Dockmate Called Me Last Night

[skolbe]

My dockmate called last night and said he is trying to sell his boat. He is in construction and work is tight. He said he had asked the bank if they would just take the boat. The bank told him - put it up for sale and any offers you get - bring them to us - even if they are low.

This had me wondering - if he sells the boat for less than he owes and the bank eats part of the loan balance. What does this mean for the guys credit?

 

[RiverRat]

Well, it can't do his credit score any good...

What's he selling?

 

[Bottom Line]

I am sure it will ding his credit up...but maybe not quite as bad as if he just stops making his payments. Is he going to try to sell it or just give it back to the bank?

What kind of boat does he have?

 

[Southpaw II]

If he sells the boat for less than he owes, he is liable for the unpaid balance. The bank will come to him for it. His credit score may be the least of his worries at this point.

 

[H2ONUT]

Giving it back to the bank is considered REPO!

 

[rondds]

This is precisely what banks are doing with many mortgages in default. This would be the equivalent of a boat "short sale?" Not sure what it does to his credit but it's a heck of a lot cheaper for the bank than repo or foreclosure and it will be a lot less devastating to his credit that a repo or foreclosure. Lotsa wheeling and dealing going on these days b/c of the economy. This is just one example.

 

[Henry Boyd]

It sounds by the way described it that they will honor a sale by providing title to the buyer. It also sounds like they are leaving the door open to re-structure the remaining balance into some form of work out loan. Normally the reply would be "your pay off is x, and if the boat sells for less then x don't bother to ask for the title unless you have a check for the difference".

If that happens and your friend can cover the re-structured balance then I would think the impact could be minimal to his credit rating. On paper it would be the same as the original loan being paid off early.

On the other hand if he is unable to cover the remaining balance and the bank has to write it off, then the impact is serious.

Henry

 

[skolbe]

Its a 2001 - 2855 Bayliner Ciera.

 

[jimdavi]

Perhaps he can talk to the bank and just pay due interest during the tough time?

 

[Presentation]

Perhaps he can talk to the bank and just pay due interest during the tough time?

Although this is a cost savings on a monthly basis, there are other issues.

The boats depreciation will continue.

All the expenses like slip fees, storage, insurance, & maintenance will continue.

I’d recommend the seller get clarification from the bank as to exactly what they are proposing.

It’s possible the bank would allow the seller to go from a secured loan of one value, secured by an asset that has a value less then the loan, to having a much smaller unsecured loan.

By selling the boat, even at today’s terribly depressed prices, it stops the bleeding, stops the ongoing expense and reduced the debt by the selling price.

Unfortunately for all the rest of us, as more people get into this situation, our boats value will be pushed down further, meaning more people will get into this situation.

From taking to a used broker I trust (I trust Jim her at CSR, but it was not him) the few used express cruisers that are selling are being sold by desperate people at greatly reduced prices and are being purchased by buyers that will only offer very low offers. If a lowball offer is not accepted the buyer moves on to another desperate seller. This broker told me sale prices on used mid 20’ to 30+ foot express cruisers are down 40% from prices they were selling for in July. So over half a year the boats value has dropped by 40%. Your $50,000 cruiser is now your $$30,000 cruiser. Your $100,000 cruiser is now your $60,000 cruiser.

I did some online looking at asking prices for boats very similar to mine. The prices being asked are not going to sell these boats. Even boats where the listing disaprears if you kept the ad and call the number, the person still has the boat for sale.

Boats like mine, similar 2003 280 Sundancers’s, loaded, have asking prices from $60,000 to $90,000. I asked the broker to give me a ‘reasonable estimate” of a price that would make the sale of my boat 90% likely to occur between January 1 and June 30. I was expecting him to say $65,000. His answer was $50,000, meaning I would pocket $45,000 after the broker fees. He was not trying to get me to list the boat for that, he was not trying to do anything but answer my question.

 

[Alex F]

Guys, lets not forget that winter months were always dropping boat sales down. Right now is just not a good time to sell (with combination what's going on with the economy), period. As for expenses, at this point most should be paid for (winterizing, storage fees, etc.), insurance and loan could be still on going. But, I think it's well worth to keep the boat until the new season starts, this is only about 3 months away. You'll pay $3K-$5K to keep the boat, but may gain $10K-$20K or more depending on the size, year and models. I'm not just speculating here, rather speaking from first hand experiance. I don't have a christal ball, but I think, just like in any year, when new season starts the boats value will go up. People will be buying starting from what will be a super good deals, but that should change the thrend and media will start talking about that boats are selling. So, if you can, just wait.

On the other hand, for those who's looking to buy, this is excellent time (in a way, unfortunately).

Alex.

 

[chuck1]

One thing most people don't think about when doing a short sale is that any amount the bank forgives on the note will be reported as income to the IRS. This could lead to an IRS lean against them.

 

[rondds]

any amount the bank forgives on the note will be reported as income to the IRS

Excellent point - but I think as part of the stimulis package, they are trying to eliminate this additional burden to the seller. This potential exclusion will not apply to a boat "short sale" of course, just homes.

 

[velooce]

Can't some boats can be considered a second home if outfitted right ?

 

[rondds]

Toilet, cooking facilities and sleeping quarters. That's for deducting interest on a loan secured by the boat. But I doubt the IRS would view it as a home if they grant forgiveness on a marine "short sale."

disclaimer!!!!!!!!!!!!
PLEASE CONSULT YOUR ACCOUNTANT OR TAX ATTORNEY

 

[CSR_Admin]

Alex, I have never seen boat values go up regardless of season. There is not day that goes by that a high production boat doesn't have unrecoverable depreciation. Next year it will be a year older so the value will drop significantly because of that, plus our market is having a major adjustment right now with lots of inventory on the market, so boat values will not be increasing.

A Bayliner 28 is a very marketable boat on the international market. Tell you friend to put it on www.BoatTraderOnline.com and even put a note in there that foreign importers are welcomed and he'll move it for a decent price quickly.

 

[skolbe]

Thanks Jim -Your the best. I feel bad for him and his family. He realized things were getting tough and he is trying to get out of it before things turn to the worst.