|Buying an expensive item like a boat from another private party may seem like a good idea but we are here to tell you there is more to the story. Many times it works out, but it can also go horribly wrong. The usual attraction for the buyer is the expectation that it will save you money, but stop and think about that for a moment. The seller's motivation is not to save you money, it is to save him from paying the commission. So he charges you the market price, sometimes more as buyers get snookered thinking they are getting a deal because a broker is not involved.
The real problem though is all the services and protections you as the buyer give up by doing it on your own. There are many horror stories of deals gone wrong, money disappearing and so forth because buyer and seller, even when well-meaning, don't know what they don't know.
Brokers earn their money now more than ever. Ask yourself the following:
And keep in mind that some boats are offered for sale privately because they will not pass a marine survey and therefore brokers will not list them.
- You want to send your deposit money to someone you don't know? Are you sure you will get it back if the deal does not close?
- Are you sure you know what you are buying and that the price is appropriate? The deal may not be what you think it is.
- What contract format are you going to use to govern the transaction? Who is going to generate the contract?
- There is much more to a valid purchase and sale agreement (contract) than the price.
- Additional contract terms such a dates, location of transfer, responsibilities of the parties and so forth are also critical to a satisfactory result.
- What contingencies should be included in the terms of sale?
- How will you know if there are any outstanding debts owed against the vessel, example repairs, storage, etc.?
- How will you know if there is a loan on the vessel? Where is the proof that a loan has been satisfied?
- If there is an existing loan on the boat who is going to make sure that it gets paid off?
- Who is going to verify what equipment is going to convey with the vessel and what the seller may remove?
- Who is going to check the ownership documents to see that they are in proper order and suitable for transfer of ownership?
- Who is going to check to see that the ownership documents are executed properly?
- Who is going to draw up proper Bills of Sale?
- If there is a dinghy and/or trailer with the sale it becomes more complicated with additional terms and documents required.
- Who is responsible for insurance coverage and when does that responsibility transfer? Do you know who to call for best coverage?
- Who is going to attend the survey? Who is going to assist in interpreting the survey?
- What about engine and mechanical tests?
- What about a sea trial, who is going to attend that to verify operation?
- Who is going to assist in renegotiating any terms that may come out of survey or mechanical testing?
- If there is an escrow, who holds the escrow?
- Who is going to determine when the escrow should be released?
- Should the boat need remedial action who arranges for that? Do you know who is best to perform the work?
- When it comes time to pay for the boat who are you going to send the money to?
- Once you send the money to the seller he will also have possession of the ownership docs and the vessel. What will you have?
- Who is going to make sure all parties live up to the terms of the contract?
- Who is going to mediate and help resolve any disputes?
- If the boat is sitting on a cradle or stands, do you know if they belong to the owner and go with the boat?
- Have you done your due diligence on the history of the vessel?
- If the boat needs to be relocated, do you know who to call?
Your broker does all the above and often more, such as offering advice and guidance and sometimes training if needed. Your broker is not only interested in selling you a boat, which is usually the owner's sole motivation, the broker is interested in you as a source of future business, referrals, and hopefully the beginning of a long term relationship.
Brokers derive satisfaction in helping their customers realize their dreams and often friendships start this way. Most of all you should be very concerned about spending five or six figures on a boat without a valid contract, proper ownership documents, someone to control the transfer of funds, and a third party to oversee that the deal is handled properly and professionally. We often act as a buffer between the buyer and seller who can become upset with one another during the course of the dealings. We are here to see that things go smoothly. This is supposed to be enjoyable, using a broker can keep you from an unpleasant situation, failed promises or even worse.
Reprinted, with permission, from the newsletter of RCR Yachts, New York.