The Essentials of Living Aboard a Boat

by Mark Nicholas

  Brokers serve several valuable purposes—at least, the good ones do. Sometimes they are the voice of reason. A peculiar thing tends to happen when you find a boat you like. Emotions take over: love, expectation, hope on the positive side, and fear on the negative side. The fear of losing the dream boat that you have fallen so dearly in love with is a problem because it could result in irrational decision-making. Funny, it takes months or years to decide if you want to marry someone, yet mere seconds to decide to become permanently wedded to a boat. Often neither is a very good financial investment.

  A good broker will work to balance the inherent conflicts of this situation—the love of the boat versus the practicalities dictated by your choice of boat and by the buying process. A good broker will speak for you so that these emotions do not conflict with your discussions and negotiations, and he will make sure that you understand all of the terms and complexities of your endeavor.

  A good broker should do other things as well: He should make sure you are protected and are getting what you expect to be getting—such as a boat with a clean title, and the equipment that you think the seller is going to be including as part of the purchase.

  It is important to take a moment to discuss a broker’s allegiances and responsibilities. In the United States a broker, unless engaged solely by the buyer, typically works for the seller. Just like the seller, that broker primarily cares about making the sale, and you should understand and believe that he will be less than forthcoming with you if he has been instructed to keep information from you. And your secrets and confidences will be revealed. Some sellers’ brokers, particularly the bad ones or those who are only looking out for themselves, will work to make sure that you pay the highest price possible. This type of broker is your adversary.

  A broker might also be a dual agent, owing allegiances to both the buyer and the seller. Being a dual agent is not just a title but a legal status, with the broker owing obligations equally to both parties. It is important that you ask questions to determine the role of the brokers involved.

  Brokers come in all shades, from very good to very bad. Most are average; all are conflicted. It is your job to try to figure out whether the broker can be trusted entirely, for it’s absolutely vital for you to be able to trust any broker that you employ. You’re looking for the very best. Some brokers will represent every party fairly, while others, like used car salesmen, are looking to move their inventory. Many good brokers work very hard to match boats with the right buyers, and are seeking to represent and price a boat accurately—and are striving to ensure that the final transaction is fair to both parties.

  Unlike the ethical code for real estate brokers in the United States, there is no inherent obligation of the seller (and seller’s broker) to reveal voluntarily all of the material problems with the boat you are investigating. The good brokers believe that it is in all parties’ best interest for the buyer to have the most information as early as possible. Even a dual broker will not reveal to the buyer the seller’s secrets, such as the bottom line price, the seller’s personal circumstances, or any defects in the boat, even if known to him. The dual broker is supposed to at least keep both parties’ secrets. This is in contrast to a seller’s broker, who has an obligation to reveal all of the buyer’s information to the seller, but not the reverse. While a dual broker is potentially much fairer, this is still not like engaging a partner. And a bad dual broker will be no different than a seller’s broker, seeking the best price and most favorable terms for the seller (the higher the price, the more he gets paid), though he will appear harmless, like a wolf in sheep’s clothing, the worst of all adversaries.

  You can handle this situation in any number of ways, but first you need to understand it. The bad brokers are interested in selling something, and will use a variety of sales tactics to do it. Your first defense is to understand the potential conflict between trying to sell a boat and fairness. You have to use your judgment to determine whether you feel that you can trust the seller’s broker. Definitely don’t reveal everything to any broker other than an exclusive buyer’s agent, especially your highest price, and don’t express all of your love for the boat in a visible manner. If you do, you will likely find yourself paying more than you otherwise would have.

  Information is valuable, and every party will capitalize on any information that they have about you; similarly, if you heard that the seller was getting divorced and was willing to sell the boat for any amount of money, you might choose to open the negotiations far lower than you otherwise might have and be less willing to make concessions. Consider engaging your own broker to help you identify the right boats (you’ll need to do this before being introduced to a boat), who will have allegiance to you as the buyer. This may be your best solution if you are an emotional or unsure negotiator. The nice thing about having your own broker is that the seller will be paying for him, as any commission will be paid out of the purchase monies paid to the seller. In other words, it costs you nothing.

  Common advice is that it makes sense to always engage a broker. It is like having a best friend who is not allowed to ignore you and your interests, someone you can confide in and reveal and discuss your strategy with. This is someone you need to trust, and it’s best not to go through this process alone, particularly if you are a novice buyer. If you are an experienced buyer, a broker is still recommended so that you can focus on the boat and not the logistics. At a minimum, the buyer’s broker can help the buyer to remain objective and focused on the goal of acquiring the right boat. A broker’s greatest value is helping a buyer to understand the flaws of the boat, particularly the problems revealed by the surveyor. You might hear about some deck delamination or blisters on the hull, and the broker, being part of this industry full time, should be able to give you an idea about costs of repair and the scope of the problem (if it is a problem at all). It’s a valuable expert opinion that you don’t have to pay for.

