Question about Boat Surveys

[skipmac]

Originally Posted by valhalla360

You misunderstand. Allowing a contingency based upon survey and sea trial is very reasonable assuming the issues found were not readily obvious and the seller didn't inform the buyer before the offer was accepted.

It's the idea that the buyer can walk away for any reason even if the boat is in perfect condition and exactly as advertised that is a contractual problem. If you want that right as part of the contract, I'm going to want the right to sell to someone else if they show up with cash even though I accepted your offer because you didn't commit to purchase.

I could care less what some fool with the Florida brokers association came up with. With an "any reason" clause for the buyer, you effectively do not have an offer.

The clause allowing the buyer to approve or decline the sale based on survey and sea trial has been part of standard contracts in FL for at least 35 years and I can assure you it was not written by any kind of fool in the broker's association since there was no association at that time. From my discussions with others in the business the contracts in other states are pretty much the same.

Regardless, even if the contract states the buyer must give a reason for non acceptance, on a practical basis the buyer could just say that on the sea trial the boat did not perform to his/her expectations and that would be a reason. Also, I have never seen a survey that didn't find something of note in the inspection so once again, in the real world there can always be some kind of "reason". Realistically, why would a buyer just walk away from a deal with no reason after spending hundreds of dollars on a haul and survey?

If you plan to sell a boat with the option to take another offer at any time, even after a valid buyer has put down a deposit and spent a good deal of money on a haul, survey and sea trial I think you will have trouble finding anyone that will accept those terms. If a seller insisted on that option in a sales contract I would then insist that the contract also include a clause giving me a full refund for any expenses I had incurred in the process.

Realistically, why would a buyer just walk away from a deal with no reason after spending hundreds of dollars on a haul and survey? In the real world I think this whole issue is a nonissue.

[skipmac]

Originally Posted by Teknishn

skipmac,
Won't be repatriating for a few months yet. Tryng to finish up a restoration on a 1937 motor yacht. Want to see the project through to completion (hell, somebody has to protect the boat against the owner's stupidity). Still have to divest myself of a couple of pieces of real estate and a couple of cars afterwards. Then, it's back to the States...and whatever adventure that brings.

Hopefully in a few months I'll be done with my restoration and will be on the boat somewhere on the US east coast.

[denverd0n]

Originally Posted by valhalla360

You misunderstand.

No, I'm not misunderstanding anything. That is, unless when you say the buyer has to provide a reason, you actually mean that the buyer does NOT have to provide a reason.

I am curious where you live, and where you have bought boats before. For myself, I have bought boats in three different states within the United States, and have bought houses in five different states. In every one of these cases the contract specified that the buyer could retain a third-party surveyor or inspector, and that the purchase was contingent on the survey or inspection being "acceptable" to the buyer. Nothing more than that. Just "acceptable."

In more than one case I have backed out of a deal because I did not consider the survey or inspection to be acceptable. In these cases I offered no explanation other than that the survey or inspection was not acceptable to me. Period. End of discussion. End of deal.

In cases where I wanted to renegotiate the contract, of course, I offered explanations as to why I thought the price should come down, and what I was now willing to pay, considering the new information I had. This is just a matter of renegotiation, though, and I was never under any contractual requirement to provide any explanations of anything.

Now let's say that I agreed to your version of how theses things work (which, honestly, I would never do), then what does the seller do with the reason that is given by the buyer? Does the seller get to decide if the reason is good enough for killing the deal or not? Do you seriously not see the problem for the buyer, if that is the case? And if the seller does NOT get to pass judgment on the buyer's reason for rejecting the survey, then how does it make any difference at all--to either party--whether or not the buyer shares his reason?

Again, this is a big world and the usual way of doing business varies greatly from one place to another. Maybe in your part of the world what you are suggesting is the norm. All I can say is that here in the United States, as a buyer, I would never agree to the kinds of terms that you seem to be suggesting. And I would never HAVE to agree to those terms, because that is just not the way it is done. Any seller who insisted on terms like those would find himself with a very limited pool of potential buyers--only those who didn't have a clue what they were doing.

[valhalla360]

Originally Posted by skipmac

The clause allowing the buyer to approve or decline the sale based on survey and sea trial has been part of standard contracts in FL for at least 35 years and I can assure you it was not written by any kind of fool in the broker's association since there was no association at that time. From my discussions with others in the business the contracts in other states are pretty much the same.

Regardless, even if the contract states the buyer must give a reason for non acceptance, on a practical basis the buyer could just say that on the sea trial the boat did not perform to his/her expectations and that would be a reason. Also, I have never seen a survey that didn't find something of note in the inspection so once again, in the real world there can always be some kind of "reason". Realistically, why would a buyer just walk away from a deal with no reason after spending hundreds of dollars on a haul and survey?

