a poor survey or an inability to secure adequate financing, you shouldn’t rely on those “outs.” If you don’t have the details worked out, you may end up losing a deposit or, at the very least, facing an embarrassing situation later.

Next, look at your schedule. If you’re buying a new or used small boat “off the lot” or peer-to-peer, you might be able to settle everything in a day, just as with a car. But with bigger used vessels, scheduling is important. A series of things must happen between offer and close. You don’t have to attend the survey and trial run yourself, but doing so is highly recommended. You also typically don’t have to go to a physical location to close the deal as you might a house, but you’ll need to have documents signed, notarized, and mailed.

You’ll also need access to a bank so that final funds can be wired. Many banks still require you to appear in person to send a wire transfer, and wires are the only way brokers will accept money. The day you close, the boat becomes your responsibility. So unless you’ve worked out a way for it to stay in its current location, you’ll need to make sure you have time in your schedule to take possession and move her. If you aren’t able to, your broker can help find a captain who can move the boat safely, though that’s another expense to account for.

None of these steps is a huge time commitment – maybe three days in a monthlong process – but don’t plan on putting in an offer and then going on vacation.

Strategizing Your Offer

Once you’ve completed all your homework, it’s time to consider what offer to make. If you have a broker, ask what the average selling price is for the boat you have your eye on. Or, if you’re going it alone, look at market comparables. (See “How Much Is My Boat Worth?” in our April/May issue.) Let’s say 10 similar models to the one you’re looking at have been sold in your region in the last year for an average price of $100,000 after being on the market for an average of six months with an average asking price of $110,000. However, the boat you’re looking at has only been on the market for three months and is priced at $115,000. Because it’s been on the market less time than average, it’s unlikely that the buyer would accept $80,000 at this point.

Also look at the list of equipment this boat has compared to ones that have sold within this price range. If the boat has new electronics or new sails (those could come with a $20,000 price tag), your offer of $80,000 is even less likely to be accepted. It’s more likely this boat will sell for around $105,000 to $110,000. In this case, it’s best to offer somewhere close to $95,000 if you’re sure it’s the boat you want.

If this same boat has been on the market for nine months, then it’s advisable to offer a lower amount. The seller is likely tired of paying monthly for financing, insurance, and dockage. Let’s say you offer $90,000. The seller comes back at $110,000. You agree to “meet in the middle” at $100,000.

This example is a very scientific approach, and most good brokers would guide you in this way. If you had gone straight to the seller with an offer of, say, $80,000, you probably wouldn’t have been taken seriously and may well have offended the seller.

A good broker communicates your offer in a professional way to the seller’s broker, stating reasons why the offer is what it is. Your broker can worry about whether or not a seller is “offended” by the offer. If buying peer-to-peer, be sure you take on the part of a sensitive and professional communicator.

One thing you want to avoid in all negotiating situations: using language such as, “This is my first and only offer.” It’s combative and sets the tone for an unpleasant experience. Strong-arming or trying to play to someone’s misfortune is a bad idea, even in situations where the boat is for sale because of a death or divorce.

Making The Offer

Whether you’re using a broker or not, make your offer in writing using a PSA. There are standardized agreements that several professional boat-buying organizations, such as the International Yacht Broker’s Association, use that have been written by attorneys and created to protect everyone – buyer, seller, and brokers. If you’re using your broker’s PSA, ask where it originated, as some brokerages will rewrite them or write their own, and there may be less protection for you.

Read over the entire agreement (it’s typically three to five pages and submitted to you by your broker in eSignature format), and have an attorney read it if that makes you more comfortable. Remember, these documents aren’t set in stone, and there may be room for negotiation. Ask your broker any questions you have about the form, and don’t sign anything that you don’t fully understand.

Initial offers are submitted to the seller in writing, both to show the buyer’s commitment and to present clear terms. It’s easy to misunderstand and miscommunicate if an offer is presented by phone. Once the offer is submitted, your broker will also have a conversation with the listing broker or seller to clarify terms. Sometimes one broker will represent both parties. When a seller is represented by a broker and a buyer is not, the seller’s broker is often obligated to equally represent the interests of both seller and buyer, like an intermediary.

After The Offer

The seller may or may not get back to you right away. If there’s going to be a counteroffer, they must come up with reasoning, such as, “We’ll only drop the price to $110,000 because we know that the other boats on the market don’t have new electronics.”

After a little back-and-forth – you can usually predict how a deal will go by how amicable the negotiations are – you’ll have your final number and your terms, including the all-important timeline.

It’s typically a bad sign if a seller won’t negotiate at all. It means they’re either too emotionally attached to the boat, or have no emotional attachment and it’s simply an investment. If the seller is in the latter category, this is likely not a seller or a boat you want to work with. Chances are the vessel hasn’t been maintained or loved as well as someone with an emotional attachment.

On the flip side, the seller who’s too emotionally attached probably won’t budge on price and may become angry when told their boat isn’t worth what they’re asking. They also may be less likely to renegotiate if issues are found in the survey. An experienced broker will know how best to approach the situation.

Once the offer is accepted, typically you’ll agree to make your deposit within two to three days, accept the vessel by a set date, then close by a set date. On most used vessels, the timeline is usually from two weeks to a month. Surveys and trial runs can take time to schedule and coordinate, closing paperwork takes time to prepare, and other variables can affect the timeline. Unless you’re opting to waive the survey and trial run, allocate a month for a deal. The seller is agreeing to more than just the offer amount; they’re also agreeing to your timeline.