Throughout the entire process of marketing and selling your yacht, the negotiation phase is, by far, the one area that will substantially impact the final selling price of your yacht. And the easiest way to ensure that the negotiation stage favors you is by being prepared.
To prepare yourself, your broker or yacht consultant must clearly establish exactly what you want to achieve during the negotiation of your yacht. Doing so readies you to face all the different outcomes from the other party. If you and your broker or yacht consultant don’t establish what you want, you may be forced to compromise, and you won’t get what you want. For this reason, it’s very important that your broker or yacht consultant gather as much information as possible about the buyers you’re negotiating with. And the more information you have about the people with whom you’re negotiating, the stronger you will be.
Now, while sellers want the highest price and buyers want the best deal, the two have to meet somewhere in the middle for the sale to happen. Finding a common agreement might seem easy in theory, but there’s a lot of emotional attachment and biases (cognitive biases and sunk cost bias) which play a part in the negotiation process.
The Top 3 Most Common Negotiation Problems For Sellers
While the selling process can take months, the negotiation talks can take hours, minutes, or even seconds. And you’ll either sell your yacht, leave money on the table, or lose the deal entirely. When you are negotiating the sale of your yacht, be aware of these 3 common problems:
Getting emotional (due to the Sunk Costs Bias)
Refusing to accept the first offer (remember: your first offer is often your best offer)
Being unrealistic (due to the Endowment Effect)
Your yacht broker or consultant should help you be realistic and detach yourself from any emotional bias during a negotiation to help you get the best outcome.
21 Ways to Evaluate The Offers on Your Yacht
An offer for your yacht might come in the form of a Letter of Intent (LOI) or Memorandum of Agreement (MOA). This should be thoroughly read and reviewed by your broker or yacht consultant before any decisions are made. Carefully review all of the terms of the offer with your brokerage team.
Below are some of the items that you and your broker must take into consideration with each offer:
Purchase Price: Consider all of the terms of the offer before getting excited or disappointed.
Included Items: Consider what additional items have been included (dinghies, toys, equipment, artwork, furniture, safety equipment, etc.).
Excluded Items: Consider what items are excluded (dinghies, toys, equipment, artwork, furniture, etc.).
Moorage: Consider any moorage arrangements included as part of the offer.
Earnest Money: Consider the initial deposit.
Method of Payment: Consider if this is a cash sale or if the seller is financing.
Possession: Consider when the yacht legally changes ownership (this is the official transfer of ownership).
Seller Disclosures: What information about your yacht is the buyer asking for?
Due Diligence Condition: Consider what “outs” will the buyer have.
Appraisal Condition: Is the sale contingent on the yacht marine survey, appraisal, or any other type of inspection?
Financing Condition: Is the sale contingent on the buyer securing financing
Additional Addendum: Are there any additional terms or addendums attached to the offer?
Warranty: Is the buyer asking for a warranty or warranty transfer?
Mediation: If a dispute arises, how will you and the buyer handle it?
Seller Disclosure Deadline: What is the deadline date for you to provide all seller disclosures?
Due Diligence Deadline: By what date must the buyer complete due diligence?
Financing & Survey Deadline: What is the deadline date for the buyer to cancel based on loan denial?
Settlement Deadline: What is the deadline date for you and the buyer to complete closing?
Response Deadline: How long do you have to respond to the offer or counteroffer?
Trade In / Part Exchange: Is the seller agreeing on taking another vessel in trade?
Closing & Possession Date: On which dates will the official transfer of ownership happen?
4 Negotiation Considerations
Consideration #1: Buyer's Due Diligence (Evaluations and Survey)
This is the time period provided to the buyer to learn, review, inspect and decide if the yacht is in an acceptable condition. Therefore, the buyer may:
Carefully review all items provided in your Seller's Disclosures.
Schedule a physical condition inspection, sea trial, and survey of the vessel.
Review the costs, terms and availability of insurance for the yacht.
Consideration #2: Buyer's Right to Cancel or Resolve Objections
If the buyer determines the evaluations and inspections to be unacceptable, the buyer may:
Cancel the contract by written notice to seller (no later than the Due Diligence Deadline).
Resolve in writing any objections (no later than the Due Diligence Deadline).
Consideration #3: Remaining Contingencies and Financing
In the final steps of the transaction, your brokerage team must coordinate and complete any remaining details.
How is the buyer's financing going? Are there any last minute issues for securing their financing?
Was the sale contingent upon the buyer selling their previous vessel?
Final pre-settlement walk-through inspection.
Consideration #4: Settlement and Closing
Settlement and closing shall take place only when all of the following occurs:
The buyer and seller have signed all required documents.
Any balance required to be paid has been delivered by buyer and/or seller.
The proceeds of the new loan have been “funded”, and all closing documents are “recorded.”
The keys, equipment, manuals, warranties, handover protocol and bill of sale are handed over to the buyer.