Owner Financing - A Bad Idea to Ask ?

[AnchorageGuy]

Originally Posted by SweetSurrender

What happens with insurance or the loan should they actually figure out (somehow) that we're living on board?

I am a bad liar.

You will find nothing in your loan or insurance which says you can or can not be a live-aboard or that address this in any way. Read over your current documents if you have both or either. So you are not misrepresenting anything and we nor anyone we know or have ever heard of, and we know lots of live-aboards, have ever had an issue with insurance or loans and remember we were a broker for 10 years. We sold lots of cruising boats. So what is the difference between a live-aboard and a cruising boat. How many of you live-aboards have insurance and have never gone to your insurance company and said "I am a live-aboard". You took out insuarance based on navigational limits. You will be turned down on loans as a live-aboard but there are NO languages in your documents that say you can not become a live-aboard.

[SV Someday Came]

Originally Posted by Ex-Calif

Most used goods are sold as-is without warranty. I don't know the details of your agreement but being able to renegotiate the price after 5 months would never happen with bank financing.

The seller is done at the point of sale.

Where the seller is carrying a significant amount of money, the buyer could come back and renegotiate if they uncovered something months after the fact.

That's not a position I would want to be in as the seller.

There were no special particulars about the agreement. The seller had tried to eradicate the termites the prior year (which I did not know about, or never recalled a conversation), and thought he was successful. But I had made the most serious possible error in buying a boat and frankly, given that mistake, and my ignorance about sailboats he was willing to renegotiate once the rotted bowsprit, rotted V berth core issues came to the surface with such a vengeance.

In short, EC he showed a deeper fairness in business dealings I have not seen in any other man. And you are right: Maybe he wondered if I would walk away. Never thought about that.


Michael

[Ex-Calif]

MV - Yes - I am not trying to relate it to your situation and it sounds like you have great seller/buyer relationship.

I think there are more good business deals than bad ones and it is the bad ones that makes everyone sceptical.

[Celestialsailor]

From the sellers point of view, it's a bad idea. It would show me you have not the means or credit to secure a conventional loan. Especially with 50% down. I saw your website...are people really donating money to you so you can buy a boat and go sailing?

[James S]

Originally Posted by Celestialsailor

From the sellers point of view, it's a bad idea. It would show me you have not the means or credit to secure a conventional loan. Especially with 50% down. I saw your website...are people really donating money to you so you can buy a boat and go sailing?

I think in days past you could make that argument, however, banks aren’t lending as freely as they once did....even to the credit worthy.

[Sam Plan B]

I sold a Dragon hull many years ago and agreed to finance it. I about to leave for grad school and needed the money. The buyer gave me a few hundred dollars down and moved the boat. Poof. Gone. No boat and no more money.

It is hard to finance anything out of the ordianry through a bank. This included boats more than 10 years old. Strange to say, one can finance a new $100,000 boat faster than you can finance a 20 year old boat for $20,000. I suppose that is one of the reasons older boats, even in good condition, don't cost all that much. I saw a Morgon 41 at Lippincot Marina in Grasonville MD with an asking price of $35,000. The thing is, to do the deal you have to have the cash. I bought a Columbia 41 for $25,000. It's a good boat and in better condition for its age than am I.

My advice, save your nickels and cruise boat yards looking for deals.

[anotherT34C]

Originally Posted by Sam Plan B

My advice, save your nickels and cruise boat yards looking for deals.

That's a pretty interesting idea. Buy and attempt to finance a boat from a yard. Maybe rent a slip with them as part of the agreement. Anybody ever try this?

[Charlie]

I know that money is tighter for me now. I don't have as much discretionary income. But lets say that someone is in a real tight spot. You can only spend more than you take in for a limited amount of time. I think that this puts the buyer in a good position to ask the seller to carry a contract. Don't forget that with you making payments on the boat the seller is :

a) getting more income and then b) not having the maintenance, insurance, and berthing costs to deal with. This means that there is a drop of $200 a month (insurance and maintenance), $400 (berthing). So if you are cutting your expensees by $600 and increasing your income by $500 that is like an $1100 a month raise.

I would think that these are good arguements to use for someone wanting to negotiate seller financing.

Would I give owner financing? Only if secured by some other asset. Would I ask for owner fianncing? Of course why not ask. Worst they can say is no.

[SweetSurrender]

Originally Posted by Celestialsailor

From the sellers point of view, it's a bad idea. It would show me you have not the means or credit to secure a conventional loan. Especially with 50% down. I saw your website...are people really donating money to you so you can buy a boat and go sailing?