  Even though there is no requirement to reveal all material defects in a boat, the law in the United States puts some limits on what the broker can say or do. The law calls the broker a “fiduciary,” which requires the broker to preserve the integrity of the deal. Brokers can’t lie. If you ask them a question, you have to be told the truth. Any monies that they hold in escrow must be held in trust and cannot be provided directly to their client unless released by you. Finally, the broker (in conjunction with the lender) is required to make sure that you are buying what you think you are buying. In other words, the broker and lender must ensure that a boat has no other claims or liens against it by other third parties. It is the broker’s job to be sure that all mortgages are paid off and that you are taking a boat that is “free and clear of all encumbrances” (to use a legal phrase), and that you are holding a title which is “clear and marketable” (to use another one).

  I would highly recommend putting together a list of written questions to ask the seller in advance, concerning any history of past damages, material problems that the seller knows of, condition of the structure and equipment, identification of things that do not work or that work improperly, and other questions that are relevant to determining the value of this particular boat. You need this information, and it is most frustrating when you find out things later that the owner of the boat knew and didn’t reveal. Get the answers back in writing and make their accuracy a condition of the offer. If you ask a question and are told something that is known not to be true, you do have some recourse, including recovering any costs that you expend to reveal the truth. More than likely, however, you will be told the truth and can more properly evaluate the boat.

  But as I said, there are bad brokers out there. If I had fewer scruples (or if I were willing to get sued) I’d list a few of the Boston brokers that are walking disasters. This one bad guy was trying to help me buy a boat, knew what I wanted, and took me to see six boats that couldn’t have been farther out of my price range or more inappropriate for me. As a novice buyer, I was starting to think
that there were very few boats out there and that I’d have to make my choice based on the boats that I was being shown. His sales tactics were high-pressure, including the use of guilt, telling me that I was wasting his time and that he couldn’t make a living from customers like me. Luckily for me, he didn’t. I changed brokers. Note: he’s still out there.

  Because of the wide variety in brokers, it is important to use word of mouth in order to determine the broker’s reputation. Find out if the broker is a member of one of the top associations in the United States—the Yacht Brokers Association of America, Florida Brokers Association, California Brokers Association, or Northwest Brokers Association—all of which have standards related to broker ethics.

  Important: Even buyer’s brokers only get paid when you buy a boat. Like it or not, they, like the seller’s broker, want to work with serious buyers who are going to make offers and consummate deals. They have financial obligations and are trying to make a living, and they face the inherent conflict of making more money with a higher purchase price. It is easy for even a buyer’s broker to approach the Dark Side and not provide the advocacy or level of service that you are paying for and deserve. Consider keeping your top price a secret even from your buyer’s broker. Be aware, and work with those you trust. If you tell the broker what kind of boat you are looking for, expect to see boats that fit your profile. Ask lots of questions, expect to have the broker teach you things, and most importantly, expect and demand that the broker tell you when a boat is the wrong boat. If the broker fails at any of these requirements, get away from that broker quickly. He cares more about himself than you.

  Finding a good broker is like striking gold. I know of a few wonderful brokers and the value added is immense.

  The Buying Process

  Preapprovals

  While we are about to explore the boat purchasing process, one critical thing to do in advance is be certain that you can acquire financing and insurance. Financing companies will give you information based on which boats they might or might not be willing to finance, and will often provide you with a letter of acceptance in advance so that you can proceed comfortably, demonstrating to yourself, the brokers, and the seller that you are not wasting anyone’s time. Insurance companies will also be able to let you know whether or not you are insurable based on your boating background and experience.

  Without this information, not only might you be wasting everyone’s time, but you also might end up falling in love with a boat, having an offer accepted, and then paying a substantial amount of money for a survey only to find out that you are unable to proceed.

  Making an Offer

  Every used boat has a stated “listing” or “asking” price (except those on eBay or at auction), which is established by the seller or seller’s broker. This is really just a starting point to attempt to gain interest and commence discussions. Concessions are made from that price, which means that the price represents the most that a seller thinks that he will be able to get for the boat. It is higher than the price that he thinks he will get. Many new boats have a fixed price set by the manufacturer, which the seller (in most cases the dealer) may not be permitted to negotiate. However, there are usually factors that may be negotiated; these include added accessories, trade-in value, and other incentives.

  While this isn’t a book on negotiating techniques and strategies, I would advise you to start with the premise that everything is negotiable. Telling a buyer that something is “as is” or “non-negotiable” is merely a negotiating tactic. The seller typically wants—often quite badly—to sell the boat, and the discussions and negotiations are really a game. The seller doesn’t want to lose a legitimate buyer and you don’t want to lose the boat. If you stop playing the game, you will lose. It might be a game that no one really likes, but it is the only way you will get the best deal. Don’t tire of the game, and remember that it will end soon enough.