If you plan to sell a boat with the option to take another offer at any time, even after a valid buyer has put down a deposit and spent a good deal of money on a haul, survey and sea trial I think you will have trouble finding anyone that will accept those terms. If a seller insisted on that option in a sales contract I would then insist that the contract also include a clause giving me a full refund for any expenses I had incurred in the process.

Realistically, why would a buyer just walk away from a deal with no reason after spending hundreds of dollars on a haul and survey? In the real world I think this whole issue is a nonissue.

Who came up with that foolish language doesn't matter. If you are selling don't accept it. You still seem to be missing the point.
- Declining for follow thru or renegotiating based on issues found during the survey/sea trial is reasonable and expected.
- What we are discussing is the idea that the sellers should accept that the buyer can walk away even if the survey/sea trial go perfectly. For all intents and purposes, that means the buyer has made no commitment to buy the boat.

Just as you see it as unreasonable that a seller take on a new buyer while the first buyer is working thru the survey/sea trial process, it's unreasonable that the seller pass up on new buyers when there is absolutely no requirement for the buyer to follow thru with this so called "offer".

I just signed an agreement last week that had no such silly language so it's certainly not a requirement.

Just because it's a standard form doesn't mean its smart or in your best interest. It's perfectly acceptable to make the broker change the form. Since the form is typically written by the sellers broker, it can be done prior to giving it to the buyer for signature.

I agree, that it's unlikely to be an issue but you don't do a written contract to cover what typically happens. If you want to hang your hat on what typically happens, just do a handshake and hope for the best when the ..... hits the fan.

[nauticalnomad]

I am a yacht surveyor and i dont know how to value a boat except for comparison against a similar model.. Anything else is a made up figure.
I always just confirm if requesting a valuation what the owner thinks its worth.. Boats are worth what people are willing to pay for them.
You tell the Surveyor who you are employing as to what price and if he thinks its fair he will state it on the report.
The survey is only an observation as to what condition the boat is in.. The price is determined as to market value. Obvioulsy its all relevent. The surveyors going to laugh if you say its worth a million when clearly its a 40ft benetau thats 10 years old and aged but still floating.

[vjm]

I can't imagine trying to untangle the mess that a contract that requires a "good reason" from the buyer to abandon would entail.

"Hey seller! There is a four foot long section of the hull under the waterline that you repaired with Silly Putty! I am not completing the sale!"

Seller: "Oh I don't accept that as a "good reason" for you to walk away. You have to either complete the sale or I am keeping your deposit."

Good luck with that. There absolutely is a contract formed when contingencies are included in the contract. A contingency is not "the buyer has a right to have a survey and seatrial". Contingencies give the buyer that right, but they also require that the buyer approve the results and release the contingency. It's a contingent sale.

Of course, any buyer and seller can add or delete most terms in a contract, as long as they agree. So if valhalla wants to sell a boat that way, have at it. I agree that most buyers would not accept those terms so the price is going to take a serious beating or the sale will take forever.

And if you are in a normal contract for property (houses, boats, cars sometimes) that includes contingencies and you sell that property to someone else you are going to be in for a nightmare. The buyer can force specific performance, or just sue you for money. If they go for specific performance then the second buyer can also sue you. Sounds dreadful and the kind of thing anyone would prefer to avoid.

Instead, the seller could enter into a normal contingent sale, but reserve the right to take backup offers (if he or she can get them).

[valhalla360]

Originally Posted by denverd0n

No, I'm not misunderstanding anything. That is, unless when you say the buyer has to provide a reason, you actually mean that the buyer does NOT have to provide a reason.

Nope buyer provides a reason or I hold him to the contract.

I am curious where you live, and where you have bought boats before. For myself, I have bought boats in three different states within the United States, and have bought houses in five different states. In every one of these cases the contract specified that the buyer could retain a third-party surveyor or inspector, and that the purchase was contingent on the survey or inspection being "acceptable" to the buyer. Nothing more than that. Just "acceptable."

Michigan, Minnessota, Spain and none have had a buyer can walk for any reason clause. The problem with acceptable is the seller can require you clarify what was not acceptable. Fail to do so with new information and they can refuse to refund your deposit typically.

In more than one case I have backed out of a deal because I did not consider the survey or inspection to be acceptable. In these cases I offered no explanation other than that the survey or inspection was not acceptable to me. Period. End of discussion. End of deal.

Just because the seller didn't hold you to the contract you signed doesn't mean you were right just that the seller didn't hold you to the contract.

In cases where I wanted to renegotiate the contract, of course, I offered explanations as to why I thought the price should come down, and what I was now willing to pay, considering the new information I had. This is just a matter of renegotiation, though, and I was never under any contractual requirement to provide any explanations of anything.

This is what I have been saying is acceptable. If the survey turns up new issues, of course you can renegotiate. Totally unrelated to the discussion.

