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What Is A Boat Really Worth?

40K views 272 replies 53 participants last post by  Ajax_MD 
#1 ·
In our "continuing education" we've learned yet another valuable lesson. Owners and brokers have a very different idea of the value of a boat than lenders and surveyors. And in more cases than not, the latter has a value sometimes approaching 40% or more less than asking price.

We saw this but getting the information direct from the horse's mouth confirmed it. And with a little more hunting we've found selling prices are more in line with lender values.

If you're a cash buyer, you can pay anything you want for a boat. If you're a seller, you can ask anything you want for your boat. If you're a broker, you're hoping both the above will get together and complete the sale.

But once you get lenders and surveyors into the mix, things change and it's usually the seller who's not happy. At least that's what we're learning in conversations with lenders and surveyors we've had recently.

I suppose inflated asking prices are due in part because there is no system in place where brokers take known sale figures and advise the prospective seller what a good number would be if they want to sell their boat reasonably soon like they often do in real estate. Maybe that's why the average boat is on the market almost a year before it sells.

In a nut shell, what the lenders and surveyors have said is the value of a boat continues to decline as it ages until eventually it has no value to the lender. If a boat is valued at 25% its original asking price, the upgrades an owner does will be depreciated at pretty much the same amount. They could also have no value to the lender. So a $20K repower may only be worth $5K to the lender, even right after work is completed. On older boats it may have no value at all.

One lender said if the owner wants to pour money into improving the condition of their boat, that's fine, just don't believe it will automatically increase the value of your boat. At least not in the lender's eyes. They are only concerned with actual value in a given market, as in "If the borrower defaults, what price do we need to be at to sell the boat in a reasonable amount of time?" They don't get emotionally involved. It's strictly numbers and they know them well.

Surveyors may attach value to major upgrades but the overall value seems to be more in line with the lender's value estimates.

The more we learned, the more I realized the saying, "A boat is a hole in the water into which one throws money" is not just a saying. It's a fact. And that fact may be why so many boats fall into disrepair. The love is gone and there's no financial advantage to keeping the boat up. Just dump it as fast as you can.

When we started our search 6-8 weeks ago, I was gathering values from BoatUS and NADA for boats we were interested in. One boat was valued dramatically lower by NADA than BoatUS. I told the broker that. He said BoatUS had more realistic prices because they also do lending. It made sense so I started using BoatUS values to determine the real value of boats in the hunt.

Recent conversations with lenders proved just the opposite. All lenders we talked to said they use NADA prices to value boats. And the surveyors tended to agree with the lenders regarding boat value. Seldom did either agree with the seller value. Still, there are exceptions.

So who is right?

If you're obtaining a loan and you aren't willing or able to come up with a down payment that will bridge the gap between owner/broker perceived value and lender value, you have no other choice than to move on if the seller won't come down to lender value.

If you have the cash, you can pay whatever you want.
 
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#129 ·
Julie, please do not let the ones who seem to think you need to rush to spend thousands of dollars of YOUR money to purchase a boat before you know enough about it to make a good decision influence you.

I have been in the business of buying and selling things for a long time, I have done it full time and part time for most of my adult life and it is about 25% of my annual income, and I can say without a doubt, I will look at whatever number of boats I choose to look at before I spend MY money, and you know why I can do this, just like you can, because it is bloody well my time and my money and I will do with it as I please.

I have sold more vehicles than I can even remember, and quite a few boats, and other things, and guess what? I know that not everyone who looks is going to buy, I can only sell each piece one time, and then it is gone, so I do not worry about it, I treat every single person as though that person were the very last one who would look, being the one that would purchase the thing I am selling. I never underestimate a person's ability to choose whether or not to buy based on how they liked the thing I am selling as well as how they liked me. I am not always patient in everything I do, but man I sure work hard to be patient with those who potentially may give me a chunk of their money.

I have told you about how I have looked at boats where the photos were old and the boat was a wreck when I got to see it. It happens all the time, in fact yesterday I was looking at several boats on yachtworld and a couple of other sites and saw some with photos that were quite obviously taken in the late 60's when the boat was new, seeing this I called the broker and asked to have some recent photos taken, he said the seller could not provide them. I thanked him for his time and informed him that I was no longer interested, you see I know that if the seller cannot be bothered to give me a true representation of the vessel, he has not taken care of it.

