Ten boats in one week. That's the average number of vessels International Recovery & Remarketing Group LLC added to its growing fleet of repossessions throughout the month of August. And that's typically the slowest month of the year!

During IRG's busy time in January, the company was netting as many as 30 boats per week. The boats are stored at a secure marina in DeLand, Fla., where almost every one of the facility's 125 slips is occupied by the company's repos, most of which will be remarketed and sold to new buyers at a fraction of the original price.

"We have, for the most part, taken over the entire marina," admits Ken, Cage, president of operations for Orlando, Fla.-based IRG Group. "It's crazy busy right now."

The sheer number of repos floating around the marketplace coupled with a decline in boat values hovering somewhere between 25 and 50 percent, make repossessed boats an attractive option for prospective buyers. When pitted against the average used boat, repos can definitely offer a substantial value. The number of repos are up about 300 percent over two years ago, says Cage.

HARRISON MARINEBoats like this one are kept clean and in good working order after they’re taken in by Harrison Marine."You will get a 10 to 20 percent discount off the best deal you can get in the marketplace through us," says Matthew J. Amata, vice president of National Liquidators, one of the world's largest marine vessel recovery and remarketing firms. The Fort Lauderdale-based company sells several hundred boats a month, Amata estimates, with annual sales in excess of $100 million.

"If we've got a boat listed, it's a good deal with a motivated seller," he says.

BAD LOANS, GOOD DEALS

That seller, in most cases, is a bank or some other lender. As a plummeting economy drove many boaters to default on their loans, lenders turned to firms like National Liquidators and IRG Group to go collect the assets. The result is that marine repossessions have sharply escalated, leaving lenders and their remarketing companies with huge inventories of used vessels.

The only way to recoup the losses on the bad loans is to sell the boats – and doing that in a down economy requires offering deep discounts. While not so good for banks, there's an obvious bright side for consumers. Indeed, if you're looking for a good deal on a late model boat, there may well be a repo out there that fits the description.

"You're going to find it cheaper here than anywhere else," says Jeff Henderson, owner and president of Harrison Marine in Harrison Township, Mich., one of the largest repossession and remarketing firms in the Midwest. (Henderson explained his business in a recent Mad Mariner Podcast.)

There are definitely advantages to buying a repossessed boat. One of the biggest: More boat for less money. With boat values depressed up to 50 percent in the current market and banks keenly interested in recouping their costs on bad loans, consumers can walk away with a heck of a boat at a fraction of the original price.

"For consumers, [purchasing a repossessed boat] helps them buy something that two years ago may have been out of their reach," says Peggy Bodenreider, vice president of Maritime Capital Group, a subsidiary of National Liquidators headquartered in Capistrano Beach, Calif.

Cash buyers exist, but many repossessed boats are financed. When it comes to financing, a repo isn't much different than purchasing a typical, pre-owned boat, experts say.

HARRISON MARINEConsumers looking to purchase repossessed boats from Harrison Marine enter into a bidding process. Ultimately, it’s the bank or lending institution that determines an eventual “winner.”"It's pretty much a standard deal like any other," Bodenreider says. "The [only] areas where banks get a bit skittish involve the condition and title. They want to make sure all the paperwork's in order."

"Condition is the big thing," echoes Jim Coburn, president of the National Marine Bankers Association (NMBA) and first vice president of Flagstar Bank headquartered in Troy, Mich. Banks want to ensure the boat is navigable and its structural and mechanical integrity is intact.

Although he's never seen a lending program or rate sheet designed exclusively for repossessions, Coburn says some banks do have specific guidelines for consumers looking to finance a repo boat. Consumers looking to borrow money for repossession may be required to have a lower debt-to-income ratio, or perhaps even provide a larger down payment.

Some retail banks will actually offer special financing incentives on their own boat repossessions to try and move the collateral, Bodenreider says. Interest rates two percent below market aren't uncommon, she explains, making these boats attractive deals for consumers.

Don't incorrectly assume, however, that just because a boat's been repossessed the lender is desperate to sell. Bodenreider cautions potential buyers that a standard 10 to 20 percent down payment still applies for a repossessed vessel, just as it would for any other used boat.

"Lenders want customers to have an investment in the transaction," she says.

SAFE AND SOUND?

Of course, buying a repossessed boat isn't without risk, and experts warn potential buyers to do their homework before diving head-first into a repo vessel.

"A lot of boats will be sold as-is, where-is," Bodenreider said. "Buyers really have to understand what they're getting. Even if it's a great deal, you don't want a problem on your hands."

Repossession and remarketing companies acknowledge that repo boats sometimes come into their facilities needing work. An owner who defaulted on a loan may not have a stellar record on maintenance and upkeep.

NATIONAL LIQUIDATORSCertified marine technicians perform a thorough inspection on all boats repossessed and remarketed by National Liquidators.Some issues are minor, primarily cosmetic, while others are more serious and require mechanical repair. Either way, repo companies say they're committed to full disclosure on all vessels.

"We're not trying to sneak anything [over] on people," IRG Group's Cage explains. "When you pick up the boat, I want you to know as much about that boat as makes you comfortable."

