Timing Your Offer
Successful buyers do their homework up front, visit the trawler they are interested in buying before making an offer, work closely with their broker to find out everything they can about the trawler’s history and give careful thought to the price and timing of their offers. There are psychology books that discuss human behavior with regard to buying and selling that may be worth studying, but for most of us the purchase of a trawler is an emotional decision that lacks many common forms of logic. In order to play the game you have to take the plunge and make an offer. Keep in mind that most trawler buyers can take from several weeks to several years to research the market and make an offer, and the average ownership term for most trawler owners is five years.
You know that old “truth” that you always find something in the last place you look? (Because you stop looking after you found it).
Well, timing an offer is a similar type of situation and once an offer is accepted that trawler is unavailable to other buyers (you can make a back up offer), but it is never removed from the market until the deal closes after the buyer has satisfied the contingencies and accepted the trawler. Ultimately it all comes down to price and opportunity, if you have studied the market with your broker you should have a pretty good idea of what the seller will accept.
Historically, there are usually a half dozen or more “candidates” for every trawler on the market. The (listing agent) seller’s broker is entrusted to get the word out and identify these buyers and as obvious as this sounds, remember only one party can be the ultimate buyer – so looking for and finding the right trawler means that someone else may have followed a similar path and come to the same conclusion – so if you are pretty sure it is the right trawler for you, better move swiftly to get your foot in the door.
The normal protocol that most yacht brokers use is to keep a boat active and FOR SALE until it closes. Even if an offer is in place they don’t normally broadcast this fact because the deal could fall through if the buyer rejects the boat and then they would have “tarnished” the boat by jumping the gun on saying it is sold. The trawler isn’t sold until it has a signed acceptance from the buyer, funds have been exchanged and received, and the paperwork is completed to transfer title and close the deal. Many brokers will wait until the deposit is non-refundable before announcing a “Sale Pending”.
Before submitting any offer I will ask the listing broker if the boat is still available. If it is great, if not then I will talk with my client about the pros and cons of making a back up offer. The listing agent may let on that there is a contingency (like the buyers other boat must sell first) that may encourage us to make a back up so that we are in line if the original offers timing expires.
When an offer is accepted by the seller then the “dynamics” shift and the onus of ownership shifts from the seller (seller has to go along with the deal he/she agreed to) to the buyer who now controls the deal and pays to complete the due diligence process (financing, sea trial, haul out, hull survey, mechanical survey) in order to come to a decision of acceptance or rejection. There are severe consequences if the seller tries to renege, but the buyer can reject the trawler for even a minor or imagined flaw.
The best time to make an offer is when you see a trawler you like that appears to be priced correctly for its’ condition and location. I have also had much more success when my client and I have been on the trawler before making the offer, it shows stronger interest to the seller and you have firsthand knowledge of what you are getting in to. It’s also best if you are prequalified and can submit your offer with the financing contingency already accepted. This puts you ahead of the game because you know what your budget is and what you can afford (both the cost of the boat and the cost of repairs and improvements) and the seller will be more receptive to your offer.
If you have been doing your homework you have likely developed a wish list of features and equipment that are important and maybe created a detailed information spread sheet to compare like model boats.
When a new listing shows up on the market it is very tempting to make that first offer. If you know what you are looking for and this is the right boat then I encourage you to go for it. In addition to seeing the trawler before making your offer you should do whatever you can to minimize any contingencies that would delay your closing – the seller doesn’t want to take their trawler off the market only to find out you can’t move forward due to extraneous factors so make sure nothing will prevent you from being ready to close in 30 days if you want the best chance for success.
If you are unable to see the boat first, but like what you are able to find out about it then sometimes you have to take a bit of a leap of faith and make an offer sight unseen if for no other reason than to get your foot in the door.
Your broker should have your contact details and a purchase and sale agreement drafted and ready to go and you can even have a deposit ready and waiting in your brokers trust account. This enables you to “pounce” and should allow you to get the first shot and hopefully tie the trawler up. You can’t try a “would-you-take” approach; you need to prepare a formal written and signed offer with a 10% good faith deposit.
Remember, just because you submit an offer, it doesn’t mean that the seller will accept it. There are three common responses – accepting the offer, countering the offer and ignoring the offer.
