How to buy a boat, the right way
Whether it's your first center console, an offshore cruiser, a 100+ MPH speed demon, a slow going looper, or a million dollar (or more) yacht, there is a common word I hear from most of my clients, and that word is overwhelming. The following is a bit wordy, but it is well worth the read, and it will help take some of the stress out of the process.
Smaller boats are generally not to bad. But the bigger and more complicated you go, the more there is to consider. Once you get up into the yacht class of boats, the process is nearly, if not more, complicated than buying a house. If you have owned multiple homes you are likely familiar with the process, but can you remember what the first time it was like to purchase a home? Was it as easy as signing on that dotted line, or was it chaotic, with many things happening at once, with you making out checks left and right?
Houses are easy. You have 4 walls, a roof, some windows, a few bathrooms, and a basic AC electrical system. Maybe you have a garage, or a pool, but does that really add complication to the process? The house you purchased was built to certain standards and building codes. There are construction codes, roofing codes, plumbing codes, electrical codes. That house, the exact same house, was inspected by a 3rd party independent inspector at many stages of the houses construction before that house was first sold. Most cities have their own building/plumbing/electrical inspectors that all sign off on new construction. If you bought your house brand new, then you are typically fine. But if you bought that house as a pre-owned house, it is always smart to hire a home inspector in order to see if previous inspectors missed anything, or if previous owners changed anything after the house was initially inspected. Banks and insurance companies often require a 3rd party independent home inspection. Once a certain threshold is crossed money wise, yachts and small craft are no different.
Boats have hulls, boats have windows, boats have bathrooms, boats have AC electrical systems that you have to plug in to get to work. Boats have generators. Boats have multiple batteries and DC electrical systems. Boats have engines. Boats have transmission and drive systems. Boats have complicated electronics systems with radars, depth sounders, GPS, and chart plotters. I could easily go on and on and on. A key difference between houses and boats is that when houses are sold new, they do get 3rd party independent inspection during the houses construction phase. With boats, they do not have that same level of inspection. For the most part, buyers are expected to take the builders word for things that a boat and all of it's systems are up to all building codes and safety standards. These days, most yachts cost more money than the average entry to even mid level house. Do you really want to take a salesman's word that your yacht is built to all relevant codes and safety standards? Before we get into buying a boat the right way, lets talk about buying a boat the wrong way first.
Buying a boat, the wrong way
The absolute wrong way to buy any boat is to fall in love before doing some very basic home work on your own. Love makes people blind.
Taking a sellers/owners/brokers words on anything is a recipe for disaster.
Buying a boat without a test ride is recipe for heartbreak.
Buying a boat without a full survey from a qualified marine surveyor is a recipe for calamity.
Buying a boat without doing your home work and due diligence is a recipe for misery.
Buying a boat without realizing the true ownership costs is a recipe for going broke.
I could go on and on. When you look at any boat, do not take a sellers word for anything. There are 2 states in the USA in which brokers are licensed are are supposed to be impartial, Florida and California. Brokers are supposed to be neutral, however, their income is tied to the sale and selling price of a vessel. No sale, no income for the broker. That's not to say there are not some good honest brokers out there, there very much are so. Also do not confuse brokers with salespeople. Salespeople have no licensing requirements. With yachts and small craft, the used vessel market is no different than the used car market. It's still buyer beware, everything is just that much more expensive.
Buying a boat, the right way.
Now that we have covered the wrong way to do things, lets talk about the right way to do things.
I always try to draw analogies when and where I can. Part of, but not all of, buying a boat, is like buying a house. Part of, but not all of, buying a boat, is like buying a car. Part of, but not all of, buying a boat, is like buying an RV/Camper. In the end buying a boat is a unique experience, there are similarities to other purchases, but there is nothing quite like buying a boat. The following will help you, and those of you that wish to mail me fresh Maine Lobsters or Omaha Steaks, buy a boat the right way. Click here for my mailing address. It doesn't matter if this is your first center console, your first offshore cruiser, or the first time buying a boat that is hundred s of thousands of dollars, if not more.
Think about and decide what your ideal boating lifestyle looks like. There is no such thing as a perfect boat. You WILL have to compromise. Personally I love a "Down-East" style boat. Your lifestyle will be different than mine.
Do your homework regarding the styles of boats that work with your lifestyle. Try not get locked in to any specific boat manufacturer.
Go look at the boats in person!!! I wish I could say I was kidding. But I have surveyed many boats that my clients were looking at for the very first time. If and when all possible, try to buy a boat you have personally seen and had a test ride in first.
Go through the boat yourself before calling in a surveyor, mechanic, and signing a purchase and sale agreement. When I say go through the boat yourself, I mean really really look and see if anything stands out at you as being out of place or damaged above and beyond what would be considered wear and tear. You shouldn't have to pay me $125/hr more to tell you that the decks are rotting, the cockpit floor feels like a trampoline, the keel bolts are ready to pull through.
Research or otherwise ask what systems the boat has on it. IE does it have an air conditioning system, does it have an electronics package? Ask the owner/broker what works and what does not work. Ask the owner/broker to disclose damage above and beyond dings, scratches, and wear and tear.
