$Owner Financing$

[SqPeg]

I have a friend that wants to sell his 2004 Catalina 320. He has an interested buyer that wants to '"Owner Finanace". Ideas? Tales of intrigue & woe?

[sv_isara]

Depends how good you are at sussing people out, and secondarily how good you are at collecting.

I bought my current boat owner financed. Of course, I have a public professional profile (not the youtube thing) etc and only financed a small portion so it made that much more sense.

Seller beware. I wouldn't do it with someone who couldn't readily afford it. I paid mine off early. Own liabilities, finance assets.

[Sailor Sailor]

Bad idea. So many things can go wrong.

On the beneficial side, he will make one or more lawyers happy.

I represent a used car dealer who offers seller financing, then assigns it to a financing company he owns. He gives me a fair amount of bankruptcy work when customers don’t pay and subsequently file bankruptcy.

Of course, it is possible to seller finance with the right legal documents, a big downpayment, and good credit, but you are dealing with a movable, depreciating asset with potential liabilities requiring insurances.

The big picture question is why does someone want seller financing for a 19 year-old boat? Most of the more financially astute members here advise folks not to finance a boat in the first place, so someone who wants to finance and presumably lacks cash and does not qualify for institutional financing, is a potential problem. Nobody needs a boat. It is a toy, a luxury item.

[danstanford]

It is a great exercise to work through the risk management side. At the end you should have a much better understanding of bank policies.

[S/V Illusion]

Last I checked, it’s not difficult to move a 30ft Catalina out of state with no one knowing where.

[sailorboy1]

Originally Posted by SqPeg

I have a friend that wants to sell his 2004 Catalina 320. He has an interested buyer that wants to '"Owner Finanace". Ideas? Tales of intrigue & woe?

I think it a terrible idea and will leave at that!

[Sailor Sailor]

Your friend needs to start by checking the usury laws in the jurisdiction where the sale will take place. Just to give him an idea of rates, my used car dealer client charges 24% interest on his financing.

[Rucksta]

I've done vendor finance sales as vendor and purchaser.
My daughter used vendor finance to purchase her first keel boat.
It is a sort of "done thing" within a community.
(I know who you are, where you live and what you did last summer.)

A hallmark of a successful transaction is the vendor wants the purchaser to have the vessel.

An arms length transaction I did worked out well for the broker and lawyer.

Not so well for the original purchaser but the next owner was happy and I had three "best days ever" instead of the standard two.

[Shrew]

Here is how I look at Owner Financing from the owners perspective.........

Would you be willing to lend this individual the boat value in cash?? Let's say the boat is worth $100K. Would you be willing to lend this person $100K? Honestly, I wouldn't even lend that kind of money to family.

[CharmCityBoater]

You will get a huge amount of feedback that says "Never do it!".

There are so many variables here though. It can be a win-win for both parties if done properly. Count me in that group, I have a very successful story about how well it can work. Buyer got a good deal vs. a commercial bank and the seller made a bit more $$ that he would have normally made, albeit it took 36 months to see the full amount.

Bottom line: IF Seller is ok with accepting the full value over a period of time, rather than up front. and IF Buyer is committed to making the payments regardless of financial situation it can be great! The buyer better be ready to make those payments his top financial priority, even before his own mortgage and credit card payments. You made a commitment, stick to it.

The deal needs to be documented by a professional marine title agency. The boat needs to be federally documented with a proper ships mortgage. You would be surprised how common this actually is, especially on the commercial side.

[sailorboy1]

If the IFs applied 5here wouldn't be a thread

[CharmCityBoater]

Originally Posted by sailorboy1

If the IFs applied 5here wouldn't be a thread

Not sure what you mean. The thread exists because the OP is asking about experiences. I had a good one. I am just sharing. Your response makes no sense.

[Shanachie]

So much that can go wrong here, even if someone did have a good experience once ...


You would need the boat as collateral. You would need the insurance policy to name the lender as first claimant. You would need to assess the borrower's finances and credit rating. You would need to pay an attorney to do all of this.



Even then, let's say the new owner severely damages or sinks the boat. The insurance company only offers partial payment. What then?


Or let's say the new owner trashes the boat and then decides to walk. Yeah, you can hire a lawyer and go to court, but what he doesn't have much in the way or assets or cash?


You can't compel a borrower to make the boat loan a first priority. The courts are full of lawsuits over bad debts. No reason why this situation couldn't be another one.



My judgment: A 2004 320 is worth 60-70k. If you don't have ready access to that amount of cash, or at least a line of credit for it, you have no business owning a boat valued that much.

[CharmCityBoater]

Going to keep giving an alternative opinion since I suspect you will only get "Do not do it's". Ultimately your choice.

Originally Posted by Shanachie

So much that can go wrong here, even if someone did have a good experience once ...


You would need the boat as collateral. You would need the insurance policy to name the lender as first claimant. You would need to assess the borrower's finances and credit rating. You would need to pay an attorney to do all of this.

Yes, except maybe the lawyer part. Title agencies usually have boilerplate documents for all of this to include the ship's mortgage.

Originally Posted by Shanachie

Even then, let's say the new owner severely damages or sinks the boat. The insurance company only offers partial payment. What then?

You need to get agreed value insurance.

Originally Posted by Shanachie

Or let's say the new owner trashes the boat and then decides to walk. Yeah, you can hire a lawyer and go to court, but what he doesn't have much in the way or assets or cash?

You can't compel a borrower to make the boat loan a first priority. The courts are full of lawsuits over bad debts. No reason why this situation couldn't be another one.

Yep, do your homework. credit check, employment and references. You are taking a chance.

Originally Posted by Shanachie

My judgment: A 2004 320 is worth 60-70k. If you don't have ready access to that amount of cash, or at least a line of credit for it, you have no business owning a boat valued that much.

I do not agree with this. Who are you to say someone has no business of owning a boat? You do not know their situation. Maybe they do not want to deal with a commercial bank, maybe they are retired and want to keep their $$ tied up into investments... too many variables. Just because someone cannot p[roduce the cash right away does not mean they should have the chance to own a boat. Would you say the same about someone who could not purchase a car in cash? a house?

Just my $0.02

[Shanachie]

I'm saying they have no business owning a boat they can't afford.


I have a brother who is an attorney and part owner of a community bank. His great line is:


"When I was an attorney, I thought everyone was rich. Now that I'm a banker, I know everyone is up to their ears in debt."