I also will not consider a boat where all of the photos were taken with a fisheye lense, this distorts the true size and condition of the vessel. If the seller will not provide clear, undistorted photos, I do not have the time anymore to go look at the boat. One trip that took an entire weekend of my time was enough to break me of doing those things. I have to weigh the value of my time, and three days to me is equal to about $2k in missed earnings, I am not going to waste my time with those who will not provide me with the information I need. I have shown my financials to a couple of brokers I am dealing with to show that I am well qualified, and I have talked in depth with them about what I am looking for in a vessel, they know I am serious, and I know it. Outside of the buyer, the seller, and the intermediaries like brokers and bankers no one else need be convinced of your seriousness, and a lot of the ones squawking the most are probably the same ones trying to skin someone on a used boat, after all, everyone knows it is still a buyers market and it is not going to get any better for sellers any time soon. Good thing we are shopping to buy and not trying to sell.
 
#134 ·
Julie, please do not let the ones who seem to think you need to rush to spend thousands of dollars of YOUR money to purchase a boat before you know enough about it to make a good decision influence you. <snip>
I don't think anyone here advised Julie to just "make an offer" on any old, crappy boat. In fact, in my posts I said that I totally respect her desire to make a smart purchase. What I, and some others have said, is that she's gone to the total other end of the spectrum into total inaction.

There are an awful lot of boats on the market, even of the type that Julie is looking for, and in all this time, they've only looked at four boats. They're at/near the Great Lakes, where there are scads of large, sweet water boats with low hours on them. I could be wrong, but I would think that a serious buyer would have at least physically visited many more boats by now.

She's having more fun tweaking paperwork and studying the boat buying process instead of actually examining boats.

Yes, yes, we're all well aware by now, of your impeccable buying and selling credentials. We've all read your epic tale of how you bested a car dealership at their own game after days and days and long nights of negotiations. Congratulations.:rolleyes:

Plenty of your knowledge does apply to buying large sailboats and some of it probably does not apply.

I really was done with commenting on this thread, but I felt that I was implicitly being lumped into the "just do it" category, incorrectly.

Really, I don't see how one could accurately compile a spreadsheet merely by sitting on the sofa, without visiting many sailboats to get a true sense of the interior/exterior dimensions, equipment, prices, conditions, etc. Raw numbers from the internet do not accurately translate into how you feel when you stand inside the boat.

If I were buying an SUV, I would visit many dealers while compiling my spreadsheet, instead of just sitting at home reading about them on the web.
 
#131 ·
Nuances.

Big huge expensive boats are more formal than less expensive boats.

In Julie's price range, a verbal offer that clarified whether there was a finance contingency and a promise to send the contract and good faith deposit right behind it, should suffice. But, it is the sellers call.

For that matter, when I made my offer on this boat, the seller, my broker, the seller's broker and me were all in 4 different, non-contiguous states. The offer was not held up by the speed of the post office. I committed that the check would go in the mail to my broker today. The offer was brought forward without it. We did haggle for a week or two, in which time the check was not cashed. I don't think the brokers want the responsibility for the actual cash, unless there is an actual deal.

However, my broker was able to vouch for me, as we had just gone through survey on another that failed. He knew I was good for it.
 
#132 ·
Nuances.

Big huge expensive boats are more formal than less expensive boats.

In Julie's price range, a verbal offer that clarified whether there was a finance contingency and a promise to send the contract and good faith deposit right behind it, should suffice. But, it is the sellers call.

For that matter, when I made my offer on this boat, the seller, my broker, the seller's broker and me were all in 4 different, non-contiguous states. The offer was not held up by the speed of the post office. I committed that the check would go in the mail to my broker today. The offer was brought forward without it. We did haggle for a week or two, in which time the check was not cashed. I don't think the brokers want the responsibility for the actual cash, unless there is an actual deal.

However, my broker was able to vouch for me, as we had just gone through survey on another that failed. He knew I was good for it.
Professional brokers generally treat 50K offers the same as 50M offers. i.e. in writing with contingencies spelled out. Sure it is occasionally more relaxed depending on circumstances but overall it is mostly done in writing.

