Boat­works

A hur­ri­cane hole-in-the wa­ter? Be­ware of stor­m­dam­aged “bargain” boats

SAIL - - Contents - By Wayne Can­ning

This past hur­ri­cane sea­son was par­tic­u­larly hard on boat own­ers in both the Caribbean and the Florida and Gulf coasts, thanks to Har­vey, Irma and Maria. BoatUS has es­ti­mated that more than 64,000 boats were dam­aged in the United States alone. While for many boat own­ers th­ese storms have meant a loss, for oth­ers, they rep­re­sented a pos­si­ble op­por­tu­nity.

In fact, be­fore Irma had even cleared the coast, many bargain hunters were al­ready looking for deals. But be warned: while this might seem like a great way to get a nice boat at a bargain price, some cau­tion and com­mon sense are needed to avoid pur­chas­ing a prover­bial hole in the wa­ter where your money van­ishes faster than light into a black hole.

First and fore­most, be­fore rush­ing off to a hur­ri­cane zone to find the per­fect boat, it is best to take your time. The bet­ter deals on dam­aged boats will come from in­sur­ance sales—since th­ese boats tend to have been worth more prior to a loss than an unin­sured boat—and it of­ten takes weeks or even months for the in­sur­ance com­pa­nies to eval­u­ate and ar­range for sal­vage of the boats they in­sure. As a re­sult, the good deals will not be gone if you wait. In fact, wait-

ing of­ten re­sults in bet­ter deals as there will be more se­lec­tion in gen­eral for buy­ers.

In­sur­ance com­pa­nies will write a boat off as a “To­tal Con­struc­tive Loss,” or TCL, for sev­eral rea­sons, and un­der­stand­ing th­ese will help in se­lect­ing the right boat. Gen­er­ally, the boat is con­sid­ered a TCL if the es­ti­mate for re­pairs is around 75 to 80 per­cent of the in­sured value of the ves­sel. In­sur­ance com­pa­nies also know es­ti­mates rarely, if ever, run un­der but of­ten run over, so they make an ex­tra ef­fort to cut their losses be­fore start­ing re­pairs.

With larger storms, such as Irma, they may be forced to liq­ui­date boats they would have oth­er­wise had re­paired as well. For ex­am­ple, if a boat can­not be re­paired within a rea­son­able time pe­riod the in­sur­ance com­pa­nies may to­tal it so that the in­sured will not have to wait an en­tire sea­son with­out a boat. After a large storm not only are re­pair yards fully booked, but the re­pair fa­cil­i­ties may also be dam­aged, mak­ing get­ting re­pairs done dif­fi­cult or im­pos­si­ble. Of­ten th­ese lightly dam­aged boats make a good in­vest­ment depend­ing on pre-loss con­di­tion.

Be­fore looking for a hur­ri­cane boat to re­store you must also de­cide if this type of project is right for you. Ask your­self if you have what it takes to make the needed re­pairs. Hur­ri­cane-dam­aged boats of­ten re­quire many skills and re­sources to re­hab. There­fore, if you are plan­ning on hir­ing oth­ers to do much of the work, I strongly sug­gest you re­con­sider get­ting one of th­ese boats. Skilled la­bor is ex­pen­sive. The fact that the in­sur­ance com­pa­nies are liq­ui­dat­ing the boats means they have al­ready de­ter­mined it was not prac­ti­cal to hire a yard to make the boat us­able again. Ul­ti­mately, storm-dam­aged boats are only fi­nan­cially prac­ti­cal if you can pro­vide the nec­es­sary sweat eq­uity to save la­bor costs.

It also has to be con­sid­ered where you will be able to work on a dam­aged boat if you get one. Do-it-your­self boat­yards are get­ting in­creas­ingly rare. The boat will likely also need to be moved, ei­ther to where you live or, at a min­i­mum, to a yard other than where it al­ready is, fur­ther adding to ex­penses. Un­less the boat is a small trail­able one, there will be a lot to con­sider when it comes to work­ing lo­ca­tions. Of course, if you go and work on the boat in its cur­rent lo­ca­tion, you will be ahead of the game. But as most re­pairs can take weeks and or even months to com­plete, most of us have to move the boat to where we live and work.

