There’s a house next door that has been for sale for seven years. Every year the Memorial Day issue of the local paper features the house; the price remains the same. The late Milton Friedman, the father of market pricing efficiency, would have been horrified. He believed in pricing to clear the market.
If you thought real estate pricing was illogical (Bill Koch’s Aspen house just sold for $33 million—the original listing was $125 million), the pricing of yachts, and especially superyachts (boats over 100 feet), is even more so.
The leading superyacht publication, BOAT International, runs a feature in every issue called “Seriously for Sale,” showcasing price drops by motivated sellers—sometimes a $60 million yacht will carry an $8 million reduction. It’s not unusual to see a yacht listed in a September issue of a yachting magazine, and then see that same listing again every month…seemingly forever.
Much of the problem is structural. Many superyachts are custom, from the design of the exterior and interior to the naval architecture and the yard where they were built. Luxury goods in general suffer from a lack of comparables, and the resale value of unique or custom products tends to be set by the owner, who usually has an emotional investment in the number. Pricing and sales both suffer for it. The ultra-wealthy, simply put, are rarely under pressure to sell.
Into this small and truly intimate world of major yacht sales comes Boathouse Auctions (BHA). Its founder, Jack Mahoney, a yachtsman himself, ardently believes that the auction process—usually associated with the world of art—is a far more efficient way to transact the sale of a yacht.
Many of the steps in BHA’s process are identical to the traditional brokerage model. Most interestingly, though, BHA only works with brokers. “The role of the brokerages enhances the return to the seller, and we do not auction yachts without the participation of the listing brokers,” Mahoney told me.
Here’s how it works. First, all the relevant stats on the yacht are collected—everything from the original construction drawings to actual engine hours, refit and modification history, and condition. Value surveys are conducted. Extensive photos are taken, with an emphasis on unique exterior and interior features. Video has become almost standard, with elaborate 3-D walk-throughs the most informative of all. Remember, buyers can come from anywhere, and they’re not going to travel halfway around the globe unless they’re convinced this may be the yacht for them.
Once all the data is in one place, two things happen simultaneously. The first is an agreement on whether to use a reserve or no-reserve auction approach. The second is completion of the bid package and the setting of an auction date. The original listing broker makes all of this happen, just as they would for any sale.
The auction approach is the keystone of the entire process. BHA and the broker—and by extension the yacht owner—must agree that if this price is met, the boat will be sold. Since the vast majority of boats that come to BHA have already been on the market for an extended period, realistic pricing is the catalyst that triggers an offer. “We refuse quite a few yachts because the seller insists on an unrealistic price,” Mahoney says, “and we just can’t take those to market.”
Usually, a yacht captain, buyer’s broker, or charter manager inspects the yacht when a potential bidder is unavailable to do so. Then the complete sales packet is distributed online, and a date is set for the auction. Packets are sent to other brokers, acting as buyer’s brokers, asking them to alert their clients to a potential opportunity to purchase a yacht at a realistic price—or, hopefully, at a significant discount. All the traditional fee splits between brokers are outside BHA’s purview, as brokers receive a fee for their auction services from the buyer.
Then, in real time, online, watchable on a cell phone or computer, the auction begins. All bids and price improvements are transparent, ensuring there isn’t any inside or hidden information. Bidders are preregistered and vetted. Deposits are put in escrow to ensure that a winning bidder fulfills the transaction. The highest accepted bid is final, and closing must happen within 30 days or less.
Founded in 2018, BHA’s growth rate is nearly 100% per year. To date, about 80 boats have been auctioned. Mahoney estimates this represents only “1-2% of the $8 billion previously owned superyacht market, so for sure we have lots of room to grow.”
Kevin Merrigan, chairman of Northrop & Johnson, a top-tier brokerage, offered his own perspective. Merrigan recently worked with BHA on the sale of Serengeti, a 130′ Westport powerboat. “Auctions are just another arrow in your quiver as a broker,” he says. “Our job is to act in our clients’ best interest, and sometimes an auction is the right way to do it. They tend to expedite a sale.”
Mahoney sees the primary challenge facing yacht auctions not as the process itself, but as a misunderstanding of the economics behind an accelerated sale. “Too many sellers focus solely on the asking price and overlook the true cost of time,” he says. “When a yacht remains on the market for months or years, the owner’s opportunity cost and substantial carrying costs quickly erode wealth. We help sellers and brokers recognize that a time-certain sale can frequently produce a stronger financial outcome by converting a depreciating asset into liquidity far sooner than a traditional listing.”
As in the art world, sometimes there is a bidding war—and when that happens, the sales price can far exceed the agreed-upon reserve. “This happens from time to time,” Mahoney observed, “and the seller really benefits.” As for the opposite scenario, when no bidder meets BHA’s reserve price, “That happens,” he says, “but we operate at about an 80% success rate, which is rather high for an auction house.”
Going once, going twice…sold to…the highest bidder!