Now let's say that I agreed to your version of how theses things work (which, honestly, I would never do), then what does the seller do with the reason that is given by the buyer? Does the seller get to decide if the reason is good enough for killing the deal or not? Do you seriously not see the problem for the buyer, if that is the case? And if the seller does NOT get to pass judgment on the buyer's reason for rejecting the survey, then how does it make any difference at all--to either party--whether or not the buyer shares his reason?

Standard contractual issue. Once the seller has the buyers reason, they make a determination if it's reasonable and respond to the buyer.
- If they agree, that it is a reasonable issue, you renegotiate.
- If they disagree, the buyer might back down.
- If they disagree and the buyer doesn't back down and the seller doesn't back down...it's off to court to let a third party decide.

This is the reason for including a deposit. As the old saying goes, possession it 9/10ths of the law. Example: If the buyer wants to walk away over an absolutely perfect survey except they found a 3/4" scratch in the fiberglass that was readily apparent when the buyer first looked at the boat. As a seller, I'm probably not going to accept that as reason to fail the survey.
- Without a deposit, taking the buyer to court is a big hassle and will probably cost me more than I wind up with in damages.
- With a deposit, I notify the buyer that it's not reasonable and will be retaining the deposit as liquidated damages. If the buyer doesn't want to be reasonable, he can hire a lawyer burn thru some cash. I don't even have to hire a lawyer as my worst case scenario is I return the deposit.

Again, this is a big world and the usual way of doing business varies greatly from one place to another. Maybe in your part of the world what you are suggesting is the norm. All I can say is that here in the United States, as a buyer, I would never agree to the kinds of terms that you seem to be suggesting. And I would never HAVE to agree to those terms, because that is just not the way it is done. Any seller who insisted on terms like those would find himself with a very limited pool of potential buyers--only those who didn't have a clue what they were doing.

Oddly, I have 3 purchase agreements from the USA that I have on hand an all of them have what I suggest. No one batted an eye at them because they are fair.

[skipmac]

Originally Posted by valhalla360

Who came up with that foolish language doesn't matter. If you are selling don't accept it. You still seem to be missing the point.
- Declining for follow thru or renegotiating based on issues found during the survey/sea trial is reasonable and expected.
- What we are discussing is the idea that the sellers should accept that the buyer can walk away even if the survey/sea trial go perfectly. For all intents and purposes, that means the buyer has made no commitment to buy the boat.

First, the buyer has made a commitment. He/she has singed a contract, put up a cash deposit and spend a lot of non refundable money up front for a survey and sea trial. In my case that was close to $2000. It would be highly unlikely for a buyer to spend hundreds or thousands of dollars for a survey and then arbitrarily walk away from the deal with no reason. I think the whole question is making a mountain out of an almost nonexistant molehill.

Also, as Denverdon pointed out, who is to decide what is a perfect survey or sea trial? If the buyer says he didn't like the way the boat sailed and rejects the deal then who is the arbiter to say if the buyer's reason is or is not an acceptable reason? Also, I was a broker for several years and I never saw a single survey that was perfect. There were always issues and 99% of the time there were issues that were more than minor cosmetics. Are you going to write a contract that specifies what objections are and are not acceptable? To cover ever possible eventuality the contract would be hundreds of pages.

Just as you see it as unreasonable that a seller take on a buyer while the first buyer is working thru the survey/sea trial process, it's unreasonable that the seller pass up on new buyers when there is absolutely no requirement for the buyer to follow thru with this so called "offer".

No one in their right mind would spend thousands on survey and sea trial, much less expend the time and energy on a boat sale that allowed the seller to sell to another buyer at any time.

I just signed an agreement last week that had no such silly language so it's certainly not a requirement.

Of course it is not a requirement. You can right a contract with any terms or conditions you like but a buyer is also free to reject that contract.

Just because it's a standard form doesn't mean its smart or in your best interest. It's perfectly acceptable to make the broker change the form. Since the form is typically written by the sellers broker, it can be done prior to giving it to the buyer for signature.

I agree, that it's unlikely to be an issue but you don't do a written contract to cover what typically happens. If you want to hang your hat on what typically happens, just do a handshake and hope for the best when the ..... hits the fan.

Don't know where the issue of handshake comes in. We are talking about written contracts.

Bottom line, you keep ignoring the real world fact that a buyer has made a significant commitment in this process. They have spent a LOT of money to survey a boat. Please tell me why anyone would throw away hundreds of dollars for no reason?

[valhalla360]

Originally Posted by skipmac

Don't know where the issue of handshake comes in. We are talking about written contracts.


Bottom line, you keep ignoring the real world fact that a buyer has made a significant commitment in this process. They have spent a LOT of money to survey a boat. Please tell me why anyone would throw away hundreds of dollars for no reason?

