Offer etiquette

[TiPegleg]

My first boat was a wreck that I rebuilt so this whole “buying a boat that can sail right away” thing is new to me.

I found a boat I’m 90% sure about. The main issues I have come down to performance under sail and the age of the standing rigging. The rigging part is straightforward, hire a rigger to survey, but the most important part, how she handles, would require a launch and haul. This boat is 1500 miles away from me so any sort of visit isn’t exactly casual.

Questions:

1) what should be enough to “hold” the boat? 5%? 10%? Is that the right term? The buyer seems extremely keen to sell and I don’t want to miss out so putting some money down would be a good way to give myself more time since I know folks are sniffing.

2) do I make an offer at this point and just make it contingent on the sea trial and put nothing down?

3) If I put down money, got a sea trial and hated the boat, do I get that money back?

4) If the rigger / surveyor reported back bad news and I backed out of the deal do I get my “hold” money back?

I understand that contracts can make anything possible, it’s why I’m more interested in what is standard and expected than what legally is possible. the seller is a first time seller and I am a first time “not a wreck” buyer, so I just want to make sure I’m being fair and reasonable. There is no broker.

[skipmac]

First are you buying direct from the owner or through a broker? If a broker the process should be fairly cut and dried. If from the owner then the process will not be so clear.

Legally to have a contract or binding agreement money must change hands. As a former yacht broker a 10% deposit was standard to accompany a formal offer. Unless otherwise specified the offer was contingent on the buyer's acceptance of survey and sea trial. If the buyer rejected the boat for cause then the deposit would be refunded in full. Cause in a survey was usually clear, damage or engine problems or other obvious things. From the sea trial it was just more or less the buyer's opinion on how the boat handled.

Dealing with a private seller, if the deposit is given directly to him/her then it will be a matter of trust that the deposit will be returned if the boat fails survey. If any doubts you might want to put the deposit in an escrow account.

[Phantom Jim]

I have no advice about how to approach the buy/sell part of this query.

If you have rebuilt a wreck, you are probably knowledgeable about boat conditions

Consider as many reviews of the performance of this boat as you can. Unless something has been done to the rigging or balance of the boat, the sailing and handling characteristics should be very similar.

[Dsanduril]

“Standard”, as far as it goes, is a 10% earnest money deposit along with an offer that has been accepted by the seller. The deposit and offer are made contingent on sea trial and survey results. If you aren’t happy with either you negotiate a reduction in the offer (to cover the deficiencies found in survey/sea trial) or walk away. If you walk away you should get your money back, but that is sometimes a bit more difficult than it should be, especially if you walk away because you “just don’t like the boat that much”.

At least where I’ve bought boats, getting a sea trial without an offer and deposit is nearly impossible, it’s how sellers avoid people who just want to go for a sail. Coming from long distance can sometimes ameliorate that, but is very dependent on the seller.

[skipmac]

Sorry, just noticed your comment about no broker. But the process should be about the same with a private seller but again, I should emphasize it will involve trust if you hand over money.

99% of the time if you reject the boat the seller will refund the deposit but I have heard of occasional problems when the seller refused and claimed the deposit was non refundable.

I would first make sure all details are spelled out clearly in writing and signed by both parties and again, if any question, use a third party escrow for the deposit.

[Bellinghamster]

Congrats on finding a possible winner. Yes, contracts make anything possible.

Google "Vessel purchase and sale agreement" and you'll get examples of what's normally in a P&S contract.

It is typical make an offer with a "deposit" (the normally used term) to secure your place in line as part of a purchase offer. Include subject to survey and sea trial and anything else you want to put in there - I recommend including something along the lines of "buyer approval of condition" since you may go see it an hate the color/smell/layout and not want to proceed further involving others (time and $) to have a contractually agreed reason to back out. Return of deposit if P&S agreement conditions aren't satisfied is normal, as is re-negotiating the price based on actual condition of things not obvious when making the offer (i.e. survey results)


If the boat is selling through a broker, they'll have an escrow account set up to hold the deposit until either the purchase goes through or doesn't.

If it's a private sale, I highly recommend setting up an escrow account to hold the deposit. This can be done through a bank, attorney or online. They'll keep a chunk of it for the service, but it eliminates the risk of the buyer backing out and trying to keep your deposit.

Good luck!

[NormanMartin]

We sold our boat direct to the buyer. We also had a local broker do up the paperwork and legal stuff for a flat fee that was quite reasonable. Just a thought.

