In this article you will learn the steps involved when purchasing a Yacht available for sale as a brokered (pre-owned) boat. This is a basic guide and cannot act as a substitute for a trained and knowledgeable broker, but will give you an understanding of the process.
Step 1. Finding the Right Type, Make and Model.
There are a lot of different yacht models and types to choose from. I would start by thinking about what type of boating you imagine yourself doing and what type of layout would best suit your needs. This is where a knowledgeable broker can really help point you in the right direction, through experience he can give you real advice on what boat you could make the best use of. As a start, ask yourself these questions:
- What is your perfect day on the water?
- Will I be doing a lot of day boating, more long range cruising or both?
- Do you plan on using the yacht for fishing, cruising or both?
- How much time will you be spending on the boat? Day, Weekend, Weeks, Months…?
- How many people do I plan on taking with me on a normal trip? Just you and your significant other? Ten friends and family?
- Will you be frequently sleeping aboard the boat? How many others will be sleeping aboard the boat with you?
- Where do you plan on keeping the boat? Behind your house, marina, high and dry, lift, etc…?
- What is your prior boating experience? You do not necessarily want to jump into a larger and older boat unless you have a good deal of experience.
- Is speed important to you?
- Do you have bridge height considerations where you will be keeping the boat?
- Do you have depth and draft considerations where you will be keeping the boat?
- Do you have slip length and width considerations where you will be keeping the boat?
With these questions in mind, take a look through the different types of yachts.
In order to ensure that you find the right boat, it is great to have an idea of how much you want to spend before you begin the search process also. Keep in mind that there is always a bigger and more expensive boat out there and it is important to keep within budget to ensure a fun and stress free boating experience. If the purchase price of a boat you like is a real strain for you I would not recommend it…make sure you have extra money set aside for care and maintenance or it could really end up costing you come re-sale time.
With these questions answered and a price range in mind you can start looking for the right Yacht. One issue you will inevitably run into at this point is the trade-off between boat size and boat age. The older you go the larger the boat will be that will fit your price range, the newer you go a boat of the same price will be smaller but more updated. This is a decision that can only be made by you, but I will say if you are a more novice boater, a newer and smaller boat may be a better decision in the long run. There will be less of a cost in maintenance and upkeep and you will have more updated technology…With an older boat you need to put aside more money and possible down time for repairs…and the bigger the boat the more money and time you may need to put aside.
If you would like to further discuss what type of yacht would best fit your needs, please feel free to contact me at Jimmy@tgyg.com. I can give you firsthand information and advice to help make the best decision.
Step 2. Finding the Exact Boat.
At this point you have a pretty good idea of the model or type yacht you would like to own, or at least have it narrowed down to a couple choices. This is where your broker, with the knowledge of what you are looking for, can search for the best deals available. A good broker (like me!) can sometimes find you a great deal that is not even officially on the market or online through their extensive connections with dealers, wholesalers and clients throughout the industry.
One question I get asked often is “How far out should I extend my search parameters?” While it may not make sense to purchase a $200,000 yacht in France and incur a $40,000 shipping bill to get it home, it may sometimes make sense to look around the U.S. or sometimes even up in Canada for the right deal, just make sure that the deal is good enough to make up for your travel expenses to go see the boat and eventually transport it home. For a $1,500,000 yacht it may be worthwhile to have a $20,000 shipping bill to get her home if the deal is right. As a yacht broker in Florida, I can say that most of the great deals are found in Florida, but I have occasionally gone up north for a great deal.
With your sights set on a few of the best deals available in the model you are looking for, it is time to go and see them firsthand for a personal inspection. Give your broker the times that you will be available to look at the boats and he can arrange the showings in the best and most convenient order. Sometimes this can be accomplished in a day and sometimes it takes a few days…depending on the location and number of boats on the short list.