When repossessed vessels are brought into Harrison Marine, a condition report is drafted. It details everything from stem to stern, analyzing the current state of a boat's motor, hull, bottom, interior and exterior. If the gelcoat is chipped, that's noted; if torn zippers mar the canvas, it's recorded.

Routine fixes, like replacing a starter or re-screwing a cabinet door dangling from the hinge, are typically addressed before a repossessed boat is listed for sale by the remarketer, Henderson explains. "The things that slap you in the face; those are the things that get done," he says.

As for more detailed and expensive cosmetic work and minor blemish corrections – buyers can find themselves on the hook for at least some of these repairs after the fact.

"The general market philosophy is to get the boat operational for sea trial but not get too much into cosmetics," Amata says.

Every boat repossessed by National Liquidators is examined by a licensed, certified technician who spends a few hours with each vessel and ultimately generates a seven-page condition report. The report is given to National Liquidator's 12 in-house yacht brokers who share that information (though not the actual report) with prospective buyers.

"We want to present the most accurate picture possible so we don't waste anyone's time," says Amata.

Of course, buyers are also encouraged to do their own due diligence on a repo vessel, including professional marine surveys, mechanical inspections and sea trials. Surveys are particularly helpful in unearthing hidden headaches, such as rot and faulty wiring systems,that may not be readily apparent during a walk through.

"Ninety-nine percent of the time a mechanical survey and a compression test will tell [a perspective buyer] what [he or she] wants to know," Henderson says. "An educated bidder is my best customer."

BIDDING WAR

Most boat repossession and remarketing firms offer repo boats for sale through an online bid or auction process. Bids are typically placed online, via e-mail, or over the phone with an in-house yacht broker.

After a bid is accepted and an initial deposit collected, IRG Group gives prospective buyers 10 days to perform a mechanical inspection, marine survey and/or sea trial on the vessel. If something doesn't sit well with the boater, Cage says prospects have the option to place another, lower bid or retain the right to walk away entirely – with every penny of their initial deposit returned.

NATIONAL LIQUIDATORSProspective buyers are always encouraged to perform their own due diligence on National Liquidators’ repossessed boat inventory, including independent marine surveys, mechanical inspections and sea trials."When the purchase is complete, you know exactly what you're getting," he says.

Repossession and remarketing firms will often advise banks and lenders which bids to accept. Sometimes, even if one bid is lower than another but offered with "no contingencies" (such as a willingness to forego a marine survey, or a cash buyer that doesn't require financing), Cage says a bank may accept the lower price.

"We may tell [the banks] not to take the highest offer but [instead] take the first as-is offer because the boat won't pass inspection," says Henderson. "The bank has to do its due diligence to try and get the most it can, but [ultimately] the market dictates what [a boat] sells for."

All three companies – National Liquidators, Harrison Marine and IRG Group – list repossessed boats for sale on their websites. They also advertise on popular "boats for sale" sites, including BoatTrader.com, YachtTrader.com and YachtWorld.com, and National Liquidators and IRG Group run ads in national and regional boating magazines. Each facility is likewise open to the public, where interested buyers can see the boats.

Periodically, National Liquidators will host live auctions to sell repossessed boats. This fall, Amata says the company will auction off three or four of the vessels owned by Bernie Madoff, the financier who admitted to defrauding thousands of investors out of billions of dollars, at its Fort Lauderdale marina, complete with a live auctioneer. Interested bidders will be required to pre-register for the event.

RISKY BUSINESS

Repossessed boats may offer potential buyers a golden opportunity to score an otherwise out-of-reach vessel for less, but most repos don't come without baggage.

"You should take extra care when buying a repossessed unit because there's increased risk the boat was not properly cared for," NMBA's Coburn cautions. "Consumers need to be careful and do their homework."

"You'd better really know your stuff if you're going to buy a repossessed boat," echoes Bodenreider. "It's probably not best suited for a first-time buyer."

If you are a first-time boat buyer and considering a repo boat, definitely involve someone in the process who is knowledgeable and is an experienced owner, Cage suggests. Make sure you buy from a reputable, established remarketing agency that's familiar with distressed boat sales and handles repossessions as its primary line of business.

"We've done it for a long time, and we're used to handling red flags before they get to the client," he says. "We don't want a buyer's first call to be to TowBoatU.S."

Bodenreider recommends consumers buying repossessed boats also purchase title insurance. "There could be some liens that pop up after the fact," she points out. Unpaid marina, dockage, storage, maintenance and service bills could all come back to haunt a new owner, and title insurance offers buyers increased protection from a boat's unknown – and perhaps sordid – financial past.

Existing warranties are transferrable in some, but not all, repossession cases, Bodenreider said. If the boat was not properly serviced by its original owner, warranties may be unknowingly void. Be sure to confirm if warranties remain valid with either the boat or engine manufacturer before committing to purchase a repossessed vessel.

"You have to talk to a manufacturers' representative," Bodenreider says. "Don't just rely on the remarketer."

Henderson's best, matter-of-fact advice: "Get past the crap."

Often, he explains, it's hard for someone to see beyond the blemishes on a repo boat. Just like a house with good bones that's considered a "fixer-upper," Henderson urges potential buyers to see through external rough spots – missing cushions, minor scratches, worn upholstery – and envision the boat's future potential.

Besides, he asks, "You think your wife's going to keep that brown carpet? No friggin' way."