If no test ride is possible until you sign a purchase and sale agreement, ask the owner/broker if you sign a P&S today, and you survey and test run the boat tomorrow, are the engines going to make full power or not? There is nothing worse than doing a trial run only to find out the engines are not performing. More importantly, if the owner/broker says yes the engines will make full power, and when on the trial run it ends up being that they do not make full power, make sure you figure out ahead of time who is going to pay for your time and the surveyors time!
Always ask when the last time time the boat was run.
Always ask the last time engines make full power.
Always ask how old the fuel is.
Always ask for maintenance records!
Most importantly, if you can not get clear answers to clear questions, simply pass on the boat and move on to the next one.
Sellers should be eager and ready to sell their boats. In a perfect world, any given boat will have your average typical wear and tear for it's year, all major systems should work. In the event they do not work, it should be disclosed ahead of time. Any damage above and beyond wear and tear should be disclosed. Boats may not necessarily be be professionally cleaned, waxed, detailed, but they should be clean. The boat should be fueled up with fresh fuel, and ready to cruise. If you step on to a prospective boat and it's detailed from bow to stern, you have a serious and eager seller.
If you have specific sensitivities to mold or other allergens, you may want to have a mold inspection done prior to a survey.
Buying a smaller boat, the process.
You have scoured the internet. You have looked at all of the advertisements. Hopefully you have looked the boat over personally, and have taken a test ride to make sure the boat fits your needs. You do not need a boat loan. Your insurance company does not require a survey (or you are not going to insure the boat) What happens next?
If you do not need any documentation for banks/insurance companies, what happens next is 100% up to you. If you like the boat, if you feel good about it, if the engine and boat performs as it should, and if all major systems work. You can take a gamble and buy it as is.
You could have a minor inspection done by a surveyor, without needing a formal report/appraisal, just to make sure the hull is sound and that the fuel/electrical systems are up to safety standards. If you know quite a bit about boats, gasoline, electrical, and if you feel safe without a survey, then happy boating! If you would like a professional opinion just to make sure, give me a ring!
Buying a yacht, the process.
When you get to the point of buying a yacht, on this level most boats are professionally brokered. They are brokered because the average owner does not understand the complexities involved regarding the overall transaction. I have said this before and I will say it again. Imagine watching a movie, in that movie there is a sleazy car salesman. That salesman greets you in a plaid suit, he has a pencil mustache, and greased back hair. That salesperson tells you the car is a "Cream Puff" , and is in perfect condition. The question you have to ask yourself if if that salesperson is simply qualified enough to judge the condition of the yacht. I can tell you from experience, that is not something sales people can do.
The United States is a big country. In 48 of our states, there really isn't much regulation regarding boat brokers. Luckily, in Florida and California, those 2 states do have regulations regarding boat brokers. For all intents and purposes, brokers in these 2 states do have to be licensed. Part of that licensing is supposed to help ensure that your broker is honest and is representing the vessel/yacht in good faith, and that the broker acts in best interests of both the buying and selling parties. Most Florida Brokers, but obviously not all, do act in good faith. I would love to say that all Florida brokers act in good faith, but we definitely have our share of the ones that are experts in playing dumb. After all, they do not get paid unless the boat sells, and in most cases, their income is directly tied percentage wise to the sales price of the boat. I do not want to take anything away from their profession, there are great brokers out there! But doing your diligence as a buyer is a must!
You have done your homework. You have looked at more than a few boats. You have run through the boat yourself, most of the systems check out, you have had a test ride, and you are confident that this is the boat for you. The next question is now what?
There are cash buyers and there are loan buyers. If you are a cash buyer, your bank is not an issue. If you are a loan buyer, ask your bank first about their survey requirements. If the bank requires a survey, then they require a survey.
I would hope that you are going to have your vessel insured. If you are, ask your insurance company if they require a survey or not. If they require one, obviously you must have a survey.
Bank said no and insurance company says no. Do I "need" to have a survey? That is going to be up to you and how much you trust your own judgement and how much you like to gamble.
How is this all going to work?
You are about to sign a purchase and sale agreement. You will have to put a deposit down on a boat. This give you limited exclusivity and access to the vessel. You will likely have to have it surveyed within a specific time window, typically within 2 weeks. I can not stress this enough, SURVEYORS ARE BUSY!!! During most parts of the year, I am personally almost always booked out 10 to 14 days in advance. During the summer time when the weather is unpredictable, sometimes I am booked out more. Before signing that purchase and sale agreement, call around to all of the local surveyors and see how booked out they are. During the busy season, you might not be able to find a surveyor within your purchase and sale agreements time frame.
The next step is you are going to pick up your phone and call me and all of my competitors and ask us when and how much. Those are always the first two questions, when, and how much. Anybody that gives you that price on the spot is starving for work and is probably not the best surveyor. When you call me, I am going to ask you for a website link to a listing so that I can look at it, I am going to ask you where the boat is, and where the haul out is going to take place, I am going to ask you if you want oil samples and engine scans, I am going to ask you if you are going to have your own mechanic look at the engines. You may or may not know the answers to those questions. Better brokers will guide you through the process and hopefully set you up so that you have the answers to all of these questions.