Bring your broker along with you when looking at the potential boats you could end up owning…he can look through the whole boat and give you a preliminary condition report. Although he may not be a mechanic or vessel engineer, he can give you a good idea of the overall condition and tell how well it has been taken care of and maintained. He also knows common issues with certain boats, what to look for and the right questions to ask.
** If it becomes too expensive and time consuming to see all of the boats in your range, it may make sense to make offers on the best ones subject to personal inspection…once you have negotiated the best deal and have assurances that the boat is “as advertised”, you can then go visit the boat you have a deal on. This is a much more targeted approach and can save you a good deal of time and money in some cases.
Step 3. Making an Offer.
After looking at all of the boats on your short list, comparing features, condition and pricing, you should be able to come up with a final list of the yachts that you would consider owning. This final list will contain the top 1, 2 or 3 of the best choices. You then start with an offer on the boat at the top of the list and see if it can be purchased for the right dollar amount and terms…if it cannot or the seller is being unrealistic, than it is no longer your top boat and you go to the next one.
Before making a formal offer, you will need to have a deposit of 10% of the approximate purchase price in your broker’s escrow account and have the remaining balance of the purchase price of the boat ready to go, or have your financing pre-approved. This is not only a matter of standard procedure in the brokerage industry, but it will also help give you an upper hand when negotiating a deal. If you come to the negotiating table with a confirmed 10% deposit and the rest of the money or financing ready to go, you will definitely have the attention of the seller…especially over the other guy making an offer with no deposit and subject to financing.
With the finances in line, it is time to write up an offer. There are 3 main factors to decide on when making an offer.
- Offer Amount – This is something that you need to talk about with your broker and the approach could be very different depending on the specific situation.
- Contingencies – The standard contingencies are: Sale of the Vessel is Subject to Sea Trial andSurvey. I also like to specify that all the equipment and accessories currently aboard the vessel are to be included in the sale…this will have you covered so that the seller does not clear out the boat before closing, leaving you with no equipment, spare props, watermaker, etc…
- Timeline – There are 3 dates that you will need to consider. The time you wish to give the seller to respond to your offer (Usually 1-2 days); the time you want to give yourself to sea trial, survey and formally accept the vessel (Usually 2 weeks from seller acceptance); and the time to close the deal and transfer ownership (Usually 1 week from acceptance of vessel).
Step 4. The Survey.
Let’s say that the seller of the yacht at the top of your list was not being realistic with his price, so you made an offer on the second boat on your list and were able to strike a deal. Great!! Now it is time to do your due diligence and have the boat surveyed.
Your broker can supply you with a list of approved surveyors that he knows will do a thorough and complete job…believe me here…not all surveyors are created equal and just because they are a SAMS certified surveyor does not mean that they will do a great job or are familiar with the particular yacht you are buying. A good broker can identify a couple of the best surveyors for the job and make the selection process easy, he can also identify the nearest boat yard and arrange for the haul out and bottom inspection by the surveyors.
Depending on the size and age of the boat there are varying degrees that you can go to get her checked out. If it is a 1-year old 60 Hatteras still under warranty, you may just want to have a hull surveyor do an inspection with haul out that will take a day. If it is a 2004 116 Azimut I would recommend hiring a surveyor team to check over all of the vessel’s systems in addition to having a certified engine mechanic or surveyor do a full analysis on the main engines, transmissions and generators with oil samples. If she is equipped with gyros, stabilizer fins, high tech integrated entertainment center, etc…it may be a good idea to have a tech that specializes in that equipment to inspect as well. A survey like this could take 2-3 full days, but is money well spent to make sure you know what you are getting into.
See below the typical schedule to a 1-day survey, say on a 60 Hatteras:
Do not be hasty and rush to judgment directly after a survey, take a day to think about it and review the full reports from the surveyors. If you have a question about a survey finding, consult the surveyor, your broker or your local mechanic. Keep in mind that it is a surveyor’s job to find problems with the boat…no matter how new a boat is or how well it was maintained…there will always be findings, no boat is perfect. When you have all of the survey results back and in your possession, with questions answered and maybe a quote or 2 received from the local service center, you can now make an informed decision on the next step.