If the seller accepts the offer then your “clock” starts and you have (normally 30 days) a pretty tight window to make all of the arrangements to complete your due diligence – hire a surveyor, book a haul out yard, find a diesel mechanic, book travel – air, car, hotel, finalize insurance, get legal advice for title and taxes, involve a documentation service, etc.) I create a “time line” for my clients with the key contact names and a due date agenda so we can keep track of all of the necessary steps needed to move forward to closing.
If the seller counters, you need to decide what to do, but until you have a signed deal they are free to accept an offer from another party, so “time is of the essence”.
It has become more common to have offers ignored if they are considerably below the asking price. Remember the asking price has been derived by the seller and the broker with a net number the seller wishes to walk away with in their pocket, a commission for the broker(s) and some “wiggle room” so that the buyer isn’t paying ‘retail’.
If, through some offers and counter offers, a final agreement on pricing and terms is reached my personal preference is to write up a “fresh” offer that includes all of the agreed upon points for buyer and seller to sign and this removes a lot of back and forth extraneous paper work.
There are many buyers who take the “if it is meant to be, it is meant to be” approach and don’t like to rush into anything. I totally understand and respect this approach after all no one “needs” a trawler, but there are stories of buyers who have boarded air planes to travel to see a trawler only to land and find out that while they were in the air another buyer presented an offer that was accepted – not common, but it can happen.
I’ve also heard of buyers who make their offers sight-unseen and do all of their price negotiating before ever stepping aboard. This is a strategy that seems flawed and would indicate to me that buyer is more interested in the deal than the boat. Personally I don’t like this method; it is more of a shot gun approach than a focused strategy.
The first offer has historically been the best. It is usually presented by an astute buyer who has studied the market and understands the value of the new listing, they may have even lost out as buyers on previous similar hulls and don’t want to miss this opportunity. The seller, who has come to grips with actually selling their trawler, often see’s the first offer as the beginning of an avalanche of interest and typically there is reluctance to accept the first offer, assuming that more will follow in short order.
Sellers who reject a first offer often live to regret it, it’s a bit upsetting to have an offer come in way below asking price, but time and again I have seen situations where a rejected first offer, in hindsight, was the best deal presented and would have saved the seller the headache of a protracted listing, price reductions and all of the carrying costs associated with keeping their trawler clean, fresh and presentable.
A good broker will help shed light on this common phenomenon and provide the necessary advice to help buyers and sellers put deals together.
If you are not the “first offer” then probably the second best timing is to wait it out. A lot depends upon availability – how many of the type of trawler you are interested in were built? What is the likelihood that a sister ship will come on the market? Does your broker know of any “pocket-listings”?
Remember, you are “competing” with an unknown number of eager suitors, all of whom are potential buyers who wish to buy a similar model trawler and invariably it seems to almost always happen where once a trawler finally sells a hand full of willing buyers express remorse that they were going to make an offer on that boat and didn’t move quickly enough.
As a buyer, when you see a boat that has been languishing you need to ask why it hasn’t sold? Is it overpriced? Is there something wrong?
Your broker should be able to confirm how long that trawler has been on the market and if there have been any offers…good data points to know.
Sellers who have had their trawler listed for sale for over six months (and certainly if it has been a year or longer) are more receptive to offers. The initial hope of finding a close-to-asking-price buyer has faded, they are probably no longer using the boat, have removed their personal effects and are done with the boat and its associated carrying costs… they are “beat up” a bit and typically become much more responsive when a qualified buyer comes to the bargaining table. Your broker may even be able to get a sense of what type of number will work based on a previous failed offer.
When a seller is tired of the process and is both mentally and physically detached from the boat…maybe they have had a price reduction or two and maybe even a failed offer…these types of sellers want out NOW and their primary objective is to put the selling process behind them – this can be an inviting situation for a buyer. Finding a “ripe” trawler, one that is the next to sell can work to your advantage if you have the patience to wait it out.
As a buyer you need to have a good idea of what the right price is to pay and factor in the location of the boat – is it close to home? If not, is that a bad thing or an opportunity to cruise in an area that you may otherwise not have experienced? There have been several times where the right boat at the right price was available for my clients, but the timing wasn’t right. They could squeeze the funds, but their kids weren’t out of school, their property or business hadn’t sold yet…this is a real tough gut-check – and in most situations they have purchased the boat ahead of schedule and kept it at the dock until free time caught up with their schedule. The rationale was that when the timing was right they would not be able to find this trawler at this price in this location…so it’s not an easy call to make, but one to consider.
Finding the right boat at the right price may mean that you have to shift your timing. As in any major purchase you will never know what might be if you don’t write up an offer and take a shot.