There are typically 5 people involved in the overall process.
4. Captain, unless the owner/broker drives the vessel
5. Boat yard, For the haul out. There may also be a mechanic.
Who pays for what comes down do how your purchase and sale agreement reads. Read it very carefully before signing!
On average the buyer pays the surveyor and boat yard, but if you are a good negotiator, you might be able to split this or work it into the deal. Sometimes the buyer will pay for the captain, sometimes the owner pays for the captain, sometimes that gets split. In most cases, but obviously not all, surveyor and yard fee's almost always pay for themselves in the long run.
Vessel Condition Representation
I talked about this already, but vessel condition representation is always an issue. It would be unreasonable to expect an owner to know if their vessel is up to every last little building code and standard. It would also be unreasonable for an owner to know if a minor system or a seldomly used pump (such as a macerator pump) worked. It would be perfectly reasonable to expect an owner to know if all of the major systems in the vessel work or do not work. It would be perfectly reasonable to expect an owner to disclose any damage above and beyond what would be considered wear and tear. Sometimes surveys get cancelled halfway through the survey due to significant discoveries. Sometimes the haul outs get cancelled for the same reason. You might not buy the vessel, but the surveyor, the captain, and sometimes even the boat yard are all due a fee for their time and for booking their day for you. After all, you did your due diligence, you picked the boat.
Make sure that you have a clear understanding with the broker/owner/seller as to whom is going to pay for what for lost monies and time lost due to significant discoveries. Make sure you have clear language in your purchase and sales agreements! I have seen it all, and I have seen it go both ways. I have seen boats being advertised as being in average condition that were actually in pretty good condition for the year. I have seen boats advertised as being in great condition that were absolute disasters, safety hazards, environmental hazards, or a sinking waiting to happen and just plain old misrepresented as a different year/different model. I said this before and I will repeat it. 2015 power boat from a well known manufacturer. My client was an out of state buyer. Vessel was advertised as being in “great” condition. Do I expect a current owner to know if their boat is up to every last safety standard or building code, no, of course not, that would be totally unreasonable. Do I expect a current owner to know that the air conditioner, hot water heater, and power trim does not work on a $$100K boat before a buyer commits to a survey? Yes I do. Do I expect a current owner to disclose obvious visible damage before an out of state buyer fly’s in for survey day, without hesitation, YES!
When you look at web pages, look at online advertisements, call the selling broker, make sure you ask that broker if they are using any “stock” photos in the advertisement, or if they are pictures of the actual boat!!!
I have seen advertisements where every stateroom has large screen TV’s, surround sound systems, fancy lighting etc. Once you get to the boat you find that there are no TV’s, no surround sound systems, no fancy lights, and the interior is a completely different color because the broker used stock photos instead of pictures of the actual boat. It happens!
It's Survey Day!
Survey day is always the most stressful. It is typically a long day. Make sure you have some breakfast!
Here is what happens on Survey Day. Everybody is going to get out to the boat and meet each other, sometimes for the first time. There may be some paperwork that needs to be taken care of. If money has not changed hands yet, it typically will now. Once the meet and greets are all done, the surveyor gets to work. There are 6 major inspection areas that Cape Marine Survey focus’s on.
1. Is the boat safe?
CMS looks for anything that can cause the boat to catch fire for any reason. Fuel, electrical, or any other potential cause for a fire.
CMS looks for anything that can cause a potential electrocution, either in the vessel, or in the water. (Note that stray current testing is not done as part of normal survey, and is only checked upon request)
Anything that can potentially cause a boat to sink.
Any other hazard.
2. Is the boat built to USCG and ABYC boat building standards?
Better boats are, lesser quality boats may not be. The most common issue is people will buy boats and then either add things to them, or alter them in a way that the vessel is no longer up to all relevant laws and standards, potentially rendering a vessel unsafe. Whether or not any boat is built to USCG Regulations/ABYC Boat Building Standards can effect the vessels insurability.
3. Does the vessel have all required safety equipment onboard?
4. CMS assess the overall condition of the hull. If you are a first time boat or yacht buyer, understand that all boats will get water into the coring material over time. Most boats that sit in the water will eventually get blisters. Most boats experience disbonding or lamination issues as they age. All of which are wear and tear and all of which are fixable. Also understand that just like everything else, boats have a limited service life. Ask yourself, how many 30 year old cars do you still see on the road on a regular basis? Do you really want to get into a 30 year old boat?
5. CMS goes through all of the systems on the vessel in order to see what powers up and what does not power up.
6. A limited trial run is performed to assess engine and vessel performance. Note that CMS does not pilot the vessel.
Finally, a survey report will be generated at the end of the process. The report is an accurate description of the vessel and it’s system on the day the vessel was surveyed. The report includes a professional appraisal and market analysis that a buyer can use as a negotiating tool.
If there is a separate engine mechanic/surveyor, they may require access to the engines for a better part of the day. If the buyer wants a compression test on gasoline engines, that should be done prior to survey day as there simply is not enough time and space for the surveyor and mechanic to work around each other.