Advantages and Disadvantages of Pre-Sale Vessel Appraisals – A Marine Analysis by Sinotech

In the current pandemic scenario, any mechanism that reduces the requirement for potential buyers or investors to travel around the world and attend inspections can only be beneficial. Moreover, it has also become much more difficult and expensive to move freely between countries due to the additional protocols applied. For this reason, the dynamic S&P market has seen a notable increase in transactions that utilize pre-sale vessel inspections.

A pre-sale inspection is organized by sellers to assess the condition of their vessel and present the report to their potential buyers. The presale report represents the vessel and provides buyers with an assessment of the condition of its critical areas. However, as the pre-sale inspections are commercially controlled by the sellers of the vessel, the reliability of these inspections and of the S&P procedure is always in question. Let’s discuss the pros and cons in detail, but first understand the difference between pre-purchase and pre-sale inspections.

Difference Between Pre-Purchase and Pre-Sale Inspection

Pre-purchase inspections usually refer to a buyer’s inspection where they engage a third-party inspection company for an assessment of the overall condition of the vessel. Based on the expert’s valuation report provided by the inspection company, the buyer makes the decision and makes an offer for the purchase of the vessel. Whereas, during a pre-sale inspection, sellers hire a third-party inspection company to assess the condition of their vessel.

Benefits of pre-sales inspections

The advantages of a pre-sale inspection differ for the seller and the buyer of the vessel. Read on to find out-

For sellers-

1. Complete control of the sale of the vessel in the market controlled by the seller.
2. Sellers have the opportunity to correct defects or resolve related issues before presenting the vessel to potential buyers.
3. There is no presence of multiple visitors. Additionally, there is less distraction for the onboard crew and a reduced risk of COVID-19 infection for the crew.
4. Confidential vessel reports are only made available to serious buyers.
5. Crew motivation is maintained.

For Buyers-

1. Buyers get ship inspection reports at a relatively lower cost as the cost of inspection is shared among all potential buyers.
2. Inspection report is readily available. There is no obligation to perform a pre-purchase inspection.

Disadvantages of a pre-sale inspection

Just like the pros, sellers and buyers have different cons when it comes to pre-sale inspections.

For sellers-

1. As the inspection is controlled by the sellers, the buyers cannot trust the inspection reports.
2. By presenting a pre-sale inspection report, sellers lose some serious buyers who prefer to have the inspection carried out by their representatives.

For Buyers-

1. Since the inspection is controlled by the sellers, there is a risk of evaluating a biased inspection report.
2. Buyers have no control over inspection procedures.
3. Buyers should compromise with the information provided and then make a decision based on it.
4. There is no competitive advantage for serious buyers. All buyers receive the same information.
5. Lack of transparency in the S&P process from the perspective of the buyer.

As buyers and sellers have to face certain risks and losses due to pre-sale inspection, Sinotech Marine‘s prospects to SNP’s due diligence, whether by pre-sale method or pre-sale method. purchase, will be a completely transparent and diligent evaluation. Such ratings are crucial to making a good decision and should therefore never be controlled commercially. A clear and completely tamper-proof report will be the preference of buyers and sellers for any type of SNP due diligence.

Sinotech Marine, as a world leader in SNP condition assessment, has observed that due to the rapidly changing market dynamics of used vessel sales and purchases, the demand for NPS assessment methods continues to shift from pre-sale inspections to pre-purchase inspections or vice versa.

Disclaimer: The opinions expressed above are the independent opinion of the author and should not be taken as reference or factual.
Source: Sinotech Marine