Professional Broker organizations such as FYBA, CYBA and YBAA require their members to proceed this way as protection for all parties.

BTW, it wasn't necessary to be in the same place to obtain the signatures although after the third or fourth faxing it might as well have been verbal! Today, scanners and email have solved the legibility issues and there is now transaction software coming on line that will really make things easier..
 
#133 ·
I think there are only two professional brokers in the wild right now, one is sick and the other is out cruising. The rest just call themselves brokers. :)

I sense there might be subtle differences by region. Ultimately, you must have a contract and 10% deposit. That seems a constant. Whether an offer will be communicated verbally, might depend on circumstance.

I guess, if no party really knows you or you appear to be a tire kicker, the process can get more formal. If it's a broker you've used before, as I have, they are the one that is going to hold the money anyway. The seller never sees it until closing. In fact, never sees it at all, since it is the same as the brokers commission. Its sort of silly to have an uncashed check sitting on the desk of a buy side broker the seller has never met.

Regardless of formality, they always present the offer verbally, even if they have it in writing and check in hand. They want to communicate what the paper never does. This is a good buyer. Your boat may not sell for another decade. Etc. They do want to get a deal done to be paid.

There is an irony to proferring in writing. While the seller may not accept a verbal offer, the buyer really doesn't have a committed seller until they receive the contract signed by the seller.

The contract ties the seller hands more than the buyers.
 
#136 ·
Few thoughts for the OP ...

The process depends a lot on how you are buying the boat, if it is with cash you can do whatever you want, if it is a loan then you are more limited.

The boat isn't a house, it is a nearly useless thing that costs money, so it is better not to approach it like buying a house. Boats are not "investments" (unless it is an oil tanker or freighter or something). The broker wants you to think of it as if you are buying a vacation home, but really it is more like buying used jewelry that you have to pay someone hundreds of dollars a month to store for you.

The buyer has all of the power in a boat purchase, the seller none, see above.

I think the best way to buy a boat is to ignore the asking price, don't even look at it, and just look at the boat and decide what it is worth to YOU. Once you do that you can take the seller's asking price into consideration, it may be that the price is a good asking price, or they may be asking way too much, but that's all their problem and has nothing to do with you and your money. Make an offer based on what you think the boat is worth to you, don't worry about insulting the seller.

If the seller is unreasonable, there's always another boat ... just walk away, life is too short and boats are too expensive to deal with pushy sellers.

During a recession all of the above x 10.

The people who scold you about trying to save money, etc, are brokers, or they were brokers, ignore them.
 
#138 ·
Spot on, TakeFive; Julie has so much sailing experience, that I forget this is the first boat for her and S.O.
 
#140 ·
Most brokers will have an escrow account where deposit funds are held. Sometimes the actual closing, final disbursement of funds may take additional time when survey findings need to be taken care of. On my purchase there were several items that needed to be remedied before the deal was closed. My check was cashed into the escrow account. When all survey items were completed, the balance due was paid and everybody was happy.
 
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#142 ·
Escrow accounts are mandatory IMO. For a relatively small fee, they insure all funds and documents are accumulated before disbursing. They will also do title searches and properly file for whatever State or Federal title you're looking for. However, ones I've used required me to do my own registration, which you typically have several months to do.
 
#143 ·
Marine Title in Seattle provides this service. They act as an intermediary between you, the broker and banks or finance companies. They will do the title search before funds change hands and receive funds from the bank to disburse to the owner, other banks and financial institutions who may hold a fiduciary interest in the vessel. Important to understand WHO really owns the property and if there are any outstanding liens as well. These may include Mechanics, Marinas, State tax authorities and sometimes the estates and property interests of spouse or family members. If you finance a vessel and pay off the note, you will also be issued with a "Satisfaction of Mortgage" note. This should kept with your original bill of sale documents. USCG documentation is only part of the ownership documentation process.
 
#144 · (Edited)
Ideally, the earnest money should be deposited into an escrow account upon full ratification of the contract (fully signed and initialed after all counters accepted). It stands as security for performance of the contract and may be designated as liquidated damages by the seller and buyer in the event of a default.

In the event of a dispute as to a breach of contract, the money should be deposited with the clerk of court in a proceeding known as an interpleader action, where the third party escrow agent tenders payment to the court to release its liability and all parties with a claim to it, seller, buyer and broker, assert their rights to it.

