Clauses Needed in an Offer ?

[phboujon]

Hi,

I am getting ready to make an offer on a boat. I do not have a buyer broker, so I am dealing with the seller's broker on my own.

What clauses are acceptable when making an offer? I am planning to include:

Subject to:
- Sea trial
- Marine survey
- Engine inspection (i.e. compression test and oil draw)
- Getting financing
- Getting insurance

Is that reasonnable? Anything else I should add?

is there a specific format of offer I should follow, or can I create my own.

Thanks
Philippe

[DaveC]

Sounds reasonable to me, except that I would probably have the financing arranged for the price range of the boats I was looking at before I actually made an offer.

Typically, after the survey there is another round of negotiations anyways so the pre-survey offer is only really a starting point. Surveyors always find something...

[sailorboy1]

I would also read though the paperwork on the look out for anything along the lines of 'time is essential" to date of closing and if there are any clauses about not getting a deposit not returned. If they are there line them out and initial as these are to screw you and pay the broker if the deal goes bad.

[FrankZ]

Personally I think the first three are reasonable.

A seller shouldn't have to deal with your lack of financing or inability to get insurance. Presenting a boat that is in the condition described is really what they are responsible for so basing sale on survey and sea trial (the engine survey might be added) is reasonable to me.

[alaskamountainman]

"A seller shouldn't have to deal with your lack of financing...". I respectfully disagree. Without means ($) no one gets paid and the deal doesn't happen. Real estate offers often include this clause because most home sales are financed. If the owner and broker wishes to only deal with buyers with cash on hand, they are eliminating a large portion of the market. The price paid for the vessel will reflect this as well, if and when it sells.

[rebel heart]

The only thing I added in was that it was subject to finding a slip in a marina. San Diego is terrible for availability, and more to the point I was putting the work on the broker. If he wanted the sale, he can help find a slip to put the boat in.

[phboujon]

Thansk for the replies! It's very useful.

[S/V Illusion]

I think the point about a financing contingency is frivolous and would never agree to such a contract offer although it is not uncommon in real estate which is typically a different transaction.
Why would anyone waste their time not to mention the time of a broker and seller essentially "kicking tires" until he/she knows they can afford/finance the purchase?

[phboujon]

I heard that boat loans depends on insurance which depends on survey, therefore woud'nt financing be part of an offer?

I am not asking about this particular offer as the boat price is low enough that I can finance it myself, and therefore will not include financing in my offer, but the question may apply to other people researching the same.

Thanks
Philippe

[S/V Illusion]

I know some buyers put financing as a contingency, however, I'd never accept a contract with such language as it puts my boat off the market for someone who has neither the courtesy or common sense to first figure out if he can afford it before signing a contract. I guess the more fundamental question is why would any seller agree to such a stipulation which shows the buyer hasn't bothered to do what everyone is required to do in real estate or other financial transactions, that being to obtain the equivalent of "mortgage pre-approval"?

A parenthetical issue is that most sellers world, for this and other reasons, much prefer to deal with cash transaction in which everyone gets a better deal so why would a buyer complicate or jeopardize the deal with financing?

Lastly, buying a depreciating asset is always a bad fiscal decision and anyone who finances ta boat purchase is already demonstrating a dubious practice and unnecessarily over-complicating the transaction which only further sours the expectation of a trouble-free deal.

Others certainly may disagree with the need to fiance but not with the fundamental reasons why it is a bad idea.

[TabbyCat]

I heard that boat loans depends on insurance which depends on survey, therefore woud'nt financing be part of an offer?

You can get pre-approved for a boat loan, and that makes your offer more attractive to the seller.

You can also get pre-approved for insurance. The "indication only" insurance quote will be pending underwriter review of a hauled condition & valuation survey before the quote is final. But at least you will know in advance that you, the boat (if sound) and your navigation area are insurable. Then if the survey comes out awful, the insurance quote will be withdrawn, but that's OK, because presumably you would walk away from the boat at that point.

[drgamble]

Don't overlook thoroughly describing what is to be included in the sale. This is especially important in a heavily accessorized boat. e.g. "all electronics, including but not limted to ST60 depth/wind/knot instruments, Raymarine Chartplotter, Xantrex inverter, etc." You could simply do this by including "all attached electronics"... Definitely call out easy removables - dinghy, galley items, cockpit cushions, sail inventory, safety items, etc.

[denverd0n]

If you can't afford to pay cash, and you do not have other assets that you can borrow against, then you really MUST have a financing contingency in any offer. Even if you are "pre-approved" that is not a guarantee that the bank will loan you the money. Until you have a firm offer on a specific boat the bank is not going to give you a firm guarantee.

As an example, lets say you get "pre-approved"--based on your income and cash available--to borrow $40,000 for a boat. Then, lets say that you decide you are going to pay $45,000 for a 25-year-old Hunter 22 that has a gaping hole in the hull, has been sunk in 3 ft. of water for the last 8 months, has no mast, and is gutted inside. Do you REALLY think the bank is going to loan you $40,000 for that boat? NOT A CHANCE!!!

This is not to say that a pre-approval is a waste of time. They are very useful, in fact, to show a potential seller that the financing contingency is nothing for them to worry about. If the boat is really worth what it is being sold for, the pre-approval means that the actual underwriting of the loan will sail through fairly quickly and easily. But the point remains that a pre-approval is not a firm guarantee from the bank that they will finance any specific amount on any specific boat.

This, by the way, is true regarding pre-approvals on home loans, also. That's why, when buying a house, even if you get a "pre-approval" from a bank, you still include a financing contingency in the contract. If a pre-approval was a firm guarantee from the bank that you've got the financing then it would be foolish to include a financing contingency in your offer on a house. Instead, it is foolish NOT to include such a clause!

And what if you don't have a financing contingency? Then you cannot get out of the deal just because the bank turns down your loan. You are going to have to come up with the money some way, or you are going to lose your deposit. So, if you need to finance the boat, include a contingency clause! If some seller doesn't want to deal with you because of that, that's his choice. Trust me, you will have no problem finding sellers who understand the reason for that clause, and who will have no problem with it, just like when buying a house.

[nautical62]

I also agree about the financing and insurance ahead of time. I know when I've purchased, knowing that those issues are not a risk, has been helpful in closing the deal.

I think the big thing to make sure is that you have a certain amount of time to make your decision and pull out for what ever reasons you see fit. I pulled out of a potential sale when both the survey and my personal inspection revealed too many issues. Just don't loose track of what ever time line the contract states. The seller or seller's broker has little incentive to remind you.

[S/V Illusion]

All good points but I still can't reason why I, as a seller, would take my boat off the market with a financing stipulation anymore than a buyer would like me to keep marketing a boat after which he has signed a contract.
This whole issue appears to swing on the premise that some boat shoppers don't know if they can afford the boat for which they are shopping and are cou8nting on that fact that a buyer's market allows them to window shop.

Question for anyone who may be inclined to respond:
I understand the concept of monthly payment constraints but how does one set a price/budget under which they shop without knowing what they can pay?