If after tak­ing into con­sid­er­a­tion all th­ese fac­tors, you still feel you have what it takes to handle a project of this type, it is time to think about se­lect­ing the right boat. With that in mind, I sug­gest you start by looking at boats as if you were shop­ping for a nor­mal used one. You will, for ex­am­ple, still want to find a boat that was well main­tained and that has the equip­ment and gear you want and need. For the time be­ing, ig­nore the dam­age and eval­u­ate the boat in its pre-loss con­di­tion. Check things like en­gine hours and the con­di­tion of the sails and rig. If the boat was poorly main­tained and/or had a lot old worn-out equip­ment be­fore it was dam­aged, keep looking. Also take some time to find the nor­mal re­sale value for any of the boats you are looking at, as this will help you later de­cide how to bid.

In terms of where to find the best stor­m­dam­aged boats. There are sev­eral sources and like most things, some are bet­ter than oth­ers. For ex­am­ple, I would leave con­tact­ing the in­sur­ance com­pa­nies di­rectly as a last re­sort. After any storm, in­sur­ance com­pa­nies are in­un­dated with calls and have lit­tle time to deal with bargain hunters be­cause they are busy deal­ing with their client’s claims. A much bet­ter place to look would be with those com­pa­nies that spe­cial­ize in liq­ui­dat­ing th­ese boats and which can be eas­ily found on­line. In fact, th­ese will be your best source, as th­ese are the peo­ple charged with sell­ing the boats once their claim is satisfied. You could also con­tact tow­ing and sal­vage com­pa­nies in the af­fected ar­eas as well as lo­cal marine sur­vey­ors. An­other op­tion might be con­tact­ing a lo­cal in­sur­ance bro­ker

Good boats to be had for a song? Maybe, but be sure to look be­fore you leap

for some help.

If you are not fa­mil­iar with boat con­struc­tion or skilled at do­ing ma­jor re­pairs, I would strongly sug­gest that you hire a pro­fes­sional to both help eval­u­ate the ex­tent of the dam­age and help de­ter­mine how much it will cost to re­pair. Many boats may have hid­den dam­age that is not easy to find right off. As men­tioned be­fore, you will want to have a good feel for a boat’s pre-loss con­di­tion as well. There’s no point in buy­ing a boat you hope will be a quick fix only to find out there is ma­jor hull core dam­age!

Keep in mind when in­spect­ing any ves­sel that you need to have the owner’s or in­sur­ance com­pany’s per­mis­sion to board and that your time aboard may be lim­ited. Use cau­tion when boarding, as there can be haz­ards from the dam­age or con­tam­i­nants. Al­ways wear shoes and pro­tec­tive cloth­ing when in­spect­ing a boat.

Not all storm dam­age is eas­ily re­paired, and some boats are to be avoided as a mat­ter of course if you want to come out ahead. For the most part, I sug­gest stay­ing away from any boat that has been sub­merged, even if it is only a par­tial sub­mer­sion, since the ex­tent of the dam­age from wa­ter in­tru­sion can be dif­fi­cult to fully eval­u­ate in the short time most bid­ders are given to in­spect a boat. Boats that have been grounded can also have hid­den dam­age, with re­pairs to rud­ders and run­ning gear be­ing par­tic­u­larly ex­pen­sive. Boats with dock rash or which have had col­li­sions with other boats or fixed struc­tures are of­ten your best bet. Rig dam­age can also be rel­a­tively easy to fix, al­though parts can be ex­pen­sive.

Once you have found a boat you are com­fort­able with pos­si­bly re­pair­ing, it is time to look at the num­bers. In fact, this is vi­tal. Be­fore you even think about plac­ing a bid it is im­por­tant to know your lim­its and stick to them, since it can be all too easy to get caught up in the ex­cite­ment of the whole process.

There are two key num­bers to keep in mind: the first is what will the boat be worth once the re­pairs are com­plete; the other is the cost to make said re­pairs. What­ever es­ti­mate you come up with, dou­ble it just to be safe. Don’t for­get to add in clos­ing and trans­porta­tion costs. That done, sub­tract the re­pair cost from the es­ti­mated fin­ished value and you have your max­i­mum bid. This should not only be your top num­ber, but the one you stick to, no mat­ter what.