Some brokers may not have the balls or the desire to act as a true escrow agent, which exposes them to liability and becomes messy and expensive if a dispute arises, and therefore never deposit the check, because they do not want to have to file an interpleader action. Instead, they may encourage everyone to sign a release (which, of course, includes a release of all liability of the broker by all!). After all, their interest is in putting the boat back on the market, not being involved in litigation.

If you are the seller and the buyer breaches the contract, you may have a right to the deposit, and you may have a cause of action against your escrow agent for failing to deposit the earnest money. On the other side, a buyer may sue for damages, or, in some instances, specific performance, if the subject matter of the contract is unique, or damages would be inadequate. In some jurisdictions, the remedy of specific performance may be available only with respect to real property.

There is a reason why we have contracts - real written contracts - and deposits; this is where the rubber meets the road and there is money at stake for performance of the agreement according to its terms. Pretending you have deal and holding a check, while the buyer spends umpteen dollars on a haul out or launch, marine survey, rigging survey, engine survey, sea trial, and any other evaluations is a sucker play for buyers who are willing to be led around by the nose by the process.
 
#145 ·
Ideally, the earnest money should be deposited into an escrow account upon full ratification of the contract (fully signed and initialed after all counters accepted).
I agree with James on this, you don't write a check to go look at a boat, you put money into escrow once the deal has been worked out. The back and forth of offer and counter-offer is just a conversation, it can happen on paper, or over a drink at a restaurant, none of it matters until someone signs it. I also don't understand buyers who sign offers, why would you do that ? Sure, send them the offer, but there's no reason for anyone to sign anything until both the buyer and seller reach an agreement on what the deal is. Brokers are the ones who force all of this because they just want the buyer and seller to get on with it so they can get their money, so they'll do anything to hurry it along.
 
#146 · (Edited)
Buyers and sellers can deal with each other any way that they choose.

Brokers can’t. They are agents and bound by agency law. It really is that simple. There is opinion being passed around here as knowledge that is just inaccurate. Deposits become cleared funds generally after ratification but prior to satisfaction of contingencies. Those cleared funds are held in the brokers escrow account (By law) until disbursed as per the ratified contract. Yes, there are exceptions to every rule but brokers are required to have and use escrow accounts in every state that I am aware of.

Now, all of you who believe that brokers are just crooks can stop reading here.

Reputable brokers belong to various professional groups depending on where they are located. The largest are the California Yacht Brokers Association, The Florida Yacht Brokers Association and the Yacht Brokers Association of America.

These associations all have rules of conduct and ethical standards which the members are bound by. In addition Florida and I believe, California, require brokers to be bonded and licensed.

Unfortunately there are always cowboys and undesirables in every industry. That means that buyers and sellers need to do their due diligence when entering into business relationships. It’s not that hard to do. A rudimentary approach would be to deal only with brokers who belong to a professional association. It’s not foolproof but a good start.

Open up a Yachting Magazine or Power & Motoryacht and look at what is being advertised for sale. Do you really think that these companies are owned and staffed by crooks? How would it be possible for fraud of the magnitude suggested here and on other forums of this type, for them to still be in business?

OTOH, the value of the boats being discussed here are generally at the lower end of the market. That means that in some cases you would not be dealing with the cream of the crop. Often brokers at this level are newer, part time or just marking time. I said often but I don’t mean all. There are also some very good people who simply like to deal in this product. Sometimes it takes some looking. If you find someone that you trust, use them, otherwise you are at the mercy of the listing agents that you call directly. Your choice.

IMO, Julie has come a long way. She started out posting her assumptions as fact but has since discovered that the process is a lot more complex than she realized.

At the end of the day you are buying a commodity not some mystical thing with special rules.

During this process people that you deal with are going to make money as the result of your purchase. If you believe that is bad then do something else with your money. Again, your choice.
 
#151 ·
I am always amazed by people that make an assumption and state is as fact...whether it be their fact is irrelevant.

So, all brokers are lazy, thieves, uneducated, whatevers? All sailors are cheap and go slow because they are afraid of going fast? All powerboaters are assholes? All lawyers are crooks? All salespeople fool around? Doctors, plumbers, electricians, (fill in the blank) are out to screw you? Great way to go through life!