You are correct. A verbal agreement (ie: handshake) to buy the boat subject to survey has more teeth than what you are proposing.

You want an example of why a buyer might mess around: The buyer puts in an offer conducts the survey and then a bigger nicer boat comes on the market way under priced before the final payment can be made. There is nothing wrong with the survey but the buyer asks for his deposit back because the contract had no teeth.

Another example: Buyer puts in and offer and then his wife finds out and issues a demand that he stop the purchase. Again, nothing wrong with the survey.

I can come up with more examples if you like.

[skipmac]

Originally Posted by valhalla360

You are correct. A verbal agreement (ie: handshake) to buy the boat subject to survey has more teeth than what you are proposing.

You want an example of why a buyer might mess around: The buyer puts in an offer conducts the survey and then a bigger nicer boat comes on the market way under priced before the final payment can be made. There is nothing wrong with the survey but the buyer asks for his deposit back because the contract had no teeth.

Another example: Buyer puts in and offer and then his wife finds out and issues a demand that he stop the purchase. Again, nothing wrong with the survey.

I can come up with more examples if you like.

I can also make up a few dozen unlikely scenarios and what if this or thats. But in the real world in several years as a broker I never, not one single time, had a customer walk away from a deal after paying for a survey unless they had good reason.

From my experience you're making an issue issue where none exists. And anyone that would sign a contract allowing the seller to decide what is right or wrong with a survey and what reason is valid or not to reject the boat would be foolish indeed. Again, I would only sign such a contract if the seller were liable for all my out of pocket expenses.

[vjm]

I actually think there is a very strong argument to be made that such a vague term, which is undefined in the industry, makes the contract unenforceable.

[valhalla360]

Originally Posted by skipmac

I can also make up a few dozen unlikely scenarios and what if this or thats. But in the real world in several years as a broker I never, not one single time, had a customer walk away from a deal after paying for a survey unless they had good reason.

From my experience you're making an issue issue where none exists. And anyone that would sign a contract allowing the seller to decide what is right or wrong with a survey and what reason is valid or not to reject the boat would be foolish indeed. Again, I would only sign such a contract if the seller were liable for all my out of pocket expenses.

As I stated before, you don't add clauses to contracts to address what typically happens. It's the oddball situation where you need a solid contract. In the vast majority of cases, it is a non-issue but when it does turn to poo, nothing better than being able to point to a solid contract to support your position while the other guy is ranting and raving.

That said, I'm aware of situations where both of these things happened (I wasn't directly involved)

[basssears]

Originally Posted by robert sailor

No, you hire the surveyor and only you get a copy of the actual survey. What you decide to do with the information is up to you.

That is how it SHOULD work, but I have read about surveyors giving the survey to the seller or seller's broker, or talking about things with seller's broker, sometimes even before buyer has seen the survey.

Ethical? No, but it happens, so be extra explicit with your surveyor about this, especially if surveyor and broker know each other or broker recommended this surveyor (often a dicey setup).

[Willy MC]

In regards only to the issue of whether or not the Seller should get a copy of the survey.... No, it's not his survey, it belongs to the Buyer, However if you intend to negotiate with the Seller about items on the survey, my standard suggestion ( as a Yacht broker ) is to give him all of the "Recommendations " pages, nothing else, and in most cases especially not the valuation page unless it is in your favor to do so. Generally, there are a lot of items on the Recommendations and you will only be negotiating on a few of them. It's good to let the Seller see that you are not concerned with the minor issues, but that you do expect relief on the major ones. In the end, it is in his best interest to negotiate with you on the repairs. If you walk from the deal he still has a list of issues that must be dealt with. It never gets better the second time around.
In regards to the complaint about the buyer being able to walk without giving a reason. First off, I don't find it worthwhile to attempt to force someone to buy something they don't want. Only the lawyers win on that one. Secondly, the standard contract has an Acceptance date, placed after survey, sea trials etc. If he isn't satisfied, he deserves the ability to walk without penalty. The Seller may have lost a buyer, but in essence he got a free haulout inspection and a list of deficiencies to work on, which the buyer paid for. Once the Buyer "accepts" the vessel, he is locked in. After that he loses his deposit if he doesn't show up at the Closing table. I've only seen this happen a few times in my career and it is disturbing to watch.

[skipmac]

Originally Posted by valhalla360

As I stated before, you don't add clauses to contracts to address what typically happens. It's the oddball situation where you need a solid contract. In the vast majority of cases, it is a non-issue but when it does turn to poo, nothing better than being able to point to a solid contract to support your position while the other guy is ranting and raving.

That said, I'm aware of situations where both of these things happened (I wasn't directly involved)

As I pointed out before, if you try to write a contract to cover any and all possible oddball cases you will end up with a very thick book and no sane buyer that will sign it.