Step 5. Final Vessel Acceptance or Rejection.
After you have all of your questions answered from the survey and have a thorough understanding of the boat you are looking at buying you need to ask yourself the important question.
Am I ready to own this boat?
There are 3 paths you can take at this point in the purchase process.
- Acceptance of Vessel. – So the boat surveyed out beautifully, there are a couple of small issues but nothing major. You got a great deal on the boat and you are excited about owning her and can already see yourself out on the water enjoying a great weekend. This is when we submit a “clean” acceptance of vessel, meaning that you are accepting the boat as-is and are ready to close the deal and take possession of the boat as soon as possible. When you submit this document to the seller, you are making your 10% deposit non-refundable and showing your willingness to close the deal.
- Conditional Acceptance of Vessel. – The boat surveyed out well, but there are some fairly large issues that popped up in the survey that you were not expecting. They are not normal maintenance items, but things that need to be addressed right away that are prohibiting the boat from performing up to specified operation. In this situation it may be warranted to ask for a cash adjustment equal to the amount it would cost to repair the items in question. Your broker would prepare a Conditional Acceptance of Vessel form, stating that you would move forward to purchase the boat if a cash adjustment is made due to survey deficiencies. If this is accepted, like the clean acceptance of vessel, your deposit will become non-refundable and you will move forward to closing.
- Rejection of Vessel. – The boat surveyed out poorly, with many items that came up putting the integrity of the boat into question. There is no point or amount of cash adjustment here that will change your mind about owning this boat. Mabye you discovered that the boat had been run aground hard and still suffers from major vibration issues that are uncurable…at this point you feel very disappointed and were excited about purchasing a boat but now are just out the survey cost and have no boat…this is rare but it happens. The best way to avoid this is to inquire about the vessel history and give the boat a good look over the first time before the survey with your broker. After submitting the rejection of vessel form, your deposit will be returned to you. Remember, rejecting a boat and walking away is much better than owning a problem boat!
Step 6. Closing and Delivery.
You have accepted the boat and are ready to make her yours. Congratulations!! You are very close to becoming a new yacht owner! Your broker will be able to guide you through the paperwork and ensure that the deal goes smoothly to completion.
Before closing and delivery there are a couple of things that you will need to have in line:
- A place to keep it. – Whether it will be in a slip behind your house, a high and dry, marina or yacht club you need to evaluate all of your options and decide where the best place will be for you. Some people go for convenience and proximity to home and others go for the ambience and amenities that a certain marina or yacht club has to offer, although it may be further away.
- Insurance. – Before you close the deal and take possession of the boat, be absolutely sure you have insurance coverage in the form of a binder stating the policy and in-service sate. If you are financing the boat, this is a requirement.
- To Title, U.S. Coast Guard Document or Foreign Flag. – In Florida, you have the choice to either title the boat with the State of Florida or Coast Guard Document. You can only Coast Guard Document if you are an American citizen. In some cases for tax or crew reasons it may make sense to foreign flag the boat…common places of registry are the British Virgin Islands, Marshall Islands and Cayman Islands. It is best to consult a maritime lawyer on this issue if it is not clear what you should do.
- Responsibilities of a Yacht Owner. – This can vary drastically depending on how hands on you plan to be with your new yacht. Whether you plan to be an owner-operator or have a full service crew…you can do as much or as little as you like.
- Finding the right crew – If you are purchasing a yacht that requires full time crew, it is essential that you find the right people to match not only the needs of the yacht, but your needs as well. A good crew not only can take great care of the yacht, but also make yachting a fun, enjoyable and relaxing experience for the owner.
These are the 6 Steps involved in a brokerage deal, I hope that you now have a basic understanding of how the process works so that when the time comes to get into that yacht of your dreams, you will be a well informed buyer!
Article written by Jimmy Rogers, CPYB. He can be reached by e-mail at Jimmy@TGYG.com.