There are good and bad in every profession.....including those who make these statements. Of course, they have a tendency to not bring that up. The key is to weed through the vendor, no matter what they are, and get to the good ones. If you didn't like doctors but needed a heart transplant to live, who is doing the surgery?

Oh, and yes, I have met some very good and honest used car salespeople.
 
#153 · (Edited)
Actually, Wind, I am not trying to get Julie to do anything. I have been answering her questions regarding the process when she does use a broker.

I have no skin in the game. I haven't sold sailboats in many years and would not be the go to person for a sailboat purchase. I participate in these forums to be helpful not to make money. I would not represent anyone here if asked. I would and do answer questions about the process both here and offline. I often look up sold boat data when asked and always explain that the recorded prices may or may not be accurate. I know some particularly skilled survey and finance people and share those names when requested. I also know some knowledgeable and reputable brokers on the east coast and provide that when asked. I am always anonymous so there is no referral fee or anything like that.

I appreciate that you have over 4,000 posts expressing your opinion but wouldn’t that simply make you an expert on expressing it?

I have been involved in 100’s of transaction in over twenty years in the marine industry so have a broad base of knowledge and experience to draw on. This I offer gratis when appropriate. How about you?

You seem to have taken exception to my comments so why not address your disagreement specifically and stop wondering what my motives might be?

Better yet, why not also share your own personal experiences about the many times that you have been wronged? That would be useful, real world information for many.
 
#154 ·
Actually, Wind, I am not trying to get Julie to do anything. I have been answering her questions regarding the process when she does use a broker.

I have no skin in the game. I haven't sold sailboats in many years and would not be the go to person for a sailboat purchase. I participate in these forums to be helpful not to make money. I would not represent anyone here if asked. I would and do answer questions about the process both here and offline. I often look up sold boat data when asked and always explain that the recorded prices may or may not be accurate. I know some particularly skilled survey and finance people and share those names when requested. I also know some knowledgeable and reputable brokers on the east coast and provide that when asked. I am always anonymous so there is no referral fee or anything like that.
I wasn't accusing you of talking your book. I said that because of your experience as a broker you are going to see the world from a broker's perspective, which isn't appropriate for a good percentage of the boat purchases that people discuss here.

I appreciate that you have over 4,000 posts expressing your opinion but wouldn't that simply make you an expert on expressing it?
Clearly. :D

And yet it also seems to have given me the ability to know when a broker is giving advice to someone in a boat buying thread ...

I have been involved in 100's of transaction in over twenty years in the marine industry so have a broad base of knowledge and experience to draw on. This I offer gratis when appropriate. How about you?
Doesn't that prove my point ?

You seem to have taken exception to my comments so why not address your disagreement specifically and stop wondering what my motives might be?
Not at all, I agree with most (maybe all ?) of what you wrote, if someone is buying an expensive boat and needs a broker. I think that is increasingly unnecessary for the same reasons that real estate brokers are becoming less important. Yes, 100 years ago when you had to send a letter to someone so they could find the property you were looking for brokers were indispensable, but now that MLS is online for real estate, and many boat advertisements are online, what is a broker actually doing for you ? It used to be that you couldn't complete a real estate transaction without a broker because the broker was the only one who even knew what real estate was for sale, but now if you listen to real estate brokers talk they sound more like therapists who are there to lead everyone through the oh so complex process of doing a title search and handing someone a check for title insurance and to close the deal, and then bringing everyone together for a group hug at the end. Does everyone really need a group hug for 3-6% ?

Better yet, why not also share your own personal experiences about the many times that you have been wronged? That would be useful, real world information for many.
I haven't had a bad experience, I bought my last boat with a handshake. :D
 
#155 ·
Wind, if a broker on this site had over 4000 posts would that make him/her the expert? Number of posts is irrelevnat to most of us. Over the years there have been many people on this site that have made 4000 look small. Some of them were great resourses and are missed. Some of them just had too much time and liked to argue...they are not missed!

So, does anyone know where SD is? He had a ton of posts and most of them were very relevant even when you got under his skin. His advise I miss.
 
