Buying a boat with a loan on it

[rireefguy]

I am buying a Pearson 31 from a private seller and he has a loan on the boat. I will be paying cash for the boat and I am not sure how best to protect myself. Lets say the boat was 25k and he owes 20k to the bank. Basically I need to give him a check for 5k and the bank a check for 20k (so they can release the title). How do I guarantee that he will give me the title. I am pretty much just paying off his boat for him if that doesn't happen. I am guessing that it will just be a contract stating all of that, but I figured that I would throw it out there in case I am missing something.

Thanks in advance.
Bob

[AjariBonten]

Since you're not using a broker; get a lawyer to write up, or at least review, the purchase & sales agreement.

[Faster]

Agreed, and see if there's a way in your area to do a lien search on the boat in case the bank's not the only one interested.

[TrueBlue]

A lawyer is usually hired by the buyer's lender to conduct a title search. As was mentioned, since you're paying cash, it's in your best interest to engage your own legal council to prepare a lien release to be signed by the seller.

[k1vsk]

the bank would have the title in the circumstance you described and would release and transfer it to you upon release of the lien or loan. In itself, you should not need an attorney but it would be prudent to have one review the purchase contract

[max-on]

I would agree with the above posts, contact an attorney who works in this area to draft the agreement and to search the boat's title for liens, and other registration and documentation matters.

This is for your protection, you're not buying a $800 laser, with $25k on the line, I would make sure the transaction is handled properly and in your best interest. If you decide not to have a formal agreement, then at least clear the title for liens.

[xort]

You can use Boat US buying service. Thay can hold the money in escrow while you check that the title is indeed clear except to the bank.

[SailorMitch]

That was the situation when I bought my P-33-2. And of course the owner waited until the last minute to tell me he had a loan on the boat. He gave me the contact info at the bank and I talked to the loan officer right away. All I had to do was have one certified check to pay the bank their loan balance, and a separate check to pay the prior owner the balance due him. The bank then gave me the lien satisfaction form, or some letter saying the loan was satisfied -- well, they gave me something because I later had to submit it to the Coast Guard along with the other documentation papers to get the documentation in my name. (And the PO had let the documentation lapse to boot, but no problem with the Coasties on that. The WV office folks are great to work with on such details.) Anyway,there was no need for a lawyer, and if the bank has a loan they are holding the title anyway as others have said.

[captainjay]

Is it a documented vessell? If it is the lien is recorded with the coast guard. I just sold my boat in the same situation, lien and some equity. I used the coast guard bill of sale, http://www.uscg.mil/hq/g-m/vdoc/forms/cg1340.doc

The buyer set up a wire transfer to my bank to pay off the balance, the bill of sale in the consideration area specifically spelled out both the selling price and the lien amount, then he brough me a cashiers check for the difference. The bank will send the lien release directly to the Coast Guard, if it is documented, upon payoff then the bill of sale can be recorded and the documentation transfered to your name. Boat US as said above will do all of this for you as well but they charge $500 to do it.

Hop this helps.
Jay

[Driver]

I cannot believe that these doc services charge $500. I've done the work myself on our two boats. The first one had a loan on it and the second one was really interesting. The boat was being sold through a broker who indicated there was no loan on the boat. True....but, when I ran an Abstract of Title (cost $25), the USCG Vessel Doc Center had documentation faxed to me showing the the IRS (that day) was placing a lien on the vessel for the entire value - and beyond. In the end, we needed to pay the US Treasury for the vessel, have the sellers complete the bill of sale and the US Treasury (IRS) had to supply a Release of Lien for the vessel. Registered the boat for the $80 doc fee and we were free and clear.