Boat Buying/Selling Tips, Part 3
Close to closing on a boat? Don't sign on the dotted line until you've had a thorough survey and sea trial.
You might find this hard to believe, but our experience over the years has shown that yacht buyers sometimes think vessels for sale are code for “free boat rides!” If you have your boat listed with a broker who’s offering an hour or an afternoon on the water on your boat without a signed contract and a 10-percent deposit in escrow, it’s time for you to find a new broker — pronto.
If you’re a buyer, work with your broker to come up with a sincere offer and make it contingent upon at least: a sea trial, including all systems operational; a marine survey, with an independent surveyor’s opinion that the vessel is seaworthy and/or the seller’s commitment that any deficiencies will be corrected. You may also want an “engine survey” and/or “oil analysis” if the engine(s) have higher hours or appear to have been ill-maintained.
While a sea trial is a must in any boat sales transaction, it doesn’t take place without having a legitimate offer, a signed purchase agreement and a deposit of 10 percent of the offered price in the bank. Note that I said IN THE BANK. “No. Mr. Buyer, we can’t just hold your check and see if you like the boat before cashing it.”
The sea trial is usually done at the same time as the survey. What surprises some sellers is that while the buyer pays for the surveyor, the boatyard charges to haul the boat out of the water and any mechanic’s fee for an engine survey, the cost for someone to operate the boat during the sea trial is borne by the seller. That operator should NOT be the seller. Frankly, I recommend that the seller not attend the survey or sea trial at all. Let the surveyor do his or her job!
Once the survey results come back, it may be necessary to re-negotiate the selling price. Forget about nit-picky things like rusty hose clamps, you’re looking for major repair or replacement items such as a non-functioning refrigerator, air conditioner or generator. A simple vibration under way could result in thousands of dollars in repairs to props or shafts. Over the years, we’ve found that the cost of the survey has typically more than paid for itself by finding deficiencies whose repairs — made at the seller’s expense — were always more than the cost of the survey.
If the price changes, the contract must be adjusted accordingly and initialed by all parties. Once the price is set, the buyer signs an “acceptance” of the boat. This is an important piece of paper, as it’s like the point of no return for the transaction. Prior to that document being signed, the buyer can back out of the deal and still get his or her deposit money back. Once the buyer has “accepted” the yacht, they’re locked in. If the deal falls through, they lose their deposit money. For example, if the bank doing the financing has a change of heart and decides not to loan the money, the buyer doesn’t get the escrow deposit back.
Finally, a closing date is set for the transaction. If there’s financing involved, that date may be determined by when the bank will have the loan completed and the funds available. Meanwhile, the selling broker should be gathering all of the paperwork needed for a smooth sale. Most likely, the yacht will either have a state title or a documentation number. If the boat is a Coast Guard documented vessel, then the documentation paper needs to be surrendered. You may want to consider using one of the vessel documentation services available to the boat-buying public. That agent will handle the important paperwork, including the change of documentation and bill of sale. They can also handle the title work, if the boat is not documented.
Additionally, if there’s a dinghy included in the sale, be sure to get the signed title for it, too.
Once everything is complete, the “closing” can occur. No money should change hands until all of the paperwork has been signed by both parties. The actual closing is often just the final step of transferring funds from the buyer to the seller. Your broker will be certain that any “pay off” on the boat is satisfied prior to distributing any funds to the seller. The buyer will want to be sure to have insurance coverage in place on the day of closing. Likewise, the seller can generally cancel their coverage at midnight on that day — rumored to be the “happiest” in the life of both the buyer and seller.
This is another in a series of personal reflections about the boating life by Barb Hansen, co-founder and manager with husband, Vic Hansen, of Southwest Florida Yachts, N. Fort Myers, Fla. Southwest Florida Yachts charters luxury trawlers and sailing vessels. Southwest Florida Yachts Sales and Brokerage Services helps you find the ideal vessel for you to own. Florida Sailing & Cruising School provides live-aboard sail and power yacht instruction. Contact Barb Hansen at firstname.lastname@example.org or phone 1-239-656-1339. © 2013. Southwest Florida Yachts. All rights reserved. © 2013. Southwest Florida Yachts. All rights reserved.