#157 · (Edited)
Wind, to recap, Julie has been asking here and on other sites about the boat buying process. She is already working with a broker. That was her choice before she started posting. Whether that is appropriate to you based on what you think might be her price point I can’t answer. You will have to offer up your unsolicited opinion to a question that she hasn’t even asked directly to her on that.

What I have been doing is attempting to answer her and others specific process questions not persuade her that she should be going about this another way. I will leave that to you or those whose goal it is to increase their post count. So, yes, I am giving advice on a boat buying thread. Unlike your responses however, mine are directed towards the actual questions asked.

As I said before, there is lots of opinion masquerading as knowledge on these sites. You yourself have apparently not used a broker but have felt it necessary to post thousands of times on the topic. Good for you but not the way I do business. I’ll stick with what I know not what I assume.

Whether someone should or should not use a broker I will leave to those directly involved. My opinion on that would be as meaningless as most so no need to take up bandwidth with what, in fact, was not even the topic of this thread.

OTOH, if someone asks particular questions about the process of buying and/or selling boats using a broker, I am happy to respond with real world knowledge and experience. They can then utilize it or not as they will.

Unfortunately for me, that means my post count will never approach yours. "Experts" come in all flavors.
 
#160 ·
Wind, to recap, Julie has been asking here and on other sites about the boat buying process. She is already working with a broker. That was her choice before she started posting. Whether that is appropriate to you based on what you think might be her price point I can't answer. You will have to offer up your unsolicited opinion to a question that she hasn't even asked directly to her on that.

What I have been doing is attempting to answer her and others specific process questions not persuade her that she should be going about this another way. I will leave that to you or those whose goal it is to increase their post count. So, yes, I am giving advice on a boat buying thread. Unlike your responses however, mine are directed towards the actual questions asked.
Fair enough, I didn't know she was going through a broker, I missed that part.

As I said before, there is lots of opinion masquerading as knowledge on these sites. You yourself have apparently not used a broker but have felt it necessary to post thousands of times on the topic. Good for you but not the way I do business. I'll stick with what I know not what I assume.
I didn't say I'd never used a broker, but I'll take the shot since I'm the one who started it by not knowing she was using a broker, my ego isn't wrapped up in it. :)

Whether someone should or should not use a broker I will leave to those directly involved. My opinion on that would be as meaningless as most so no need to take up bandwidth with what, in fact, was not even the topic of this thread.

OTOH, if someone asks particular questions about the process of buying and/or selling boats using a broker, I am happy to respond with real world knowledge and experience. They can then utilize it or not as they will.
Like I said, I didn't read close enough and didn't know she was using a broker.

Unfortunately for me, that means my post count will never approach yours. "Experts" come in all flavors.
Again, I'll take the shot since I started it by not knowing she was using a broker. I'm responsible for the thread going off topic, so I'm responsible for fixing it.
 
#162 ·
While I scanned these 160 posts above I noticed that none apply to the value of my boat. I think my boat is without value in respect that it is so far removed from the market. Though it is forty years old, I've owned it for the last thirty years. It's in good shape,- every day I do something for my boat and every day, with rare exception, I'm on my boat. All the posts above only relate to boats that are on the market. I've saved mre than the value of my boat in slip fees by terms of anchoring out. I've saved another full value of my boat over the years of paying liability only insurance instead of full hull coverage for a Florida registered boat. I've saved third full value of my boat by not paying any property taxes on a house for over forty years,- and likely a fourth value of my boat by not owning a car and associated expenses for the last twelve years. My forty year old boat is truely priceless. Over the decades it paid me back many times my cost in having it, and if I lost it tomorrow, I'd still have gained. The last time I dealt with a broker was in 1973! I'm all for brokers, but if your boat's as old as mine and not on the market, even pristine, there is no discernable value.
 
#163 ·
david-
How you do a title search would depend on whether it is a documented vessel, or by state laws if it was only state registered. In any case you might start by calling the folks who issue the title to see if they have any suggestions.
But you might also want the sale contract (especially if you are drawing up a private one) to expressly state that the seller is conveying free and clear title, with no known encumbrances or liens, and that they not you will be responsible if any such liens are filed or discovered based on the time when they owned the boat. That shouldn't be a problem to anyone who knows he hasn't incurred the wrath of tradesmen or bankers.
 
