The process of appraising a yacht is exactly what you think it would be: Compare and analyze the condition, equipment, age, levels of engineering, interior layout, joinery and exterior aesthetics. Then identify the tightest cluster of actual selling prices, find your trend lines and voila, you have just found the fair market value (FMV) of a yacht with the high rate of probability.
The most difficult part of the appraisal process is finding reliable insight to those pesky “actual” selling prices. Getting beyond the asking prices and the hubris of those involved in the sale is imperative to accurate appraisal.
Real-estate sales are a matter of public record in 49 of 50 states, but yacht sales are private so there is no county auditor to review selling prices. Getting to the actual selling price, accompanied with the yacht’s condition, can be challenging.
I’m fortunate that I have access to more than 20 years of sales data. The brokers that work in our office participate in an update system, a database that offers us insight to confirmed selling prices of yachts, along with reports of yacht conditions based on the personal inspection of the broker authoring the update.
We are able to use this insight to quickly build trend lines and cluster charts for various boats that would otherwise be a guessing game to anyone who needs to know the FMV .
When the data isn’t available, it is necessary to call anyone that was involved in the sale of a yacht that is similar to the one you are appraising, all the brokers, captains, crew, managers, the dockmaster, surveyors etc. In other words, you have to research the comps. This is a time-consuming, yet effective way of gaining accurate insight to a yacht’s FMV.
The variables that regularly skew the numbers and slow the sales process include:
1. Confusing fair market value with intrinsic value. An owner who has used and loved a yacht may be inclined to think it’s more special than it is.
2. The professional captain or crew who says “I know that boat has got to be worth at least … .”
3. The gross investment theory: “I know what they usually sell for, but here’s what I’ve done to this one.”
I have found that verified selling prices, the use of our update systems and personal inspections allow me to weed out the inaccuracies. Inaccurate information on Web sites, or yachts that have been repossessed, abandoned and/or have excessive damage, need to be identified and properly quantified when evaluating a yacht.
Sure, there is the rare exception when a boat sells outside of its probable FMV, but it is rare, and if you are wrong, it can be an expensive gamble when the carrying cost of the boat is factored into the equation.
I take great pride in my ability to find a yacht’s fair market value with a high rate of probability. For several years now we have been in a difficult and confusing market. But the principles of appraisal still apply: always bet on the comps and condition reports of like-kind vessels.
If you can avoid intrinsic values, expert buddies, and gross investment theorists, you’ll be amazed when the boat sells to the first qualified person who looked at her.
Meanwhile, the expert buddy who knows his friend’s boat should be worth a different number is still trying to explain all the geo-political reasons why the boat hasn’t had an offer or anyone look at it in months.
Jason Dunbar is a licensed Florida yacht broker, vice president of Luke Brown Yachts in Ft. Lauderdale, and yacht valuation specialist for Broward County courts. Comments on this essay are welcome at firstname.lastname@example.org.