FSBO transaction (contract, escrow, lawyers, etc)

[sailingharry]

I'm on the verge of buying a boat that is FSBO. I've never met the seller, or seen the boat. We are going to be seeing the boat later this month, and based on the model, pictures, and lengthy discussion with the seller, there is a strong likelihood that we will reach an agreement. Price will be pushing $200K.


Like I said, I've never met the seller. However, our on-line relationship is over a year old, and in certain online circles he's very well known. It's kind of like having Maine Sail reach out and say "hmm... I might sell my boat, you interested." Sure, we've never met him, but his reputation is very strong.


So, the question is the transaction. My first and strong thought was "you need a contract." But then I started thinking, "what kind of contract." I have a sample contract I got for another boat we put an offer on, so I've got some reference material. But then I started wondering what should go into it. He owns the boat free and clear. I will be paying cash (huh? How? $100 bills? Personal check? Bank check? Wire transfer?). If we reach an agreement, the only detail will be the survey. Then we exchange money for boat. Without a contract, one or the other of us could renig -- in which case, the deal simply falls through. If we have no (or small) deposit, not sure what risk that is -- why would one of us say "yes" and then say "no" (except for an honest change of heart, which I don't expect). The risk is the cost of a flight and a survey, basically.


The big money/risk will be the actual exchange of assets -- my handing him the check, him handing me the title. Up until that 30 second transaction, neither of us could get badly screwed. And in that 30 seconds, I sincerely trust this person's reputation enough to believe that he won't take my check and jump into a getaway car.


I'm thinking the biggest thing here is not the contract language (the party of the first part agrees to provide a clear title....blah blah blah), but the meeting of the minds. A simple document, maybe even hand-written, that lists the price, the date, the survey intentions, and the major equipment that will/won't be aboard (for instance, he's already told me the dingy won't be included).


Am I missing the big risk/concern here? It seems crazy to make the second largest business deal of my life as simple as buying a used car from a Craigslist seller.

[Paul L]

It's not an insignificant amount of money. You listed above your understanding of the deal. You put that in a contract and both sides sign it. Then you know both sides have the same understanding. You can use a documentation company to escrow the money that you wire to them.

[Checkswrecks]

A contract can be whatever you and the seller want to say. I've done a purchase contract for an airplane on the back of a piece of yellow receipt paper. In addition to the date and our names and the registration number for the plane, it just locked down the price, the condition and flight time, and the date we were going to finish the sale. We wrote the same words on the upper and lower half of the sheet, both signed each half, tore it into two, and we had a valid contract.

This one is big enough to have an attorney work with you on your version of the contract. As I'm also in Maryland, I know there are a number of boat attorneys who specialize in just this sort of thing. So I think the real question you are trying to ask is what specifics you want to have in the contract. To that end:

Basics:
Date of agreement
Both of your names
Make/Model/Serial of what is to be conveyed
Where to be conveyed
When to be conveyed
Price

Then it gets into the "What if" items:
Deposit amount? What happens to it if you walk? If the other party walks?
List the major expensive pieces of equipment present and which need to work at delivery. Who pays for what if they don't?
You already mentioned a survey. Who is going to pay for it?
Surveys find things so who will pay for what and up to what limits?
What if you/he decide to back out? Do you charge him for any of your expenses or can he charge you for anything? (Both unlikely)
Warranty? What if you find the keel is held on by bubble gum a month after the purchase?

You get the idea.

As for transfer of funds, some States have escrow firms and others use attorneys. It usually goes by State where you buy the item, so when you talk to an attorney, see what is the norm in the other State. You can use a firm or attorney that normally does real estate.

[letsgetsailing3]

Seems to me you can find a decent one on the internet that you could both agree to.


As long as it's clear and understandable to both parties, it can work.

[Cheechako]

Use a Boat title agent. For $500 (1999 $) they get you a title search, clean title and escrow until everything is kosher.
About your contract; make sure that all offers or counteroffers etc have time expiration specified, Also, make sure survey/inspection can be rejected for any reason by the seller even if the seller says he will fix it.

[sailing_gal]

I would, at a minimum, hire an independent surveyor to look at the boat and report back to you. You could write the contract subject to a satisfactory survey- that is quite typical, and any seller reluctant to do that would be suspicious to me. Plenty of good surveyors in the Annapolis area.

[Sand crab]

You don't say how it's titled. Selling a boat with a state title is easy and quick. Changing a documented boat over takes longer. Either way a marine escrow company would be worthwhile especially if it's documented.

[wayne.b]

Originally Posted by Cheechako

Use a Boat title agent. For $500 (1999 $) they get you a title search, clean title and escrow until everything is kosher.
About your contract; make sure that all offers or counteroffers etc have time expiration specified, Also, make sure survey/inspection can be rejected for any reason by the seller even if the seller says he will fix it.

