Archive for February, 2011

New England Are You Ready?

February 25, 2011

Coinciding with the New England boat show Knot 10 Yacht Sales is poised to bring its unique perspective on the brokerage market to this region. Rich Feinen our head broker is quickly seeing the benefit of our efforts and building a growing inventory of boats to lead the way for buyers in the NE market. Some customers in this market may already be familiar with the Knot 10 brand but for those that are not allow me to introduce the core differences that in 3 years have made Knot 10 the Mid-Atlantic’s brokerage leader and allowed clients to leave 10% brokerage fees in their wake.              Stop by the booth in Boston and Rich, Gary or myself will be happy to tell you about the Knot 10 difference which involves:

  • Photography: built from a perspective of getting one chance to make a first impression our boats are presented and photographed professionally. Look around and compare for yourself a Knot 10 boat listing versus the same boat model with another broker.

 

  • Advertising: you can’t sell what people don’t see and we spend more to do so. With a huge commitment to printed advertising we spend over $8,000 a month on print and thousands more to enhance ever listing on websites. Most brokers only do the web and ask your self if it did not work why we would spend so much? Are you getting the exposure needed in this market?

 

  • Technology: having so many listings and multiple offices we have invested in systems that allow our brokers to match buyer and sellers together to the ever changing inventory that we have.

 

  • Commission: 7% plain and simple. Who ever decided 10% was an industry standard? The industry standard is decided by you the customer. If others need to charge 10% fine by us but why not 12 or 15%. We have built our model from day 1 around this cost structure and have proved it can be done. Competitors will tell you it can’t but compare our advertising to theirs, our look to theirs, our inventory to theirs and you will see the customers have decided its time to leave 10% brokerage fees in their wake. I assure you we are here to stay and making the profits to prove the customers saw the Knot 10 difference as clearly different and clearly better.

Buyers Market Credit Is King

February 25, 2011

OK we all know it’s a buyers market and will be probably for the next year or more. Most sellers are in tune with that fact and adjusting prices to levels that are attracting buyers. So as a buyer in this market you have the chance to land an incredible boat and minimize the cost of ownership for 2, 3, or 10 years down the road when you go to sell the boat. Remember equity, investment, and profit should never be used in a boat purchase discussion. This is a lifestyle purchase and one that gives enjoyment and family time unlike any other form of spending.

But as the economy has changed to create this buyers market so have the credit markets! If you are financing a boat, RV, or plane there has been a complete shift in the criteria needed to qualify. Time after time we see people come into our office and fall in love with a boat, make an offer only to find out that this is not the same process as getting a car loan or even as easy as qualifying for a mortgage. This is consumer credit and the banks have gotten very strict on qualifying criteria. There is plenty of money available, that is not the issue, the issue is you have to meet far stricter standards to get that loan. CREDIT SCORE is king and if under a 690 you can probably say in 98% of cases you will be declined. There are great places to go and see your credit, monitor it and clean up anything that may improve your chances. Identity Gaurd (I prefer) or Free Credit Report.com are just two of many that allow you to see what your score and offer advice on moves that can raise that number to where it needs to be. THE BEST MOVE YOU CAN MAKE IS TO PREPARE AND GET PRE-APPROVED FOR AN AMOUNT BEFORE FALLING IN LOVE WITH A BOAT AND BEING DECLINED. PRE-APPROVAL ALSO MAKES OUR JOB OF PRESENTING YOUR OFFER MUCH EASIER AND YOUR OFFER HAS MORE STRENGTH WITH A SELLER. Follow these steps and become a buyer with money in hand:

1) Figure out a price range and payment you are comfortable with (loan calculators exist for this and figure 10, 15 or 20 year terms)

2) Sign up for credit report monitoring that allows you to see if you have a credit problem and work to correct things that may be inaccurate or could be adjusted to quickly affect your score

3) Make sure you have the cash in non retirement accounts to show the bank liquidity of 10-15% of your estimated purchase price. It is very hard to do a deal with little cash these days and even if the boat has enough appraised value to do a 2-5% down payment you need to prove liquidity with bank statements

4) Contact a marine finance broker (not a credit union or personal bank) as these people work with 5-9 banks and make their living by writing loans only for boats. They know the criteria and can guide you to the right marine lender for your situation. Trident Funding or Scott Financial or nationwide and 2 examples of this type of resource.

