How Does the Offer / Survey / Purchase Process Work ?

[Capt Phil]

Suggest you read and digest Capt D's post, Sailorcanuck... He is obviously very experienced and in the midst of negotiating a deal on his new boat. The issue of liability during yard time is important and a great suggestion. Many times a surveyor will be reluctant to give you a figure on repairs... if that occurs, have the yard give you an estimate or at least a range from best to worst case. Then you will have a basis from which to bargain. Make certain you have an escrow account establishd by a reputable broker, attorney or bank to keep track of deposit funds, expenses incurred that the payment of is not yet decided. Also the survey should be acceptable to the buyer if you are paying for it. Good Luck... Capt Phil

[socalsailor]

Years ago when I bought my Catalina 30 I made an offer that was what I considered to be just a bit above a low-ball offer taking into account that I saw the boat before the owner cleaned out his personal stuff "boxes of half empty booze bottles". The boat was a dock condo with little sea time, I found a silk purse that looked like a sows ear. after a short sea trial the boat went to the yard for haul out and survey. The suveyer found minimal blemishes, nothing serious. The rigging survey was ok, rig in need of tuning and masthead sheaves. I adjusted my offer to reflect repairs and the offer was accepted. It all went smooth. I am now in the market again and I am finding that in this economy it's a buyers market, offers half of the asking price is not uncommon, how long this will last is hard to tell. I am keeping an eye on two things, 1) the boat that I want and its price. 2) the current market trends. I am taking my time to find a boat that fits my criteria but if prices start going up by next summer I may have to hurry the process.

[MitchM]

one of the the biggest ticket items is the engine. most surveyors can't won't survey the engine. so request copies of the maintenance and repairs log, and repair bills. if they look reasonable, hire a professional mechanic to get an independent appraisal of engine health. he or she can tell a lot by spending an hour in your engine room. check for bad mounts? $800 to $1,000. damaged transmission and gearbox from engine running on worn mounts for 25 years? $2000 and up... and so forth ...

a friend spent 11 years of his life as a professional welder doing the hull work on his bruce roberts 36. he fittid in out topnotch with yanmar 3JHE 40 horse engine, rolls batteries, furlex furlers, bimini, great sails.. then screwed up the interior with a weird looking wooden floor made of off cuts of scrap timber not wanting to spend $ on teak and holly. asking price 90K, on the market 2 years til it sold for 45K...

[bobofthenorth]

We're right in the midst of the process now with a 43 Defever under offer. It seems to me that the system is loaded against the seller, not that I mind that now but it won't look so good whenever it comes time to sell. In our case we made a written offer after a thorough personal inspection but without any deposit. It simply isn't practical for Canadians to offer a deposit with the offer unless you have virtually unlimited time. We have 10 days available so we didn't want to hold up the process and the broker was agreeable to submitting the offer without a deposit.

We've done a lot of real estate deals and always used an appraisal to determine our offer or asking price but that isn't an option in the boat business because there is no central publicly accessible price registry. In the real estate situation you can go to Land Titles and the selling price has to be disclosed, at least in Canada that's the way it works. In the boat business it appears that asking prices may have little relevance to selling prices but there is no way to confirm that. We've been looking seriously for about 4 years now and really seriously for the last year so we felt we had a handle on the likely real value of the boat but at some level its still just a WAG.

Once the seller accepted our offer we instructed our bank to transfer the deposit into an escrow account but those funds won't likely arrive until after the survey is completed because they are an international transfer. We've hired a surveyor and a yard for Monday. After that the negotiations will start all over again because the only right that our offer really gives us is the right to walk away if the survey is unsatisfactory. That's still loaded against the seller but it's not as if he absolutely has to remedy any and all survey deficiencies. He can still say "NO" and we can still decide to take the boat anyway. Our only right is the right to walk if the survey comes up short. We made our offer contingent on obtaining moorage until July 2011 but in this market that simply wasn't an issue. The marinas are happy to have somebody who wants to lease the space.

[CarlF]

Don't get your heart set on a "great deal". Sure it happens but it takes luck and a willingness to walk away from a lot of boats. How much is your time worth per hour of boat shopping?

Extremely experienced people also tend to get a better deal - mostly because they know just how hard it will be to fix something and will probably do the work themselves (again without really charging for their own time)..

I don't fall into either of the above groups.

Out of the survey there seem to be three options:

1 -- the boat is in great shape and the surveyor finds a thousand dollars or so worth of stuff (in my experience they always will find enough to cover the buyer's survey cost so that the buyer feels good about getting a survey). Most sellers are expecting this and will reduce or fix.

2 -- The survey turns up repairs in excess of 10% of the offer that are a "surprise". Something like "old sails that need to be replaced" should not be a surprise and should already have been factored into your original offer. In this situation, I would walk away. "Surprises" are bad - they tend to become nightmares. Do you really want to buy a boat that the owner didn't maintain well?

3. -- The survey turns up a number in between 1 and 2. In this case, you negotiate and settle in the middle. Where "in the middle" lies depends on the seller's hurry. Don't believe the stories that all sellers are desperate. The desperate ones usually have poorly maintained boats. I assume you are want to buy a well maintained boat. The last two boats I've sold and the last three boats I've bought were in group 1 above.