===


That's good advice in my opinion but I believe you made a mistake in the wording. The last sentence should read: Based on the survey and sea trial, the sale can be rejected by the buyer for any reason prior to the acceptance date.

The survey acceptance date should be specified in the contract and is normally 7 to 10 days after the survey. If rejected, the buyer should receive a full refund of the deposit minus any expenses incurred. That should be spelled out in writing.

[Cheechako]

Originally Posted by wayne.b

===


That's good advice in my opinion but I believe you made a mistake in the wording. The last sentence should read: Based on the survey and sea trial, the sale can be rejected by the buyer for any reason prior to the acceptance date.

The survey acceptance date should be specified in the contract and is normally 7 to 10 days after the survey. If rejected, the buyer should receive a full refund of the deposit minus any expenses incurred. That should be spelled out in writing.

Yes I agree, I wasn't trying to offer actual wording. Just a couple of comments based on glitches i've seen.
-I once sold a boat through a broker. During the process I counter offered a buyer's offer. The Broker didn't put a "must accept by" date on the counteroffer. The boat sold a couple weeks later to another buyer at full price. The original offerer claimed he had not rejected the counteroffer yet and got a lawyer. It took some money to get it resolved. Lesson: everything must have a time line.
-I have also seen broker's contracts that state the buyer must pay the Broker fee (or partial) if he rejects the boat when the seller offers to repair inspection defects .

[boatman1]

This response is worth exactly what it cost: the reality is that litigation to enforce the terms of a contract is most likely not going to happen, especially if there's not a broker involved. The cost of doing so would be probibitive unless the dollar amount of the transaction is substantial. Contracts allow the buyer to void the agreement for really any reason up to a "trigger" date some time after a survey/inspection period, so any contract is mostly there to assure the buyer that the seller can,and will, provide title after the buyer has spent the money on the survey process. As previously posted, your agreement whether verbal or written should provide that the seller produce documentation that he can indeed produce marketable title, free of encumbrance, before you spend money on a survey. I may be way wrong, but one can probably safely say thet most transactions that fail to be completed are because of the buyer failing to perform.

[sailingharry]

Boatman, I think you have the right idea. As the buyer, I don't really have to worry about the seller flaking out. And as the seller, he really has no risk of my flaking out -- he's right where he started, owning a boat. I'm thinking our "contract" will be a one page document listing the buyers and sellers, the price, the agreed survey date, major equipment inclusions (and EXclusions), and the delivery date. Sign, date, done. The contract, especially in this case, serves to document what we as gentlemen agreed to, rather than a "legal" basis for bringing in lawyers etc.

[sail sfbay]

below is a link to a purchase agreement, with contingencies, similar to one I used recently.


https://www.popyachts.com/Files/Sample_Purchase_and_Sale_Agreement.pdf

[Paul L]

Originally Posted by sailingharry

Boatman, I think you have the right idea. As the buyer, I don't really have to worry about the seller flaking out. And as the seller, he really has no risk of my flaking out -- he's right where he started, owning a boat. I'm thinking our "contract" will be a one page document listing the buyers and sellers, the price, the agreed survey date, major equipment inclusions (and EXclusions), and the delivery date. Sign, date, done. The contract, especially in this case, serves to document what we as gentlemen agreed to, rather than a "legal" basis for bringing in lawyers etc.

You left out all the contingencies.

[Cheechako]

Originally Posted by sailingharry

Boatman, I think you have the right idea. As the buyer, I don't really have to worry about the seller flaking out. And as the seller, he really has no risk of my flaking out -- he's right where he started, owning a boat. I'm thinking our "contract" will be a one page document listing the buyers and sellers, the price, the agreed survey date, major equipment inclusions (and EXclusions), and the delivery date. Sign, date, done. The contract, especially in this case, serves to document what we as gentlemen agreed to, rather than a "legal" basis for bringing in lawyers etc.

As long as you are not worried about walking away from the $600-$1000 you have in survey and costs etc... if the buyer wont participate in fixing something more major...

[sailcrazy]

Based on personal experience, don't forget to address what happens to survey findings...and a test sail (who sails, where to/how long, etc)...does he fix/make whole, or renegotiate a reduction in purchase price, or??. When are you (buyer) and he (seller) committed? And what about IDing specifically what is included with the boat-and what is not/what remains the sellers property. And how long does he (seller) have to remove his property from the boat and you are allowed to "move in", and how the $$ will be exchanged and when. Just a couple of the "issues" that showed up when we bought our boat-lessons learned! But, as has been said, you can write it all down on a napkin, or have a lawyer draw it up, or anything in between-it's all legal, but that way you both know what to expect....and it can save some real bad feelings once things start to roll.