The Search and Doing the Deal
The last two issues discussed doing your homework, working up a budget, and building your search team. Now it’s time to begin the search and do the deal. While your search started with the homework; now it’s getting serious. It is likely that your prioritized list is now narrowed significantly to a range of sizes, boat brands, age, and price. A caution here: keep that basic prioritized list in clear view and try to avoid the temptation to stray too far from the parameters you have set… especially going after something you will have trouble affording.
How brokers work
Recall the way that the brokerage market works. The listing broker will have to share the overall commission with his or her firm and your broker and his or her firm. It is probable that the broker you have enlisted to assist you is of a separate firm. The commission is still the same and to get the maximum value from your team, work through him. He will share in the listing broker’s distribution. That is how he earns his money in advising and assisting you. Working through your broker is extremely important when checking out a series of boats. Use his or her experiences to refine your choices. Your broker can research boats recently sold of the class and vintage you are considering thus helping you to present an offer. He or she may also uncover “what will the owner take.” In all likelihood, the choices will narrow to several boats.
Having possibly re-visited a prospective candidate, it may become evident that one or more problems or defects are suspected. Normal wear and tear is to be expected, but calling out every little defect will not be too helpful in arriving at an agreed selling price. This is the time when you will need input from your surveyor and perhaps the boatyard or service company in putting an offer on the table. At some point, you may have seen enough or even be sick of road trips. Surely you have an idea of what not to buy. Have you forgotten anything? Probably: the most likely being “re-sale value.” For example, a pontoon boat may be good for a lake, but in an area with high wind and choppy seas it is a poor investment.
Decisions and negotiables
You have found what you want, and it’s decision time. Here’s where nerves kick in. Relax. This is what you have been working toward for months, perhaps longer. Be patient. It is natural to wonder if your offer is too high or too low and even possibly viewed as an insult. Be prepared to negotiate, but also be prepared to walk away if the deal looks shaky for any reason… and there can be many. Procedurally you will make a formal offer and provide a deposit (usually 10 percent). The deposit protects you against someone else bidding up the price. This is not an auction. A contract will be executed with conditions… subject to survey(s), a sea trial, and a time limit. Even though you have lined up financing, it may be useful to also add “subject to financing” as an out should things get complicated. There may be several back and forth discussions to reach an agreement that will get to the next step a marine survey.
As the buyer, you will be paying for the survey, haul out, and other associated costs. Enter the “negotiables.” These are the items that have been called out in the survey report that can be leveraged to turn the bad to good in arriving at a final price. For instance, the stuffing box needs replacing or bottom blisters need to be repaired. How much and who will perform the repair will be discussed. It is probable that the defect must be addressed in order to obtain finance or insurance. Will the owner knock something off if the buyer will repair on his dime?
There are endless possibilities and probabilities. Your broker can help here, so make sure he or she does. This is an ongoing part of the back and forth; broker, owner and you… or if a FSBO (for sale by owner), it’s you! Be patient, go slow, and keep focused. Remember too that the seller and listing broker probably want the sale to work as much as you do. The last piece of the puzzle is the sea trial. Who will be onboard, such as owner, brokers, surveyors, et al, will depend on circumstances. The key is to establish what works (and perhaps how well) and what doesn’t. There may be a further price adjustment. Once the final price basis negotiables has been agreed to it is time to close the deal.
The deal and delivery
Working with your broker, you must obtain a clean bill of sale free of any liens or encumbrances and a title transfer. You must decide whether to document or register the boat. For larger boats, documenting establishes ownership under federal law and is more secure, has a one-time fee, and is required for cruising to foreign destinations. State registration is simpler but carries an annual fee, and assuming you plan to keep the boat more than say five years, can be more costly than the one-time documentation fee.
Enter the tax man. Whether documented or registered in the state where you will berth your boat, everyone wants a cut! Be careful here. The rules vary from state to state. Be sure to insure your boat before taking ownership. You will have to provide the insurer with a copy of the survey report to validate insurability. Your boatyard or marina will require verification of insurance, especially liability coverage.
It is easy to see why it is wise to have your team in place early on. Several loose ends would also need attention. Perhaps there is a yard bill for bottom paint that you agreed to pay for and the haul out for survey. Most surveyors require payment on the day of the survey and sea trial. The report comes several days later. The last action is taking delivery. Taking delivery can be as loose or formal as you want to make it. It’s a function of your incidence of comfort. Your boat may already be in her slip or may have to be splashed and moved to her new home. Either way, it’s one of those two happiest days of one’s boating life. Enjoy!
by David "Merf" Moerschel
For Part I in this series, click to So You Want to Buy a Boat.
For Part II in this series, Money and Building Your Team, click here.
Editor's Note: After 15 years of writing, cartooning, and delivering magazines for the PropTalk and SpinSheet family, Merf has retired. We are grateful for his friendship and wish him all the best in his new adventures.