#164 ·
From the YBAA Yacht Purchase and Sale Agreement form, referencing the word "title":

5. ... The closing of the sale shall be deemed completed when:
A. All documents necessary to transfer good and absolute title to the YACHT have been received by the BUYER, or by the SELLING BROKER on behalf of the BUYER;

8. SELLER'S REPRESENTATIONS: The SELLER warrants and/or agrees as follows:
A. That he has full power and legal authority to execute and perform this Agreement, that he has good and marketable title to the YACHT, and that, if necessary, he will obtain permission, prior to closing, from any authority to sell the YACHT,

E. To hold harmless and defend the BUYER and BROKERS against any and all claims incurred prior to closing that may impair or adversely affect the BUYER's receipt, use, and possession of the YACHT, including BUYER's condition survey of YACHT and SELLER'S possession of good and absolute title to YACHT, and to assume all costs incident to defending the BUYER and BROKERS against such claims, including their reasonable attorney's fees.

David, in the same agreement this is what it says regarding buyer default:

12. DEFAULT BY BUYER: The BUYER and SELLER agree that the amount of damages sustainable in the event of a default by the BUYER are not capable of ascertainment. Therefore, in the event that the BUYER, after accepting the YACHT under the terms of this agreement, fails to fulfill any or all of the obligations set forth in paragraphs #5 and #9, the deposit shall be retained by the SELLER as liquidated and agreed damages and the BUYER and SELLER shall be relieved of all obligations under the Agreement. This sum shall be divided equally (50%/50%) between the SELLER and the BROKERS after all expenses incurred against the YACHT by the BUYER have been paid. The BROKERS' share shall not exceed the amount the BROKERS would have received had the sale been completed.

But it seems 8E contradicts 12. If I'm reading it right, if the seller sues because the buyer defaults, the seller has to "hold harmless and defend the buyer and brokers against any and all claims..." and "assume all costs incident to defending the buyer." :confused:

If no one knows of the defaulting buyer having to pay up, maybe this is why.
 
#165 ·
Julie, you are reading it wrong. The indemnity given by the seller to the buyer is that the seller agrees to assume all risks relating to claims incurred prior to the closing, for example, unclear title (the seller still owes money on a loan he used to buy the boat; if the bank now sues the new owner for repayment, the seller has to make it good), any liens (the mechanic who installed the new engine is still owed $), or anything like that. It does not include any claims incurred by the buyer's own actions (like default). Such clauses are common in all contracts for sales of major items (including real estate).
 
#168 ·
Last I heard, banks charged money on escrow accounts. So if a small broker wanted to open an escrow account, it would cost him money. Plus perhaps a piece of everything deposited in it. Making it simpler and cheaper to just put the check in the draw and see what happens.

Maybe not as professional, maybe not a good way to find out if the check is worth anything, but I'm sure that would work for some folks.

"An undeposited check is worthless for enforcing the contract as it can be cancelled at any time so"
Oh, the laws about checks, and offers, and contracts...they keep attorneys in all fifty states and all eleven insular possessions busy enough.<G>
 
#170 ·
Last I heard, banks charged money on escrow accounts. So if a small broker wanted to open an escrow account, it would cost him money. Plus perhaps a piece of everything deposited in it. Making it simpler and cheaper to just put the check in the draw and see what happens.

Maybe not as professional, maybe not a good way to find out if the check is worth anything, but I'm sure that would work for some folks.
Maybe, but it would be illegal in any state that I am familiar with.

"An undeposited check is worthless for enforcing the contract as it can be cancelled at any time so"
Oh, the laws about checks, and offers, and contracts...they keep attorneys in all fifty states and all eleven insular possessions busy enough.<G>
True enough that.
 
#171 ·
No point going to a local bank to open an escrow account. Use an escrow agent that already has one.

There is really no practical point to cashing the good faith check prior to survey. In the standard contract, the buyer can bail for absolutely any reason whatsoever and get it all back, up to that point. Why would anyone in their right mind (attorney, broker, etc) bother with the liability for accepting the cash, when they have zero right to it yet.

The process is mostly good faith, until she is accepted post-survey, and that's all.
 
#172 · (Edited)
No point going to a local bank to open an escrow account. Use an escrow agent that already has one.