I wish I could tell you yes, but nope - not a single donation yet to the "Rum Fund" on my website. I thought it was a fun widget and maybe somebody would feel like spotting me $20 to buy a fifth of rum for my first voyage out on my new boat. But it looks like everyone is concentrating on buying their own rum these days.... oh well it was worth a try...

We have now entertained owner financing twice with not so good results. One owner proposed it before we did and we had already walked away from that boat. Another boat we proposed it first and watched as the owner took quite a bit of delight in knowing we were somewhat "desperate" for funding. He quickly pumped up the price to full asking price, hiked up the interest, and changed our originally pretty attractive proposal to downright rape of two very serious buyers. Somebody forgot to tell this guy it's a buyers market.... So far we have learned that owner financing is playing with fire for the buyer too. It has been a rotten experience and no matter how much we like the boat we're not buying it now because it's got some bad ju-ju....

As far as the bank denying on the basis we don't have the credit or means... This is not the case in our situation. Credit and means are present, just income to debt ratio is not good enough for People's Bank (my partner's ex refuses to let my partner off a mortgage and it is going to court). Banks are clearly getting much pickier and it is also clear that the economy is making this happen.

Good news is we were successful in getting a credit union to help - so all is not lost and we should have a boat shortly.

[David_Old_Jersey]

Originally Posted by SweetSurrender

We have now entertained owner financing twice with not so good results

I would disagree. You now have two results that tell you (first hand) that owner financing is an option in the real world (and not just a wild and crazy idea) - just haven't found the boat and deal to suit.....but I am sure you will , and my hat off for not jumping at any deal

[bene505]

Buy a repo boat. You wil get a good deal, and the bank that currently owns her will gladly give you a loan, sometimes at a reduced interest rate.

Originally Posted by SweetSurrender

In today's day and age of charging your dreams... we have realized that we'll need some more cash to get the boat of our dreams.

This means we have to finance the boat. Financing has been tricky these days to find and we're still searching....

If we are unable to find financing, is it bad form if you have over 50% down to ask the owner to finance the rest? I know some of you are brokers (or were). Could you tell me from your experience if this proposition worked?

[Chattcatdaddy]

I bought my Cal 29 with owner financing. The previous owner was a little apprehensive at first. I told them to write what they wanted the contract to say and we all went to the bank and I had automatic payments set up to go directly from my account to their account. Gave them about a 40% down payment and agreed to not take the boat from the area until I paid it off 6 months later. Owner also carried insurance the length of the financing.

If I had had the money up front I most likely would have saved about 10-20% off the final price. If the buyer can make it a short term payment plan then an owner might be more inclined to consider the offer.

[Seaventure]

When we bought our boat we were strapped for cash. We had some property on the market and were waiting for it to sell (before this current market situation). We wrote up a contract with the seller and offered to give him chunks of money at specific intervals along with a decent down payment. We were willing to leave the boat at his dock but he decided to let us take it. He was nervous, but went for it. It worked out great for both of us.

[btrayfors]

No question that the current credit situation is tight. Perhaps worse than we've seen in several decades.

However, IMHO a seller needs to be very, very careful with self-financing. Quite apart from the dollars and cents computations, and the credit worthiness of the buyer, there's the liability issue.

In this litiginous country of ours, I'd be very wary of an arrangement wherein I was responsible for any part of a vessel not under my personal posession and control. Particularly with larger boats.

In a very real sense, boats are financial weapons just waiting to unload.

I know personally of a situation in which the owner "carried the paper" when he sold his boat. The buyer moved to another marina, didn't take care of the boat, the boat sank, spilling many hundreds of gallons of diesel into the water, then disappeared. The boat was not insured at the time, I believe.

The hapless seller was deemed to be liable, and was hit for the costs of cleanup, refloating of the vessel, fines, past dockage, etc. It was a terrible case which also resulted in the guy losing his new boat....along with his shirt!

Be careful. Let the banks and credit unions do the lending. One of these days they're gonna come to their senses and realize they can't stay in business without lending money (bankers never were the brightest bulbs in the pack)

Bill

[roverhi]

We sold one of our boat and financed it. We did not change the title till the boat was completely paid off.. It was officially a lease option with 30% down and payments based on 10% interest/10 year amortization. 10% interest was actually a good deal in the mid '80s. It worked out well for both of us. You just have to find a seller willing to go along with you. Probably not that hard in these wonderful economic times.

Aloha
Peter O.
Pearson 35

Alp