The current (March 2010) copy of Soundings has an article about an experienced cruiser, re-builder and his problems after buying a Whitby 42.
The boat was on land so they could not do a sea trial as the yard was overhauling it's launch area. They were able to run the engine and sent the transmission fluid in for analysis.
Everything checked out fine so they decided go ahead with the sale and just hold back 10% in escrow to cover anything found after the sea trial.
They shortly found out that the transmission was no good and it would cost 10,000 to fix. The escrow was only about 4,000.
The broker told the new owner he was not responsible for a dishonest PO and that the sale was final.
The new owner finally found out that the PO, living in Australia was not part of the scam and the broker did make good under threat of legal action.
Caveat emptor = buyer beware.
Lets put it is perspective......
10% held back in escrow = $4K.
Therefore cost of boat = $40K.
New transmission for a Whitby = $2-3K (I happen to be pricing one).
Installation cost, which will also let you do work on engine room +/- $3K (just guessing, I expect to spend less by doing a lot of the grunt work).
Getting a great boat for $36K - Priceless.
Not exactly the story of despair that is suggested in the original post + the broker is chipping in. Then again I may be biased.:D
Just curious as to where the $10000 figure for the transmission repair came from. Last I checked, a new transmission would be less than that... and if the repairs needed are that extensive, replacing it would make far more sense.
I hope the broker was named in the article, as his actions were clearly unethical and dishonest at best.
I'd also point out that getting a 42' bluewater capable boat for only $40,000 is a really low price...and any intelligent buyer would suspect that there was something fishy about the boat. According to one website I looked at, the starting price for a Whitby 42 is about $140,000... and there is usually a good reason a boat is selling for less than 30% of the normal market value.
That owner is a friend of mine and a forum member here.
I can only imagine that the story does not translate as well to print as it does in real life, but I have not yet seen it. Trust me, if you heard all the details in person you'd be more than horrified.
Andy knew all about the condition of the hull, rigging and what could be deciphered on land of the engine from the survey and his vast knowledge of all things boats. He is involved in a fairly complete re-fit, knowingly.
The problem is that he was flat out lied to about the gear box. The PO knew it was totally fried and told the broker as such. IIRC Andy was also told that he would need to do the repair work at that yard, hence the super high, held hostage, price quotes.
Perhaps Andy will chime in here and give the "rest of the story". Please don't portray him as a naive boater as he is anything but and is actually a very knowledgeable and savy boat owner/cruiser with many, many miles under the keel. He was scammed, lied to and bamboozled, flat out. They avoided in water sea trials for a reason, and it was a good thing he held money in escrow, as any knowledgeable boater should and any good brokerage should have right in the P&S.
Yes he got a decent deal BUT the broker knew damn well he needed to sail the boat back to Maine. The boat is far from a basket case, actually very nice for the price, but does need some work, mostly some known wet areas of the deck, which I have been very lightly helping with, mostly in the form of tool loans... The Fein strikes again..;)
The bottom line is he was flat out lied to and it was known that the boat did not have a working gear box. None of this knowledge was disclosed to Andy before he showed up for sea trials.
The broker also knew Andy was planning to sail the boat back to Maine for a winter of re-fitting. It is also very hard to believe that the broker did not know about this as the boat would have needed to have been towed or sailed into the slings for a haul out. The PO sent this information to the broker in the form of an email which he provided Andy as electronic proof that the brokerage knew about the non-working gear box.
After lengthy discussions with Andy I am of the belief that yacht brokers need to adopt some set of minimum standards for full disclosure, just as they do in real estate transactions, though in this case it was the brokerage hiding facts, not the owner. The fact that an owner can list a boat that has KNOWN major defects and willingly HIDE these items, hoping a survey will miss them, is unethical IMHO.
It was not until Andy provided time stamped electronic PROOF to the brokerage owner, that they KNEW about this defect, that the brokerage owner stepped up and finally took ownership of the lies and deceit. If Andy had not contacted the PO, and did not have this electronic PROOF that they were notified of the non-operational gear box, Andy likely never would have recouped a dime..
