Timing Your Offer
Successful buyers do their homework up front, visit the trawler they are interested in buying prior to 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 people, the purchase of a trawler is an emotional decision that lacks many common forms of logic. Keep in mind that most trawler buyers can take anywhere 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 for it? (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 backup 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 good idea of what the seller will accept.
Historically, there are a half dozen or more “candidates” for every trawler on the market. The seller’s broker (listing agent) is entrusted to advertise the trawler and identify these buyers. As obvious as this sounds, only one party can be the ultimate buyer. So, when you finally find the perfect trawler, remember that someone else may have reached a similar decision. You have to move swiftly to secure your boat.
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. The deal could fall through if the buyer rejects the boat and then they would have “tarnished” the boat by jumping the gun. The trawler isn’t sold until it has a signed acceptance from the buyer, funds have been exchanged and received, and the paperwork to transfer the title and close the deal is completed. Many brokers will wait until the deposit becomes non-refundable to announce a “Sale Pending”.
Before submitting any offer, the broker should ask if the boat is still available. If it is, great, if not, then your broker will talk with you about the pros and cons of making a backup offer. The listing agent may reveal that there is a contingency to the sale (like the buyer’s other boat must sell first) that may encourage you to make a backup offer so that you are prepared 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 must go along with the deal he/she agreed to) to the buyer who now controls the deal. The buyer pays to complete the due diligence process (financing, sea trial, haul out, hull survey, mechanical survey) in order to form the decision of whether to accept or reject the boat. 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 fairly priced based on its’ condition and location. Boarding the trawler prior to making an offer can lead to a more accurate and successful offer. It shows stronger interest to the seller and you gain 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. Knowing what your budget is and what you can afford (both the cost of the boat and the cost of repairs and improvements) will make the seller 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 potentially created a spread sheet with detailed information to compare similar model boats.
When a new listing appears on the market it is very tempting to make an offer immediately. If you know what you are looking for and this is the right , then you should go for it. However, you should make time to see the trawler prior to putting in an offer and 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 discover that you can’t move forward due to extraneous factors. So before sending in your offer, make sure nothing will prevent you from being ready to close in 30 days. This will give you the best chance for successfully acquiring your dream trawler.
It is not always possible to see the trawler prior to making an offer, perhaps it’s in a different state or you’re unable to travel to it. If you are unable to see the boat first, but like what you learn about it online and through phone calls, then you may have to take 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 along with a purchase and sale agreement drafted and ready to go when you make an offer. You can have a deposit ready in your brokers trust account to help increase efficiency. These things enable you to “pounce” and hopefully tie the trawler up. You can’t try a “would-you-take” approach; you have to prepare a formal written and signed offer along with a 10% good faith deposit.
Remember, just because you submit an offer 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 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.) Here at JMYS, we create a “timeline” for clients with 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. 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 most brokers will draft 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. After all, no one needs a trawler and this approach is understandable. Be aware that there are stories of buyers who have boarded airplanes to see a trawler only to land and find out that another buyer presented an offer that was accepted while they were in the air– not common, but it can happen.
Some buyers have make their offers sight-unseen and do all of their price negotiating before ever stepping aboard the trawler. This is a strategy that seems flawed and would indicate that the buyer is more interested in the deal than the boat. This method is more of a shot gun approach than a focused strategy, which limits its utility.
Historically, the first offer is 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 is typically reluctant to accept the first offer. They assume that more, potentially better offers, 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. Time and again sellers have rejected the first offer, and in hindsight, it was the best deal and accepting it 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 you should 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 trawler and almost always, once a trawler finally sells a hand full of willing buyers express remorse that they didn’t move quickly enough on making an offer on that boat.
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.
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…which are 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 a bit “beat up” 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. Over time, a seller can become both mentally and physically detached from the boat and tired of the process. Maybe the seller has had a price reduction or two, or 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 to pay is 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? You may encounter a situation where the right boat at the right price was available, but the timing isn’t right. Maybe you can squeeze the funds, but your kids aren’t out of school, you’re waiting for a property or business to sell…this is a real tough gut-check. In most situations, you may still be able to purchase the boat ahead of schedule and keep it at the dock until free time catches up for you. This has happened to many buyers. The rationale for this is that when the timing is eventually right you would not be able to find this trawler at this price in this location. It’s not an easy call to make, but one to consider.
Finding the right boat at the right price may require you to shift your timing. As with any major purchase you will never know what might be if you don’t write up an offer and take a shot.