On a sunny but cold morning, we bundled up O and headed south to a tony suburban community. The yacht brokerage office was in a sunny yellow building past several marinas. A silver haired gentleman in spectacles, a fleece jacket, and khaki’s received us at the front door. This was the buyer’s broker we were meeting with. We discussed boats and peppered him with questions as I bounced Otter and paced the office. We left two hours later with some homework. These are our some of our notes from the meeting:
Broker compensation: the industry standard is generally a 10% commission and is usually split 50-50 between the buyer’s broker and seller’s broker. Situations may vary.
We were strongly advised to secure insurance beforehand, especially since we have not owned a boat before. According to him, lot of first-time owners wait until after the offer has been accepted and financing is secured before looking for insurance (it seems logical in the progression of buying a home), and then get rejected right before the deal is closed. He gave us a name of an insurance company to call. As you can see in my earlier post, some people warned against broker recommended insurance. However, BoatUS is the name that comes up over and over again in the forums, especially for first-time buyers and that is the one this broker advised us to start with.
In advising us on making an offer, he tries to find out as much from seller as possible. Sometimes that is not possible if the selling broker is tight lipped.
If we are not sure if an offer is going to offend a seller, he may call the selling broker and say, “this is what my buyer wants to offer, do you feel comfortable going to your client with this offer?” and usually the selling broker will give some feedback such as, “Yes, I feel comfortable,” or, “I have no problem presenting the offer, but the odds are not good,” or, “don’t do it, you’ll piss the owner off.” Then it is our choice whether we still want to make the offer.
Our deposit (10% of offer price) will be held by the buyer’s broker in a non-interest bearing escrow account. To make the offer, we would have to sign a purchase agreement.
We discussed the various costs of shipping/trucking a boat if we buy from a different region, other costs such as sales tax, excise tax, registration fees with the state or documentation fees with the Coast Guard. Of course, we will verify the information.
Depending on the season, a test sail may not be possible. In the winter in the northeast, when a test sail is impractical or a non-starter, we would negotiate to hold back a portion of the sale proceeds in escrow pending launch and a test sail in the spring. As buyers, we have an obligation to do the launch and test sail by a certain date specified in the purchase agreement.
A title search can be done anytime during the process. If the boat has been documented, the Coast Guard charges a $25 fee to provide a list of all past owners. If the boat was not documented and instead was registered with the state, the boat title would show if there were any outstanding loans. We could also hire a marine documentation service for several hundred dollars (he recommended this) and the company would do comprehensive title search.
We got a name of a marine surveyor that we could speak with to see if we wanted to use him. Warning! This is a very controversial topic. Some people strongly feel that brokers have no business recommending surveyors. So, we are not ruling out this person, but will have his name vetted with some other liveaboards around here. We will also try to get some other names as we walk the docks. One tip I got from the Living Aboard forums is to ask the insurance company, as they will need to accept the survey.
The broker also provided a reference of a liveaboard client who currently lives at the marina that we frequent. “Ask him what other questions you missed,” he said. “Ask him what mistakes he made, what he would do differently.”
Someone warned that my questions might make the broker bristle, but that hasn’t been our case. He was very open to answering them and welcomed the question. My homework is to call the insurance company-that’s the part that worries me most-and look for more marine surveyor recommendations.
The pesky footnote: These notes are solely based on our meeting and will not necessarily reflect the actual buying process, ours or yours.