Taking the steps to be a pre-approved buyer with cash in hand saves you time, heartbreak, and makes you ready to take advantage of a buyers market the likes of which may not be seen for a very long time.

The Supply & Demand Crystal Ball

February 13, 2011

Everyone is well aware the market for boats is 100% a buyers market. Has been for the last 2-3 years and probably will be for some time to come. Even more so than the housing market boats are being sold all over the country and world as one 340 Sea Ray is the same as any other except for colors and subtle options. Holding up a crystal ball and looking 1-2 years ahead an interesting cross road can be seen.

The brokerage and used boat market has kept many new boat dealers from floundering and consumers have been going after well priced clean brokerage boats albeit cautiously. In 2008, directly in 2009 and most noticeably in 2010 tremendous production cuts by new boat manufacturers where put in place to stop overhead and map a plan for surviving the downturn. Simply put there will be a huge gap and shortage of any boats with 09’ or 10’ hull ID #’s. So let’s skip ahead to 2012 and 2013 when the economy may be inching slightly higher, unemployment rates declining, and those small green chutes becoming a bit more fertile. At least we can hope this is the case.

Boaters in 2012 and 2013 will face an interesting dilemma. You will likely not be able to find 2009 and 2010 brokerage or low hour used boats. We will run head on into a classic supply and demand economic argument. Demand will be there but supply will be almost non existent. Buyers will face one of two choices:

1)      Purchase New (if you go to any recent boat show it is shocking how new boat prices continue to shoot higher and higher. It may be petroleum cost, or paying for advances in technology but in most cases boats over 28’ seem to be moving up in price past the reach or LOGIC of most buyers. There will forever be folks wanting to buy new, to be the only person to have slept in that berth etc. But when armed with logic and research the majority of buyers will reach the conclusion of “I can pay $295,000 for a 33’ gas I/O boat that is new for 2011, or look at 1-3 year old ones”. SEE LAST PARAGRAPH

2)      Purchase Used (right now we are starting to see the issue discussed in the closing paragraph. While we are still in a buyers market once the prices hit the right level many of our listings are having 2-3 offers arriving at the same time. Boats not priced right are still seeing ZERO calls or emails yet at the same time boats that are have people fighting over them.

So instead of buying that $295k new 33’ you set out to find a low hour clean 2008-2009 only to find there are none available. This dilemma is going to create a supply and demand crossroads. Some say it will be the harbinger for turn around in the new boat market, some say it will drive used boat prices higher. I sense it may be a bit of both but more than likely the used boat market will continue to win and 2005-2007 boats may become hotter sellers and demand may tick prices up slightly. I think the sting and shift in mindset of the consumer from this economic peril will still make many stop in their tracks from buying new unless manufacturers can find a way to hold or reduce cost of brand new boats. If you’re a buyer and see a clean well priced brokerage boat, don’t turn around as someone may be right behind you. It’s still a buyers market but when you see one you love you better grab it for they may be hard to come by.

THE SECOND SALES INGREDIANT THAT MAKES A DIFFERENCE

February 2, 2011

I need to emphasize the 2nd key factor after price is condition. Not features, not hours, not color, but condition. While it’s true that every buyer wants to feel they have gotten a great deal in this market but and it’s your advertised price that gets eyes on your boat, when their feet get on the boat the condition will determine if it sells or sits. Judy and I have recently decided to put our house on the market and start the process of moving much closer to the office. The knowledge I gain from watching and interacting with buyers made me realize certain things you can’t ignore.

After living in our house for 11 years there are cosmetic factors you have to look at and spend ahead of the curve to take away any negatives a buyer may have when viewing your home or boat. To make a first impression you have to spend some money up front and hopefully it will preserve your price. In my own situation spending several thousand dollars to improve cosmetics will likely preserve tens of thousands by preventing any buyer from saying “yes we like the house but we need to do …………………………!