There is really no practical point to cashing the good faith check prior to survey. In the standard contract, the buyer can bail for absolutely any reason whatsoever and get it all back, up to that point. Why would anyone in their right mind (attorney, broker, etc) bother with the liability for accepting the cash, when they have zero right to it yet.

The process is mostly good faith, until she is accepted post-survey, and that's all.
Because it's the law. Maybe it shouldn't be law but until it isn't it is.

Attorneys', brokers, etc don't get to decide that.
 
#174 · (Edited)
Well, here is one practical reason for depositing the earnest money check - you will have clear funds when necessary, especially with funds drawn from a different federal reserve district.

I closed real estate and business transactions at one time, and I can tell you about all the different types of "Official Check"s, "Treasurer's Checks", "Cashier's Checks", etc. people and financial institutions will submit, even when they are told to obtain certified funds or send a wire transfer. Some checks are marked in such a way to appear to be cash equivalent, but are in fact drawn on a bank in a different federal reserve district so the maker can earn the interest until it is honored. [Virginia has had a Wet Settlement Act to force parties to advance actual cash equivalent funds or pay interest/damages to others.] You can call the bank to ask if a stop payment can be put on a particular type of check or how long before funds clear and you will receive some interesting answers.

Also, what if the contract survey contingency and all other contingencies are satisfied, the escrow agent, who didn't timely deposit the check upon ratification, now goes to deposit the check at the bank, and that same day, the buyer backs out and changes his mind. The seller now has no liquidated damages waiting for him. Oops! Who is at fault, the escrow agent for not depositing the check?

And why not deposit it, the inconvenience of having to write a check and obtain a release? The escrow agent earns a fee for a reason, and has liability in the process.
 
#175 · (Edited)
The contract usually gives a period of time post-survey or a date specific for the buyer to accept (read as back out). In my experience, the check is usually deposited between the survey and that date, when it becomes clear there will actually be a deal. Contingent repairs, etc, have not necessarily been completed. I've not seen an escrow agent even engaged until that point, therefore, the expense of one. No point, if the boat is going to be rejected.

On the one hand, it is as simple as writing a check to refund. But, for the broker, who would probably hold it in their own account before engaging an escrow agent, they have to have bookeeping and internal controls to watch over significant funds they are responsible for, if anything screws up. Easier and arguably safer to just sit on the check that the seller has no rights to yet anyway. Buyers are happier too. Makes for a less threatening experience, until it becomes necessary.

I'm just going to speculate that checks are cashed earlier than this, simply to test whether the buyer has the money. I am not saying I know this to be the case. On the other hand, once a buyer has agreed to contract a surveyor, they're committed. The one argument for cashing the check would be survey costs that may attach to the boat, if not paid. However, I've always known the buyer to contract the surveyor, not the seller, so I'm not sure they could attach.
 
#176 · (Edited)
If you handle enough of a certain type of transaction, you will eventually have that 1 in a 1,000 case that reminds you why you should employ standard, routine, defensive practices as an escrow agent...

As you probably know, I am not a big fan of the brokers' association contract, so you can't generalize about escrows for all boat sales transactions. Some buyers may be sophisticated enough to insist on the use of their own contract.

Julie seems prone to allowing the broker to control the sale.

The broker's advice to ask the broker about the meaning of the contract is quite comical.
 
#179 · (Edited)
I am not licensed in Florida so I cannot speak to its laws, but most states have exceptions to the crime of unauthorized practice of law that allow agents to fill in the blanks on a form contract, and in some cases draft an addendum to that contract. Going beyond those exceptions is engaging in the unauthorized practice of law.

A broker who represents the seller and who starts giving legal advice to the buyer about the implications of certain provisions and the law of that state has likely crossed the line into the unauthorized practice of law.

A buyer who relies on the legal advice of the seller's agent is a fool.
 
#180 ·
I am not an attorney so I can't comment on your first part except to say that I haven't believed that pointing out the parts of the agreement labeled as pertaining to the seller and/or the buyer is "practicing law". It is a good point and I am going to research it further.

For the record, I suggested that Julie ask her broker any contract questions that she is signing with him about what is in his contract. To my knowledge, she is not dealing directly with the seller or the seller's agent.
 
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