Are boat auctions a bargain?

Boat/US Magazine, Jan, 2005 by Caroline Ajootian

Every year, boats that are literally and figuratively washed up because of accidents, fires, sinkings and storm damage live to float again when they are sold at auction, often for rock bottom prices.

Last year was no exception. Weeks of non-stop hurricane activity on the East Coast in September and October yielded a bumper crop of thousands of seriously damaged and dented vessels, many of which can be viewed online at boatus.com/hurricanes/liquidators. The temptation to buy one of these vessels is strong when you consider what seem to be give-away prices.

For example, how about the possibility of buying a 1998 36-foot Tiara for under $20,000? At less than a tenth of what the boat would normally sell for, it sounds pretty good--until you consider that Hurricane Frances left a 15-foot split in the hull and unzippered the hull-to-deck joint for 20 feet. And, it's anyone's guess what shape the twin turbo-charged Cummins engines are in.

On the other hand, for someone who wants a little runabout, there are any number of boats with only slight damage that could be picked up for a song.

Separating the good buys from the proverbial "holes in the water" takes a lot more than just luck. Potential buyers of auction vessels can improve their odds by using some common sense.

"Whether you're buying a boat at salvage, on the Internet or from an ad in the paper, always hire a marine surveyor to inspect it," advises Carroll Robertson, vice president of BoatU.S. Marine Insurance Claims, who put up for auction at least 500 of the thousands of vessels totaled by hurricanes Charley, Frances, Ivan and Jeanne last fall.

"For the couple of hundred dollars that you spend, even as much as $1,000, a thorough survey inspection is worth its weight in gold," warns Robertson.

Marine surveyor referrals are available online at boatus.com/insurance/survey. Long distance buyers can hire a marine surveyor located near the auction site to evaluate the boat and report on its condition.

Sully Sutherlin, owner and founder of U.S. Auctions, one of the major online boat auction houses handling disposal of totaled vessels for BoatU.S. Marine Insurance, observes, "The nice thing about a damaged boat is that you don't have to put it back into perfect shape if you just want something to get out on the water with. You can skip some of the aesthetics."

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Still, he cautions, "Damaged boats are not for everyone. They require expertise and resources," in other words, elbow grease and money.

Auction boats are also a good source for parts needed for boat restoration projects. However, most online auction houses do not sell individual parts or engines. So, if you need a special bow rail or window frame, you might just have to buy the whole boat.

U.S. Auctions "posts pictures along with everything we know about damage and type of boat and engine," Sutherlin said. "We can tell you if it sank. If there's anything derogatory we'll say it. We don't pull any punches. But, if it doesn't have owner records, we don't touch it."

The company, like most other online auctions, offers no guarantees about physical condition. Boats are sold "as is, where is" with clear titles and no liens. Sutherlin says his company makes a 10% commission on every boat sold.

Potential buyers should take advantage of the week or longer preview period before bidding closes to have would-be prizes inspected by a marine surveyor. Once the sale goes through, buyers have three days to make another inspection and during that period they can notify the auctioneer if they wish to cancel the deal. Cancellations must be done in writing. After the three days are up, there's no turning back. The boat is yours.

"We are the intermediary between the insurance company or seller and the buyer," Sutherlin says. "What we're mainly interested in is a fair auction. We don't allow any shenanigans."

That means the auction house watches online bidding like a hawk. "Bid manipulation is prohibited," the company's Web site warns. In other words, individuals are not allowed to place bids simply to drive up the price.

U.S. Auction's online sales are handled by eBay and buyers are urged to use the proxy bidding feature. This allows the bidder to place a "maximum" bid for the most he is willing to pay. This amount is confidential. eBay's computer bids for the buyer in increments small enough to outbid others. It will not automatically raise the bid to the full amount. Bidding on most auction boats begins at $1, since they are sold without a minimum price or reserve.

The sale is open for one week and "the last person standing is the winner," Sutherlin says.

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"The problem with salvage boats sold at auction is that there are definitely unscrupulous people" who buy them for resale and don't disclose previous damages once they've made some cosmetic improvements. Sutherlin adds, "There are dealers who take boats on trade and don't find out until later [about serious damages]. They don't want to get stuck with a wreck so they pass it on again to someone else" without revealing the boat's history.