A romantic notion often underpins the decision making process when purchasing a boat and there is no better way to tap into this sentiment than a boat show. In today’s challenging market filled with legal pitfalls this romantic notion needs to be coupled with maximising value and minimising risk. The processes described in this article are both practical and legal in nature and should assist in planning and considering your next sales, hopefully allowing ample room for the romance.
Many years have passed since I first dreamt of owning my own yacht, with plans and ideas of this boat bandied about late into the night between like-minded friends over the odd glass of wine, when finally the yacht ‘Dawn’ appears. The advertisement described her as a 33 foot vessel that had been partly restored and in desperate need of a good home. She was moored in Old Cremorne, Sydney and registered with the Sydney Amateur Sailing Club, a club full of loved yachts of yester-year.
Dawns journey started in 1937, built on the shores of Lake Macquarie north of Sydney by Les Steel, who went on to build ‘Rani’ the first winner of the Sydney to Hobart yacht race and later ‘Struen Marie’ a two times winner, so indeed she came from a good stable. Raced out of Belmont Yacht Club on the lake, she ventured south in 1940 to find a new home at Middle Harbour Yacht Club being part of the ‘First Fleet’ with registration number MH 21. She had been purchased as a present for the new owner’s son who sadly was killed during the Second World War. She was then sold by way of letters of credit to the forward-hand who skippered her as she lined up to take part in the flying of colours for the queens 1954 visit on Sydney Harbour.
The new skipper raced her hard until the mid-nineties, and when I met her, she was tired, with almost half of her ribs broken at the turn of the bilge. Entering her after all those years of glory her floor boards were floating in the bilge and the pervasive dank smell of a closed boat, grease and bird’s nests hurt the nostrils. There were however, some significant positives and it was these that certainly swayed the decision making process over the next three months, after walking away with the thought that this project was just too hard. So what makes a potential purchaser a boat owner?
Recent research found little by way of real guidance for prospective purchasers as either, the information was written from the broker or registration perspective or was so legalese it provided little practical guidance, not to mention the conflicts of interest found within some industry articles. The premise of this article is to suggest that industry educate their customers in their choices while in return providing client information for the industry so as to provide better service and sales contracts.
Supporting the purchaser
Often a boat purchase is guided by emotion and while its tempting to get carried away, business should provide the best information to support a well thought out decision. Let’s face it whether your selling new or second hand, it’s a buyer’s market and making that catch is not easy. By providing good information and support will not only make a happy purchaser but will more than likely ensure the purchaser returns for their upgrade.
In respect to Dawn, we walked away from her however after months of deliberation we considered that the raw material of rig and fittings, hull timber (King Billy Pine) and lead could be sold and at worst we would break even. But it was the very quality of these materials that gave the idea of restoration wings as any future construction would be based on a sound foundation of quality materials.
Make a list
Often purchasers have an idea, but no certainty so work with the purchaser in creating a list of needs that will guide you in providing the best-fit, service and contract terms. The list that flowed from the idea of owning Dawn was based in the practical reality that the vessel would be used for lake sailing with the occasional coastal hoping and short overnight stays.
Consider the purchaser’s financial circumstances
You should assist the purchasers in considering, the annual ongoing costs of maintenance, mooring, registration, use of vessel and insurances. Under the New Australian Consumer Laws (ACL) financial consideration of your client’s ability to pay could make the difference between a clean sale or one that comes back to bite you.
Dawn’s purchase price was so low that it could be redeemed if she was to be scrapped. And after purchasing her she was then sailed for a further four years before any decision was made to restore her with ongoing minimal costs.
Research second hand
Provide as fuller picture as possible that should not be limited to a survey but should consider many aspect such as; the class, history, the builder and company history, popularity in the market place i.e. for future saleability. Where possible encourage purchasers to speak to other owners, brokers, shipwrights and marine mechanics and industry bodies.
Once Dawn had been viewed for the first time, she was slipped and we were able to see her hull, keel, the condition of thru-hull fittings and rudder stock that all appeared in good order. Her history was known to a degree, but the real surprise was to follow after speaking to a good family friend when he informed us that, Mustang (aka Dawn) had been owned by his uncle (the forward-hand) and we were then able to piece together her full history.
This point is especially important and should form part of the process before any contracts are entered into especially, where the vessel is being constructed overseas. The reality is that a potential purchaser will be less likely to purchase if they are not secure with the builder/company constructing the boat, given the difficulties involved in recouping deposited money especially in a foreign country if the builder goes into bankruptcy.
A recent client, based overseas contacted our office stating that he was purchasing a vessel in Australia and he had the purchase contracts that needed reviewing. As part of this service we researched the builder/company’s history, the directors and company’s credit history and researched the premises that were leased to a company already under administration. The importance of this information cannot be underestimated, especially in our client’s case, as it assists the purchaser to make an informed decision whether to proceed.
The contracts were reviewed and several changes made to protect our client’s interests and while not all were accepted by the builder, our client was in a better position had the contracts not been amended. The significant issue here is that many purchasers either don’t receive contracts or the contracts are purely for the benefit of the vendor and that it should be realised that contracts are negotiable instruments that should reflect the interests of all parties a position held under the ACL.
Design the boat
That is, using the needs list and all research, show the purchaser through the boats discussing their needs and research so the new boat owner will end up with a vessel that fits their needs and budget. Importantly the purchaser must distinguish between their dreams and what they can afford.
This step really is critical as it draws the purchaser’s attention to any weakness’s in their purchase plan, but more importantly this information guides the decision making process whether in selecting the boat or in drafting the purchase contracts and schedules that describe the boat’s inclusions.
The steps that have been described, while not an exhaustive list, go some way to providing guidance in assisting purchasers in making an informed decision when purchasing their next boat. And while boats are often viewed as holes in the water that you just throw money into, hopefully your next sale will not give too much grief, and provide much enjoyment, allowing you to minimise risk and maximise value for your customer. Dawn has not realised her full value yet as she is not fully restored but her hull is tight after replacing the broken ribs, she has a new diesel engine, cockpit and her interior is framed ready for the next step in her restoration but most importantly, she’s back in the water with a first placing already under her belt.