I will call Andy this a.m and let him know you guys are discussing his article..
I just wanted to point out that the 10% reserve for escrow is usual and customary. However, the actual amount placed in escrow is another point for negotiation, just like the sale price.
I had an accepted offer on a boat that had been decommissioned and stored in the owner's yard. That deal fell through because the owner would have agreed to a 10% escrow, but because I was not able to test anything, I insisted on 20%. The seller would have received the agreed to sale price IF the boat checked out. I walked away with no regrets.
Well it MUST be True - No Good Deed Goes Unpunished
For the record - My name is Andy Schoenberg and I wrote this article in Soundings (however since Soundings has renegged on the complimentary subscription - I have not seen what they printed). I wrote the article to warn my fellow boatsmen that no matter what you think you know - this is the Brokers Game and not ours, and you need to go above and beyond. For the record the asking price of this Whitby 42 in last years market was $75,000.00. The agreed upon price after the land survey and the transmission oil evaluation was $57,000.00. The boat had been sailed up until Sept. of 2008 (purchased in April 2009) and was on the hard in a boat yard that had a non-functional hoist and could not be sea trialed until after the closing. This is done routinely in northern climates (I live in Maine and this is status quo). The quote of $10,000.00 was for a new transmission plus the labor to remove the old one and replace it with a new one. Based on the configuration of the Whitby 42 and the size of the Ford Lehman 4D254 either the entire cockpit floor needs to be removed or the engine must be repositioned to allow for the removal of the transmission. The cost of the transmission is cheap compared to the cost of labor (2 men working at $75.00/hr - 2 days each way is approx. $5,000.00).
However the issue here is not an inflated cost of the transmission, but the fact that MONTHS BEFORE closing on this vessel the broker and the prior owner had several e-mails back and forth discussing the fact that the transmission was BROKEN and that the broker SPECIFICALLY TOLD the owner that since the travel lift was down I could not do a sea trial and therefore all the owner would be out would be the $5000 escrow - and that in the marine market in early 2009 no one would buy this boat with a broken transmission. Additionally the broker knew I was coming down with my three children (ages 7-14) to sail the boat back and that he was more than willing to allow me to leave the dock (at a very difficult waterway) with my family and a broken transmission. You make the call regarding his honor and honesty. The final icing on the cake was the response of the Brokerage owner when he finally agreed to pay for the transmission repair - He said that he learned not to sell boats for owners out of the country. What I took this to mean was that had it been for a domestic seller, all conversations would have been over the phone and therefore there would not have been a paper (electronic or otherwise) trail to get caught with. PS.... the broker is still selling boats in Maryland for the same Brokerage.
Hope this clarifies the message
Andy, you might want to contact the county or state DA's office in NY, because it sounds like the broker committed criminal fraud, which they will enjoy prosecuting. At no cost to you.
We all benefit from having a few less crooks around.
It might also help the rest of us if the perp was identified.
I'm sorry about the hassle you experienced, but grateful that you've shared the story with us (and to DavidPM for calling it to our attention, as well as MS for getting you over here to comment). There are some good lessons in there.
Setting aside what was clearly unethical (and truly despicable) behaviour by the broker, the primary lesson I take away from this is the importance of properly sizing the escrow when a sea trial of the engine/transmission cannot be completed prior to consummating the sale.
It does get a bit tricky, though, figuring out what that escrow should be. Using a straight percentage may or may not be the best approach. It might make more sense to price out (at least in ballpark figures) the cost of an engine and transmission, as well as installation. Of course, that gets complicated by the fact that the negotiated purchase price of the boat usually did not contemplate the value of a brand new engine.
In other words, when purchasing a used boat, we are buying a used engine/tranny with a certain amount of life remaining on it. We likely would have paid a much higher price for the boat with a brand new engine/tranny.
So where does that leave us on the escrow size for boats purchased without benefit of sea trial?
As an owner and potential seller, the other lesson is to make sure things are working as advertised so these kinds of issues don't crop up.
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