The agreement to purchase a boat can be as simple as a handshake deal, or as complicated as a roomful of brokers, attorneys, and bankers can make it. You, the average boat buyer, will probably have an experience that is somewhere between those two extremes.
Enter into a handshake deal with someone you know well and trust, and even then your attorney—and all of your friends—will probably tell you it is a lousy idea. It is, for a first-time buyer to purchase a boat “as is-where is.” It is rare that a new boater will know enough about what he or she is doing to forego a contract, survey and sea trial. Whatever other terms and conditions your purchase agreement contains, no matter how simple or complicated the document is, some sort of “subject to survey” language should be included.
Should you hire a broker? That depends on how much time you have to locate your boat on your own. Brokers have access to hundreds of listings and can narrow down your choices to boats that best fit your needs and budget. While it is true that the broker works for the seller, brokers work on commission – in other words, they get paid to make the deal work. It is the broker’s best interest to carefully match sellers with buyers.
What about an attorney? Some people never make a move without consulting an attorney; some never consult an attorney about anything. Personally, I have always preferred the safety net of having an attorney review any contract or purchase agreement before I sign it.
Whether you decide to handle all aspects of the purchase yourself or have a broker and attorney on your team, do some homework so you can make an informed decision. This month we are fortunate to have advice from a wide range of experts. Read what they have to say, take a look at the Top Surfing Spots (one website includes a sample contract), and then take a deep breath and buy a boat! Good luck!
Top Surfing Spots
A good guide to the final steps of buying a boat. Debunks a few pricing myths, includes a sample purchase/sales agreement, and thoughts on using a contract.
Why work with a broker? This site discusses the advantages both for buying and selling a boat. It also offers good tips for prospective owners to prepare for their first meeting with a broker.
Ask an Expert
Our first excursion was to Jacksonville, FL to look at a 44 ft motor yacht. I was sent pictures of the boat. Pictures don’t tell the whole story—the boat was a dog. The next step was to find a good broker. Our friends gave us the name of a broker in Ft. Lauderdale. I called him and told him that we wanted a boat much like theirs. The next day I began receiving faxed sheets on several boats. We set up an appointment to meet the broker in Ft. Lauderdale. During the day and a half we were there, we looked at 14 boats. NOTE: Take a camera and take lots of pictures. After a while, all the features on the boats start to run together. The 14th boat was beautiful but considerably out of our price range. The next day we looked at three of the boats a second time and went back to the office. The broker said he would like us to make an offer on the one out of our price range. I told him that he would be laughed out of Ft Lauderdale. He didn’t care. As it turned out, the owner of the boat countered to within $5,000 of the top of our range. We took it.
The broker can provide market research and coordination during the boat shopping process. Once boats of interest have been located, the broker and buyer will inspect each vessel. When the buyers find the right boat, they submit a written offer to the seller or seller’s broker. Normally, some negotiating takes place and then – when all parties agree on price, terms, and conditions – a binding written contract is formed and the buyer places a 10% deposit in escrow with the broker.
When I work with a first time buyer, I try to get a sense of the person’s overall boating experience and their intended use of the boat. I urge people to realistically assess the size of boat they are comfortable handling. I ask them if they will normally be boating by themselves or if they plan to invite friends along most of the time, stressing the importance of being able to handle their boat with minimum crew – usually the two owners.
I also ask if they plan to cruise outside the US & British VI or if local waters will be their only cruising grounds. Different boat designs are intended for different uses; I try to match their planned use with the appropriate design. We discuss features such as draft, furling sails, swim transom, generator and air conditioning. I determine a price range or target budget for the boat based on the buyer’s preferences and resources.
Generally, the boat buying process goes as follows:
* General market profile
* Broker searches
* Boat showings
* Comparative market analysis on chosen boat
OFFER TO PURCHASE
* Broker drafts written offer specifying: offer price, conditions for acceptance, acceptance date, and closing date
* Seller may accept, reject or counter offer
* Offer becomes binding contract once all parties agree in writing
* Buyer & Seller have agreed on price, terms and conditions in writing
* Buyer places 10% deposit in escrow with broker
* Broker coordinates with buyer’s surveyor to inspect vessel
* Broker coordinates with seller and local yard for haul out inspection
* Broker coordinates with all parties to sea trial vessel
* Buyer submits acceptance or rejection of vessel based on sea trial/survey
* Broker coordinates closing per terms of the contract
The buying process will proceed according to the timeframe specified in the contract. Generally, a buyer will have about two weeks to conduct a sea trial and survey on the vessel. Based on the results, the buyer will accept or reject the vessel. Upon acceptance, all parties proceed to closing as defined in the contract. At the closing, the new owner will receive a notarized Bill of Sale, which is needed to register and document the boat in his/her name.