In ad­di­tion, be warned that pur­chas­ing a hur­ri­cane boat is of­ten not a sim­ple task, and there are some pesky bu­reau­cratic black holes to watch out for. As noted ear­lier, most in­sur­ance com­pa­nies will con­tract a com­pany spe­cial­iz­ing in liq­ui­dat­ing its in­sured as­sets. How­ever, while some of th­ese com­pa­nies spe­cial­ize in marine work, many do not. The larger of th­ese are or­ga­ni­za­tions are of­ten very pro­fes­sional and will do their best to help you out, but not al­ways, and some smaller, lo­cal com­pa­nies may be down­right dis­rep­utable. Be­fore plac­ing any money on the ta­ble, so to speak, know who you are deal­ing with.

No mat­ter who you are deal­ing with, make sure you fully un­der­stand what you are buy­ing. Make sure the seller has the right to sell the boat and that you will get the ti­tle free and clear. That free and clear part is es­pe­cially im­por­tant as you do not want to end up with a sal­vage or yard bill when the auc­tion­eer’s gavel hits the block and you be­come the new owner. Make sure you read and un­der­stand any con­tracts be­fore bid­ding. Any rep­utable com­pany will be happy to pro­vide you with a copy of the sales con­tract prior to do­ing so. If there are

lim­its placed on when the boat is to be moved make sure you un­der­stand that as well.

Many auction com­pa­nies re­quire that win­ning bids be moved within a short pe­riod of time, after which you will have to start pay­ing stor­age fees. You also want to make sure that what you think you are bid­ding on is what you are go­ing to get. For ex­am­ple, make sure any gear aboard when you viewed the boat is go­ing to re­main there after the sale. You do not want to bid think­ing there is a full set of sails only to find out the pre­vi­ous owner re­moved them after they be­came yours.

Fi­nally, know­ing how to bid is also im­por­tant. There are ba­si­cally two types of auc­tions held with sal­vage boats. The first is an open bid, where you know just what the other per­son is bid­ding. The other is a closed bid, where you sub­mit your best bid and hope for the best as you have no clue what other bids may have been placed. You may also come across mod­i­fied ver­sions of th­ese, such as eBay, where you knew the high bid but may not know a per­son’s proxy bid. Speak­ing of eBay, the days of the small closed auction are com­ing to an end as an in­creas­ing num­ber of liquidation com­pa­nies turn to this site to reach a larger group of the bid­ders in an ef­fort to get the best price pos­si­ble.

In many ways, bid­ding in an auction is a bit of an art. How­ever, the key is to never get caught up in the ex­cite­ment and end up bid­ding more than the boat may be worth. Again, set your top bid based on boat value less es­ti­mated re­pairs and ex­penses, and then stick to this num­ber!

Re­turn­ing to last year’s hur­ri­canes, with so many boats dam­aged in the Caribbean, many have ex­pressed in­ter­est in find­ing a storm-dam­aged boat in places like the BVI. How­ever, for sev­eral rea­sons, I feel this is not a prac­ti­cal op­tion.

For one thing, many of the dam­aged boats there were in char­ter ser­vice, and the char­ter com­pa­nies are go­ing to do, and did do what is needed to get back in busi­ness as quickly as pos­si­ble. This means (and meant) strip­ping boats not worth fix­ing to get the ones that were re­pairable back up and into ser­vice. Many fa­cil­i­ties in the area were also dam­aged, so get­ting help may be dif­fi­cult at best, es­pe­cially since many lo­cal yards are go­ing to give pri­or­ity to their reg­u­lar cus­tomers—the char­ter com­pa­nies. Get­ting parts to make even tem­po­rary re­pairs may also be dif­fi­cult and ex­pen­sive, and many of the boats were un­der for­eign own­er­ship, which will only serve to com­pli­cate things fur­ther still.

Bot­tom line: al­though it may be tempt­ing, you are bet­ter off stick­ing close to home when looking for that great deal. s Wayne Can­ning is a marine sur­veyor based in South­west Florida who has sailed ex­ten­sively aboard his Irwin 40, Vayu, which he pur­chased as hur­ri­cane sal­vage in 2006. Wayne also re­cently

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