  Your job is to develop a strategy to acquire the boat of your dreams for the best possible price. Maybe offer close to your best price first and communicate that this is the maximum price within your budget. But if you do that, making future concessions will prove you to be a liar, which will open you up to even more concessions. Maybe start very low and work up. Start too low and your offer might be considered offensive and you might lose your credibility with the seller and the brokers. Ask about the seller and know that any information you receive will be valuable. Is the seller trying to buy a new boat? Does he desperately need the money? Maybe he now has two boats and is desperate to get “out” of one of them. Maybe there is a divorce and the court has required that the parties sell the boat. Information is power (and in this case, money). Maybe the seller doesn’t really care whether the boat is sold and plans to use the boat if it is not sold.

  Remember that this is a game—or a dance—and the seller will always want you to think that the situation is not desperate, that there are others interested in the boat. Why? It scares you into thinking that you might lose the boat. Remember, the seller is often dying to sell the boat in almost every imaginable scenario. While you are scared to lose the boat, he is scared of losing you.

  Note: The use of the phrase “as is” is often a seller’s way of saying “there’s lots of stuff wrong here that I don’t want to fix. So offer with caution.” It might also be a way of saying, “I won’t fix stuff. What you see is what you get, so only offer what the boat is worth.” Don’t be intimidated into thinking that because you made an offer on a boat that is reportedly “as is,” you need to incur any shortcuts in deciding whether to purchase the boat, including omitting a thorough survey. When you find something wrong, you will find that “as is” doesn’t mean anything at all.

  You want the seller to think that while you love the boat, your life and happiness don’t depend on whether or not you end up owning that particular boat. Keep looking at other boats while you negotiate. A very famous book on negotiating, called Getting to Yes, Negotiating Agreement Without Giving In[1], talks about making sure that you always have another option—remember, there are millions of other options, and even if today no option is evident, tomorrow one will be. It is not cause for an emotional breakdown if you don’t end up with the first boat that you love.

  Use your buyer’s broker to help discuss strategy, and then be calm and calculated as you advance through the process. And be sure that even your broker does not know your highest price, and you want to be reluctant to make concessions from the initial discussions. That will make your broker a better negotiator.

  A couple of final thoughts: First, there is a value to goodwill—it is nice when the seller wants to help and get to know the buyer, and this will only happen if the seller doesn’t feel as though he or she has gotten screwed. If the deal is amicable, many owner/sellers will gladly meet with the buyer to teach the buyer about the ins and outs of the boat that has been purchased. There is quite a bit to be said for this, although despite the promise, few buyers and sellers ever really stay in touch.

  The second thought relates to the offer itself. First, it is very important to be sure that your offer does not give away all of your protections. Make sure that your offer either makes the deal contingent on your getting adequate financing and an acceptable survey, or provides you with sufficient time to secure financing and a survey before requiring you to go forward with the transaction. This is standard in some forms of offers and not in others (the Yacht Brokers Association of America, YBAA, form contains this provision).

  Second, the offer should contemplate the complexities of the survey, the most important thing that you will do in the boat buying process. Does the boat need to be hauled so that the surveyor can check the bottom? (Many surveyors will want the boat hauled several days in advance so that the hull adequately dries.) If so, the haul and launch will need to be scheduled. The boat will need to be sea-tried (motoring the boat in a waterway to check engine operation and other equipment). Who will captain the boat during this time? Will the engine
need to be commissioned and decommissioned? Is the boat insured (particularly if the purchase is occurring off-season)? While all of this is at the prospective buyer’s expense, it is important that these issues, including timing and logistics, be negotiated and agreed to up front. Don’t just focus on the price of the boat.

  Having an Offer Accepted

  Sometimes offers and transactions get a bit complicated. There might be delivery terms, logistical problems for surveys, and things like that. Although the day that the seller finally tells you that your offer is accepted is a truly wonderful day, you do not have time to celebrate—except maybe for a glass of wine, as there is always time for a celebratory drink: you have work to do. Work very diligently to secure your financing, and have a surveyor hired and surveying very soon after the offer is accepted. You need the information that the surveyor has, and so do your financing and insurance companies.

  There is a deadline in the offer, a date by which you must complete your obligations. Standard forms have different terms for it, although the YBAA calls it “acceptance of yacht.” You might have only two weeks to “accept the yacht,” and that period of time is very valuable. Get that survey report quickly and start calling around for quotes for fixing certain problems. Find out how much the repairs and desired improvements would cost, and don’t trust any one person. Learn everything you can about the boat and be sure that all of the logistics of boat ownership are in order. The scope and scale of any problems must become known to you right away.

  The period after an offer is accepted and before the deadline for accepting the transaction is a very special and important time for a buyer, and the time belongs entirely to you. The seller cannot walk away from the transaction, but you can. It is important to use this time wisely—and the clock is ticking.