Serial Boat Owner
If the dealer can’t compare boats on multiple criteria (including positives and negatives about several models), keeping looking.
Jose Garcia Valdivia
St. Thomas Yacht Brokerage and Charters
Now that you’ve found your vessel, it’s time to make an offer subject to a professional survey and sea trial. If your offer is accepted, it’s time to choose a surveyor. Even with a vast knowledge of boats it’s always wise to have another pair of eyes. You will also need a survey for financing and or insurance. Normally the sea trial and survey are at the buyer’s expense. A surveyor will explain his fees and services. After you have made your choice your broker or surveyor will schedule a haul out to inspect the bot tom. A sea trial should be performed with your surveyor aboard. You then will receive a written survey that should list any discrepancies or recommendations. Do remember that any used vessel will likely have recommendations. You should now have the information to allow you to make an educated decision.
Kevin W. Weatherbee, Esq.
Red Hook Plaza
Do you NEED a lawyer to buy a boat? Absolutely not. Whether you use an attorney or not should be weighed against the level of risk and complexity in the transaction. Most boat purchases that do not involve financing also do not involve an attorney. Few yacht brokers will recommend an attorney unless they anticipate a problem. On many occasions, even financed vessel transactions do not involve attorneys.
Marine transactions are best compared to real estate transactions. Property is being bought or sold. It is fundamental contract law. Each party desires (or should) a record of the sale to evidence ownership (it’s mine!) or lack thereof to deny liability (it’s NOT mine!).
When deciding whether to use an attorney, consider the level of sophistication of the party on the other side of the transaction, whether they are represented or not, and the depth of the purchase contract. If you don’t use an attorney, spell everything out with sufficient detail to determine who gets what – dishes, charts, parts, and etc. – and get the seller to state that he/she will defend any claims against the vessel for the buyer. List everything on the Contract to Purchase as well as the Bill of Sale. Complications can and do occur.
An attorney can assist with Federal documentation. Lenders will require documentation to mortgage the vessel. Some foreign ports require it for clearing in. Documentation makes life simpler here in the Caribbean – no trying to explain your North Dakota boat registration to Cus toms authorities in Roatan. However, the Federal documentation does NOT mean you do not have to register your vessel with the State. Here in the VI, as with many States, if you keep a vessel here six months or more per year, it has to be registered here and have a sticker displayed.
Finally, at the risk of being repetitive, if you do handle your own vessel transaction, get everything in writing. Make lists of all ground tackle, electronics, galley items and inclusions in the sale and make sure they are intended to convey with the boat. Such items can amount to tens of thousands of dollars and are often the source of dispute. You, the buyer, need to protect yourself by doing your research, know what you’re getting into, and by making a clean, clear contract.
NOTE FROM JSW: If you are a boat owner, former owner, boat broker, boatyard owner, marine store owner/worker or have experience with any other aspect of boating – insurance, haul-outs, financing, marinas … you name it – and would like to share some of your experience, I would like to hear from you. Please send your comments, and a picture of you, your boat or your business logo, to me via e-mail at [email protected]. Please include your business name, website and other pertinent information. I reserve the right to edit remarks and will submit as many as I can to the publisher, who reserves the right to do even more editing.
Next month: How to Buy Your Boat –The Survey and Sea Trial
Boat Buying Tutorial
Guide Tips for Buying a Boat
J. Summer Westman took an in-depth study into How To Buy a Boat. I think it is a tour that each of us in the Marine Industry needs a refresher every now and then – especially before you buy or sell your next boat. These same lessons are valuable for sail boats or power boats.
- Part 1 – How will I use my boat?
- Part 2 – What do I really want
- Top Five Buying Tips for Boat Insurance
- Tips on What to Consider When Buying Boat Insurance
- Why does Boat Insurance Cost So Much?
- Steps to Follow When Buying Boat Insurance
- Part 6 – The Budget: Slip Fees and Hurricane Storage
- Part 7 – The Budget: Maintenance Fees and Other Costs
- Part 8 – How to Find Your Boat
- Part 9 – The Art of Negotiation
- Part 10 – Brokers, Lawyers and Contracts! Oh My!
- Part 11 – Survey and Sea Trial
- Part 12 – Transporting your Boat
Here is a handy list of Boat Brokers in the Caribbean