[Shrew]

There are many Title and Escrow companies out there. They act as the impartial intermediary. They hold the deposit in escrow, they transfer the title or ownership documents when the check clears, or refund the money to the buyer if the contingencies are not met.

[Jammer]

It is hard to provide specific advice without knowing whether you're looking at a $7500 boat or a $75000 boat.


Long-distance deals like this fall through all the time and the absence of a broker makes this more likely. No matter how careful you are you may get ripped off. If I were in your shoes I would ask for a 24 hour hold, send as little money as the seller will accept for that via Paypal as a deposit (hopefully not more than $500 or so), and take the next flight to go see it.


Once you see the boat, see the owner, and satisfy yourself that the owner has title that can be conveyed and that the boat is one that you want, you can put down a customary deposit (~10%), and go through the steps of a survey and sea trial.


Most transactions go OK but there is always a chance that you'll get ripped off at any step.



The frictional costs -- travel, survey, haulout/launch -- are disproportionate for a boat that isn't worth much. With a low/mid-priced boat e.g. $20,000 or $30,000 there are no easy answers as there's risk if you don't go through all the steps but considerable cost if you do.

[valhalla360]

Don't be crazy but spell it out in the contract. As long as it isn't silly, shouldn't really be an issue.

Sea trial can be very subjective, so if the seller is holding the cash and the issues are vague, they could at least attempt to keep it if they don't agree with your assessment. The argument is they may have lost viable offers while holding it for you and you were unreasonable.

If it's held by a escrow company, you are in a much stronger position if things turn sour but again, try to justify based on objective criteria if you want to back out.

As someone else mentioned, the price does come into play. On a $1mil boat, you would be crazy not to be very formal and have a reliable 3rd party holding the cash. On a $10k boat, it's probably not worth the hassle for the small risk the seller would try to keep your money.

[AKA-None]

To reiterate a sea trial is not a test drive it’s to validate the boat is in the condition as represented

[GoneDiving]

When buying or selling, tyre kickers abound and cash is king so I treat any discussions as essentially meaningless unless cash has traded hands. If it's a direct sale this is more so: agents and brokers are use to day dreamers. It's part of the territory. A private seller may not be and would regard your good intentioned cashless offer as it's another time waster.

Real world examples: My current boat had a lot of interested parties when it was for sale. Some were in discussion for a long time though no one put cash down. I came in with a cash offer at a sizable though fair discount that was accepted and two days later I motored away. Apparently both the seller and agent received heat from other prospective buyers saying that they didn't get a fair deal.

I'm in the middle of a major refit and sold a Genset while it was still in the vessel and able to be seen running. Again, lots of talkers and interested parties. One guy gave me $100 deposit on the understanding I would deliver it on a pallet in a month's time. I stopped answering others' calls.
I pulled the Genset and he then paid the balance. Everyone was happy.

Moral of the story: be clear and honest in your intentions; keep to your word; have some skin in the game if you want the other party to take you seriously.

[goboatingnow]

People seem to complicate things

Put down a earnest deposit 10% typ , then you review the P&S, after you sign there are typically two break clauses where you walk away with your money with essentially no reason , post survey and post sea trial. Always do the sea trial last.

Price gets renegotiated after both survey and trail if required or justified.

You pay survey , lift out and sea trial costs ( if any)

That’s the Formal way. Alternatively no deposit , buyers surveys , you take him for a spin he gives you a cashiers cheque.

Job done

[valhalla360]

Originally Posted by goboatingnow

after you sign there are typically two break clauses where you walk away with your money with essentially no reason , post survey and post sea trial.

In theory...sort of but not really.

There must be a reason or they can hold you to the deal or keep the deposit (often they cut their losses to get rid of you but they can keep it if you don't have a decent reason).

If the seller is holding the deposit and you start jerking them around with no good justification, don't be shocked when they tell you they are keeping the deposit. Maybe you can take them to court to get it back but if you don't have a good reason and they documented how you jerked them around, good chance they win.

Of course, the best thing is to be reasonable and only back out if there is a real issue that came to light during the survey/sea trial. But if you get into a gray area over something the buyer thinks is a non-issue and you think is a big issue, deposit held in escrow works in your favor.

[Jammer]

Certainly true in this case since there is no broker involved.


The standard contracts the brokers use are based on the premise that nobody should be forced to buy a boat if they don't want to buy a boat, and so buyers have ample opportunity to walk away and get their deposit back.