The Yacht Buying Process and Similarities to Real Estate

Would it be fair to say that if you're in the market to buy a yacht, you're likely to be a seasoned real estate buyer perhaps from a residential and a commercial perspective? 

The mistake many yacht buyers make is that they treat purchasing a yacht like that of buying a car; negotiating with the seller or salesman to get the best deal on your pleasure craft but this is the costliest way any one person or entity can buy a yacht.

• Search

When you're looking into buying a home, chances are you'll head to Zillow or Redfin to conduct your own research before appointing a realtor, to search the MLS, provide their local market knowledge and their connections to local closing agents or contractors; the same is true when buying a yacht. Your yacht broker will protect your financial interests and provide you with all of the yachting MLS information you can not obtain on your own and which would likely be omitted by sellers. Appointing a yacht broker comes at no cost to a yacht buyer and positions you to save a considerable amount on your purchase. 

• Making the Offer

When buying a car, you make an offer after test driving it but when buying real estate you would never ask to sleep in the home before making an offer; buying a yacht again is more like real estate. Whether you're buying your yacht new, previously owned or building one, your broker will arrange showings where in which the yacht will not leave the dock prior to an accepted offer (this discourages free boat rides for unqualified buyers).

Once you prepare your offer, it will be accepted, rejected or countered with a counter being the most likely as every yacht purchaser loves a good deal and every seller often overestimates the value of their vessel.

Offer Strategies:

1. Mirror Negotiation: This is the old school way of doing business by bonified seamen and veteran yacht brokers; an offer, followed by a counter, with equal concessions made to arrive at a mid-point. I HATE (strong word) this strategy because I feel as if the seller wins out and both brokers make a higher commission at your expense. 
2. Handshake and Sucker Punch: This is the real salesman's strategy as a high offer increases the probability of acceptance with the hope that you'll renegotiate at a lower pricepoint following the findings of a survey. While many sellers don't want a deal to fall through following a legitimate offer, the buyer runs the risk of paying that (contractual) premium if there are no substantial findings revealed during the survey. This is also not my preferred offer strategy. 
3. Beat Down and Apology: THIS IS my preferred strategy and we can talk in further detail about it but this is why I created Yachtlytics; to leverage financial datapoints that support low but fair offers that favor the buyer. 

• Accepted Offer

Once the offer is accepted, you're typically required to deposit 10% of the purchase price which is typically wired to your representing broker's escrow account, and allows for you to schedule the sea trial (an automobile's test drive) and a survey (home inspection). 

• Survey

When hiring a marine surveyor to perform your marine survey, they are to inspect the mechanics work properly, the hull is in sea worthy condition and that any issues or inproper functionings onboard are documented, which allow you to learn the true condition of the yacht. The main thing to know about a marine survey is that none of them come back totally clean and if they do, you're hired a bad surveyor. 

Some marine surveyors earn the reuptation as being puppies and some hounds, with the puppies documenting only the large issues while hounds sniff out every misaligned detail. As a buyer you want the hound but it's important that you realize these findings are not to scare you away from purchasing but to give you a true picutre while leveraging your second negotiation.

To assure that you hire a hound, make sure that your broker provides you with a list of surveyors that aren't there to facilitate a quick sale but there to do their due diligence on your behalf.

* I always recommend clients to perform a survey offshore in rougher waters to give the hull, engines and transmissions a thorough test. 

• Renegotiation

Following a survey and a sea trial, it's likely that you and your broker will project the costs associated with rectifying survey findings. At this point, you will decide if you accept the vessel in it's current state, reject the vessel or accept it on a conditional basis. Based off of your calculations what typically happens is the seller will extend a credit ($500,000 off the initial offer of purchase price) or the seller will be required to perform the work to fix the vessel to keep the purchase price the same.

While each situation varies on a case by case basis, I prefer to allow the seller to take on the repairs IF THE CORRECTIONS CAN BE PROVEN. This mitigates your risk of having one issue that spirals into several other, which becomes a headache and increased cost to the seller opposed to you as the buyer. However if you have a reliable shipyard or can get work done the way you want it, a credit may be more beneficial.