Carl

[SuenosAzules]

Was reading this post. For the most part agree. There are qualified enigne surveyors out there. Just make sure they are a member of SAMS or NAMS, and are actual mechanics. I have a link to one good engine surveyor on my website. As far as estimates on repair work, I can tell you that Capt. Phil is right, most surveyors are reluctant to give estimates for repairs as that is out of the scope of what a surveyor does (unless it is a damge claim survey). In the case of a damage claim survey, then quite honestly what the surveyor does is get an estimate from the boat yard and negotiate some of the labor and cost for supplies down a bit if it looks to high. Then they submit it on the damage claim report. A survey does not speculate on anything. The survey just reports findings and recommendations. "I came, I saw, I left on this time on this date." Thiat is how a survey is mainly written. You can get on that slippery slope with the client, your professional organization, and legally if you speculate on much in a survey or verbally in a report. Especially if the actual cause is something different than your speculation. So I am like Joe Friday.. "Just the facts."

[Khagan1227]

When buying a boat, is it permissible to ask for a specific surveyor?

As with any inspector, there are those that are really good and those that are really bad. I'd feel much better using a surveyor that has good recommendations when I'm buying a boat that I will trust my life to.

[Capt Phil]

Bobofthenorth... if you are dealing with a US broker, he has access to sales figures of similar boats to the one you are buying in the geographical area in which your prospective boat is lying. Getting comparables on boats in simillar condition with similar equipment should be part of your due diligence. IMHO, the boat you are looking at is well designed and seaworthy. I owned a DeFever for about 5 years and lived aboard for that time and she was everything I had hoped she would be and more. DeFevers tend to go for a bit of a premium if they have been well maintained. Nevertheless, as well as a marine survey, I would have a mechanic check out the power systems including an oil analysis. I suspect the reason the broker is happy to present the offer without earnest money is testament to the fact that the market place is not exactly on fire at the moment and offers are hard to put together. I suggest taking SuenosAzules up on his offer to get lined up with a qualified mechanic. Marine surveyors work with folks they trust and I would go with someone they have worked with before. I assume you have already seen the boat and have a good feeling about the vessel. Try and spend at least a day or two aboard the boat your self. This might be difficult if she is currently being used as a live aboard. Good Luck with your purchase... I met Art DeFever several years ago in San Diego and he was not only a great designer, he was a wonderful man to spend time with... cheers, Capt Phil

[Capt Phil]

Khagan1227... the surveyor works for you... you decide who you want to undertake the survey. Make certain the are licenced and familiar with the type of vessel you want them to check out. Don't be pushed into a surveyor that the broker recommends unless YOU feel he/she will represent your interests and give you a fair and balanced opinion. Try and get testimonials from the surveyors' prior clients. Choose one who is familiar with the type of vessel you are looking at. By and large, these folks are professionals and their reputation is their best asset. On occasion, as a seller, I've commissioned a survey of the boat I was selling to give me a qualified opinion as to whether the condition of my boat was as good as I thought it was. I have also made the survey available to qualified buyers which in a couple of cases helped close the deal.

[tartansail]

Great thread and, for us, very timely.

We're in the process of buying a Tartan 40 as our "get ready to retire" boat. It's our second Tartan and third boat. Price flexibility seems to vary with the number of boats on the market and the seller's motivation. Here in the Northeast US, boats are out of the water for the season which adds some twists to the process. Our approach:

We're working with a broker who is brother of a friend. He has access to actual purchase prices of the kinds of boats we've been looking at and, in some cases, knows the boats and the circumstances of the sale. That information was very helpful in guesstimating the likely price we'd end up with in the initial negotiation.

Gave a 10% deposit with the offer which my broker put in escrow. We negotiated a price that included terms of settling yard bills and an escrow specifically for things that can't be tested until the boat is in the water in the Spring. The boat is in storage with stick down. Some work has been done as part of winterizing. Spring will bring the reverse. We don't want to be surprised by unpaid yard bills that aren't ours and need to be settled pre-launch.

Boat was surveyed by a very knowledgeable surveyor up this way who had surveyed our last boat. Survey was eight hours of an extraordinary education. Do not miss the opportunity to be on board when the survey takes place. Final report is pending, but findings included a few modest surprises -- one of the water tanks is leaking, Ideal windlass needs seals, one of the winches needs work. My take has been that stuff should work, but, in a twenty year old boat, not be new at the price I'm paying. The tanks shouldn't leak. The winches and windlass should work and not drip oil. Owner heard about the tank and is already on it. I'm awaiting the full report before discussing windlass, winches, etc. I expect to negotiate an adjustment.

Hopefully, this will all be resolved within the week.

[Capt Phil]

Good addition to the thread, tartansail... I had neglected to mention the importance of being present at the survey unless you are 1000's of miles away. Not only do you get a good walk through, the surveyor will carefully check things you might overlook or give just cursory attention to. I've been around boats for nearly 60 years and I still learn something everytime I've been aboard with a marine surveyor... Capt Phil

[hellosailor]

Anyone making a deal can propose any deal they want.

With a boat purchase you probably should put something (5-10%) of the purchase price into an escrow account, which is held by the broker or attorney or bank until the terms of its release, i.e. "$5000 to be held in escrow against engine repairs if engine is not fully operational by delivery date".

Making your offer or setting your escrow to refer to "concealed defects, structural defects...any non-cosmetic repairs necessary for the safe operation of the vessel" should give you room to consider things. Expect some back-and-forth, but if the seller throws a fit about "concealed defects, damages, or acccident repairs"...well, then you know they're hiding something.