There are simply too many boats that we see could spend 2-5k on improvements (canvas, carpets, wax etc) but are unwilling to do so. That $2-5k can make the difference in a buyer making an offer you can live with versus no offer at all or a very low offer. Many of you have stated “well I’ll take care of that after they make an offer” or “it’s priced accordingly” but I can tell you the buyer does not feel that way unless you are repo priced. There are simply too many boats available and they continue looking for unlike a house (where it can be location, location, location) your boat can be shipped anywhere a buyer desires. In the past 2 weeks 3 boats have been sold to buyers more that 3 states away. Don’t ignore your boat even though you’ve decided you want it sold for in the eyes of the buyer it’s a new and exciting huge purchase. You may have given us the price we need to get it traffic so let’s make sure we show them the condition needed to get it sold.

The wrong way to price it

February 2, 2011

“I need to price it at $xxxxxx because I owe the bank $xxxxxxx” With very little exception those words are almost said exactly as I wrote them. This is by far the biggest mistake you can make. There is not a buyer out there concerned about what you owe the bank but only what they think they can buy a boat for. As a seller you need to think like a buyer and if you are looking at buying anything in this economy (real estate, cars, boats, capitol goods) you are attracted and on alert as it is clear that buyers still have the upper hand and will for at least another season. There is clearly less low hanging fruit on the trees but that is because that fruit is the only stuff that’s getting picked.

Knot 10 I’m proud to say settled more than $12mil in closed transactions for the 2010 year. That’s a lot of boats and I can assure you none of those sales had an owner that felt great about the price. They were relieved and thankful and most say after a month or so felt great to have completed the sale, but nobody felt they got what their boat was truly worth. This brings me back to the bold mistake above. If you focus on what you owe the bank as opposed to what your boat is worth in reality then it’s going to be a long road ahead. There will always be someone selling your same model or similar who paid cash, put 30, 40, or 50% down and is willing to sell for what the market level really is as opposed to a payoff that is 15-25% higher than someone is willing to pay.

This is what we do every day to earn a living and thankfully have lots of boats since you picked Knot 10 as what you perceived to be the best chance to sell your boat. We remember that your choice has a lot to do with our success but it’s also true that owners who have taken our consul based on what we see in this market have gotten better results than making the mistake of ignoring the market. Why is it that our average length of time for selling KNOT 10 trade boats this year is 12 days? It’s because we know before we take that trade where the boat needs to be price to sell in 30 days or less. I have numerous examples but want to use an ideal true story to illustrate exactly how critical this is.

We listed a 2003 Sea Ray 340 at $119,000 in early 2010. For six months we had zero emails, zero phone calls, and zero interest getting anyone on the boat. The boat was very clean and had exceptional options. The problem is there were/are 80-95 of these on the US market between 100k-$149k. The owner was very active in engaging us to try and get the boat moved. We convinced him to go to $99,900 and be the boat that got all the phone calls and interest. In the next 2 months the boat rec’d 2-3 calls a week, was shown and rec’d 3 offers of 90, 92, & 94k. The owner had told us he would stick right to his $99k price point. All 3 offers were rejected and then in the 3rd month he rec’d a $98,500 offer which he took, the boat surveyed and is SOLD. At $110-$119k I have no doubt that boat would still be getting little interest. Price brought the interest, the cleanliness brought the offers, and eventually he got what he needed.

As a company of boaters I am very sensitive to the fact my boat is worth far less today than 2 years ago and I’m thankful I don’t have to sell in this environment. At the same time I have thought if I had to sell it I know where it would need to be priced. Not everyone is in the position to price where the market is, some simply can’t afford to, and others are willing to be more patient. At the risk of sounding like a broken record I want as many of you to avoid the #1 mistake above and focus on the following thought. If you had an offer of $xxxxxx tomorrow and would take it is your current price more than 3-4% higher than that number? If so you may want to try the strategy illustrated by our Sea Ray 340 which we have seen be more effective than anything else countless times.