Guide to Buying a Yacht
Beginning Your Search For The Right Vessel
The best way to start your search for a boat, no matter what size, is to carefully consider and articulate your criteria. A knowledgeable broker will try to help you establish the important issues to consider and to itemize. Ultimately, some of the major issues in boat selection are:
- What can you afford to pay for the boat? Will you need financing, or will you pay cash for your purchase? Have you figured in the cost for maintenance?
- How will you use the boat? Will it be for long range family cruising, fishing, or for just local family fun? What you will be using it for will determine the features that maynot be obvious to you, like power requirements, vessel range, crane capacities, stabilizers, hull design, etc. Getting clear about your intended use will make both your boat search more efficient and your time aboard more enjoyable with family and friends.
- How many people will you be taking out on the boat? How many overnight guests do you anticipate?
- Where are your intended cruising areas? There are many factors in this question, including the vessel draft, climate equipment specifications, port authority requirements, questions regarding whether you put your yacht into charter service.
- What is your time frame in making a purchase? It is important to be open with your broker so that he can know how best to help you. If you’re prepared to make a purchase immediately upon finding the right boat, that requires a different approach for your broker than if you are ‘just thinking about it’ or expecting it will be in the next couple of years. To be appropriately respectful of your time and the broker’s it’s important to have a clear understanding of your needs, capabilities and dreams.
- Once you and your broker are clear about your parameters, your readiness, the need and the desirable features, he can make some inquiries and present you with some recommendations for your consideration.
Yacht Sales Buying And Selling 101
There are countless issues related to buying and selling yachts. A professional broker must do much more than advertise and showboats. A career professional must and will give serious attention to:
- The increasingly complicated and costly management of worldwide internet marketing
- Continuing educational requirements, including learning new vessel systems, tracking, and understanding market trends, legal and customs issues.
- Keeping current with emerging classification and statutory matters regarding safety standards, emissions, etc.
- Pursue continuous customer engagement
And then, when a transaction starts developing, the hard work begins:
- Transaction procedures must be managed, and agreed upon dates must be observed.
- Earnest deposit accounts must be managed.
- Legal documents must be carefully constructed and established in balance and integrity to ensure that both parties’ interests are honored.
- Ethical treatment of both parties to a transaction must be guaranteed.
- Coordination of survey and trial run of the boat.
- Resolution of noted survey defects in an agreeable and proper manner.
- To know the regulations of governmental regulatory agencies related to transferring ownership whether it’s a documented vessel, titled vessel or a vessel that is flagged in a different country.
- To continuously have the knowledge and relationships to get things done in the yachting community in order to make the best recommendations for contractors & crew.
- And perhaps most challenging: managing both parties’ expectations.
Buying a boat can be an ordeal if you aren’t guided by a professional knowledgeable broker, with abundant experience and proven developments.
Understanding the Purchase
This Purchase Process is a guide to smoothly help you through the transactions and create a path to a mutually satisfactory completion.
The purchase process itself is quite simple and is very similar to a conventional real estate purchase transaction. We structure all transactions in a manner that protects the interests of both the buyer and the seller. Our simple purchase offer / agreement form which has been developed by the INTERNATIONAL YACHT BROKERS ASSOCIATION preserves contingencies for you, the buyer, and it protects your earnest deposit.
Once you’ve decided which boat is suitable for your needs, you can evaluate the boat further by arranging a condition survey and trial run for you. To signal your intent to engage the buyer and begin your evaluation, you would bind the boat with a contingent purchase agreement. This will prevent the seller from negotiating with any other parties until either your transaction is complete, or the transaction is cancelled by you. We will provide you with our standard purchase and sales agreement for your review and signature. You would then either sign it and scan it back to us or esign it. Once we receive it back it is our job to present it to the seller on your behalf. The contract will also outline a timeline for surveys, acceptance or rejection of vessel and closing date. Your broker also helps you through the process of your due diligence: review of seller’s ownership documents, survey, defect remediation, acceptance and finally, transaction completion.
You would then wire a 10% earnest deposit to our designated escrow account which is outlined by Florida state law. The funds are then held in that escrow account pending eventual disbursement to seller at closing or return to you if you decided that this wasn’t the right boat for you. Note: You must inspect a vessel, or have a certified surveyor inspect it on your behalf, however, a survey and trial run may only be conducted after earnest deposit is deposited into an escrow account. In the case where you may be traveling a long distance to inspect a boat, you’re encouraged to arrange transfer of earnest deposit in advance of your trip so that you can clear the way for trial run and survey while you are there inspecting the boat.
A seller always have three choices when presented with an offer on their boat: they can accept the offer and then the transaction proceeds; they can reject the offer and then neither party is under any obligation or liability to each other to continue; or third, the seller can come back to the buyer with a counteroffer. If there is a counteroffer made (as is often the case), and it is accepted, then the transaction proceeds. Once the buyer and seller have reached an acceptable price & terms, then the buyer would deposit a 10% deposit into his brokerage firms escrow account. The firm would then proceed with doing an abstract of title on the vessel and work with the buyer as to whether they would like to state title the vessel or do a Coast Guard Documentation. If the vessel is going to another country then your broker would work with their customs agent to have it flagged in the country of your choice.
There are a few times that a seller will ask that we obtain a buyer’s Proof of Funds prior to accepting a contingent offer. If the buyer is planning on financing the vessel it is in the buyer’s best interest to get a pre-approval from their bank before going to survey. You are encouraged to contact your banker and prepare this in advance. Financial compliance laws in both the US and in Europe require thatbrokerage entities meet anti-bribery, anti-terrorist funding and other anti-financial crime statutes. Information may be required such as full name, proof of address & nationality as well as background information regarding the source of wealth and principal’s business activity.
Now that you the buyer has an accepted Purchase and Sales Agreement, the next step is to arrange for a vessel survey, a mechanical inspection and trial run. These are done so that you can determine what the condition of the boat is in and is to your satisfaction. Depending on the size of the vessel must insurance companies will require you to have a survey done before they will issue you insurance. If you are financing you vessel the bank will require a survey. You can arrange for your own surveyor, or we can make recommendations for you as necessary. As your broker we would be there with you during the survey and trial run to be a resource for you in the evaluation of the boat.
Within a few days after the survey is completed you will receive a written report on the vessel. After reviewing the report with your surveyor and broker you will have the opportunity to either accept the vessel or reject the vessel. You also will have the opportunity to ask the seller to fix certain items that were found or you can ask for a survey allowance to help you cover the cost to fix the items on you own. If you should decide to reject the vessel for whatever reason or if you are not able to reach a negotiated change in the original agreement (as a consequence of unanticipated issues which may be discovered in the course of the survey), then the transaction will be canceled, and the deposit is immediately returned to you in full. Otherwise, following your acceptance of the survey & trial run, we would move through the final step of the transaction, coordination of the transaction completion process.
After your acceptance of the vessel, you would wire the balance of funds due to our escrow account . The assigned documentation company would then prepare all the closing documents and as all parties sign off on transaction completion, we would direct disbursement of purchase funds, de-register the boat from its hailing port and assist you with re-registration of the boat. Generally, the entire process, start-to-finish, takes 2 to 3 weeks.
We take responsibilities very seriously. It is the most important part of our commitment to providing you with expert, world-class yacht brokerage services. We will strive to ensure that upon successful completion of the purchase transaction on your new yacht, you will be happy to be another very satisfied reference for us.