I am in a dispute with a marine surveyor over a survey that he performed on my boat. I bought a boat that was a bank repossession. We got a really good deal, and similar boats were being sold at the time for more than twice the purchase price of our boat. I know that this boat, as a bank repo, was not in perfect condition, but I also know that we got a great deal on it. My problem with the surveyor started when I saw the market value that he put in his survey report. He listed the appraisal at the selling price instead of the real market value for the boat. As a consequence of the appraisal, we were unable to insure the boat for what it was truly worth. We tried to work with the surveyor to come to a compromise on the value, but he insisted that the most accurate factor for determining market value was the purchase price. With this in mind, we have two questions. First, is there a specific policy for how to appraise repossessed boats? And second, should I pursue a civil case against this surveyor for the effect that his appraisal is having on our ability to insure the boat for its true value?
Whether a boat is repossessed or not has no bearing on the value of the boat. Repossessions and foreclosures do have a reputation for being sold below “true” market value, and this in turn does have some impact on the rest of the boat market — but repossessed boats do not have their own market value separate from the overall market for a particular boat.
Regarding appraisals in general, there is no “policy” for appraising repossessed boats, but there are certain guidelines that are followed by surveyors and brokers when they are evaluating the market value for any boat. Valuation usually starts with the sale price for similar boats. The legal definition of fair market value is the price that a willing buyer and a willing seller are able to agree upon. However, the purpose of a surveyor’s appraisal is to educate a buyer so that he or she can competently negotiate with a seller. As such, a surveyor should never rely upon the agreed upon purchase price for the transaction in question to establish market value for that particular boat.
Assuming an appraisal is being conducted prior to a sale, the appraiser will look to one or more industry sources, such as the “soldboats.com” database and the “BUC” guide to find recent sales of comparable boats, and adjust those numbers for the condition of the boat and the current status of the market in general.
However, for a boat that has been recently sold, the most reliable source of market value for that boat is the purchase price. This is the number that is usually relied upon by insurance companies and county tax assessors to determine the value of a boat, even if it is significantly below the “real” market value.
If a boat owner disagrees with a valuation, he or she should first share with the surveyor any evidence he or she may have regarding value. But if the surveyor refuses to change his opinion, there’s not much that can be done about it. If our reader feels strongly about the value, he should probably hire another surveyor to get a new appraisal.
Our reader was also interested in bringing a possible legal action against the surveyor for an unreasonable appraisal. But, based solely on what he shared with us, he does not appear to have a case.
Appraisal is the product of a person’s opinion — it is not a science. And, by definition, a buyer hires a surveyor to render an opinion about the condition and value of the vessel.
In other words, our reader hired the surveyor to render an opinion and, in fact, the surveyor rendered his opinion. In other words, he did his job.