Owner Financing - A Bad Idea to Ask ?

[Sandero]

I don't see why this cannot work. it certainly can save cost of financing going to a bank, which in effect can go to the seller.

With credit hard to secure it may be the ONLY way to sell some boats.

The stinking point for the seller is getting the payments and recovering the boat after a default.

How would one deal with the fact that during the course of the contract the equity is moving incrementally from the seller to the buyer and at the mid point it becomes more the buyer's than the sellers?

How do you deal with both depreciation and appreciation from refits and market demand?

This is an interesting concept to contemplate. I like leaving bankers and brokers out of it though. hahahaha

[James S]

I think in this financial climate asking the owner to carry the paper should come as no surprise to them at all!
If I was the seller my bottom line would be collateral other than the boat....If you can do that, you're probably in a strong position

[SweetSurrender]

Originally Posted by nautical62

SweetSurrender,

As I look at today's financial times: all the businesses and people who are in a world of hurt because they over extended themselves on loans, it makes me even more warry of the financial commitments I make. If you can not get financing, perhaps the "boat of your dreams" is not a purchase you should be making. Have you considered keeping the dream, but compromising on what boat you need to fulfill that dream?

Well I may have slightly overstated the purchase. It's not the boat of our dreams technically (what I now call my "Armageddon Boat" which is approximately $1.7M and not yet released... so it may change). The boat we potentially want to buy is as close as possible without skimping too much on the things we want/need to have.

[David_Old_Jersey]

Originally Posted by MV

LOL! Well, in this case, the owner has nothing to worry about. I have done nothing but rebuild, refit, redo, and re-sand and re and about everything in sight! In this financial climate, I dont know if my boat would sell, but I really would like to think that what I have done so far is genuine added value!

Michael

Ooops My previous post was a general point, not aimed to your case - I was thinking more about someone doing a refit / rebuild on a boat that didn't need one - and doing it badly or only partly. But as I said, depending on circumstances I would not let this put me off - albeit I have no intention of ever selling mine

[SweetSurrender]

Originally Posted by MV

LOL! Well, in this case, the owner has nothing to worry about. I have done nothing but rebuild, refit, redo, and re-sand and re and about everything in sight! In this financial climate, I dont know if my boat would sell, but I really would like to think that what I have done so far is genuine added value!

Michael

So true...The "note holder" would have much to gain by selling us our boat if they were going to take it right back - lots of fun projects in mind already. This is the kind of thing I think when the possibility of "repo" comes to mind however unlikely in our case because we believe we're really doing our planning. *Crossing Fingers*

I understand how some would be afraid we'd sail off into the sunset with our purchase, but that's what references and credit checks would be for.... Yes, true, there are thieves but thieves don't typically have good references (unless they are damn good thieves). We've got good references and good credit and no criminal records , just not very many options for lending.

Here's the issue we're facing... some banks/credit unions won't finance a liveaboard. Some liveaboard financers aren't lending because of "insert their such and such reason" = economy. I'm sure some are financing, but who are they really and did you personally do business with them recently? We'd like to know. What we're experiencing is something completely different when we go to "the banks that are still lending". I'd like to know who they are lending to.... the guy with 80% down???

I also know that this economy is forcing some owners to get out of their purchase because their life leads them elsewhere. This could also be a way for an owner to help them get on with their life. Perhaps they don't have the sum of the purchase price in total, but they do have a source of income for a short while until the debt is repaid (considering extra purchase price value and interest).

I think proposing this is a win-win and we greatly appreciate all the forum contributors who have said they've done it which gives us the courage to ask.

What we are thinking about doing is give our offer contingent on test sail, survey, and financing by bank or owner (any other good contingencies I'm missing?). The offer would include a proposal for interest and perhaps additional purchase price value (this part we're still thinking through..). We're thinking this will put a seed in the owner's mind to imagine the interest and additional purchase price they may earn on the purchase. I think of it as making the deal a little sweeter for the owner.

Everyone's thoughts?

[AnchorageGuy]

if you guys hook up with a good broker in your area he will work with you to either determine that you can be financed through lending institutions that he uses or that you are not going to qualify. Remember these guys deal with financing every day and there are lending institutions making loans on boats every day. They are going to continue albeit with tighter requirements for the borrower such as higher down payments, interest rates and credit scores. NEVER apply for a loan, insurance or anything else as a live-aboard. You can be a casual owner the day you buy your boat and suddenly become a live-aboard two days later but stay away from this area for loans, etc.

[svHyLyte]

Michael--

Given everything you've had to do to your yacht to bring her up to snuff, the Seller should have been making payments to you! Cheers for you!

s/v HyLyte

An important point I included in the contract with my buyer is that in the case of a repo, any costs to return the boat to the condition it was in on the date of sale, as well as any costs or liabilities incurred by the buyer through ownership of the vessel will be the responsibility of the buyer. I itemized the big concerns such as taxes, slip fees, and liens. On thee buyer's behalf, I also wrote into the contract a complete inventory list, and had him sign off on those items. I do agree there is a big difference between carrying paper on a $25k boat, vs a $125k boat. Rule of thumb for me is to never finance more than I can afford to loose., then make it clear to the buyer that I always collect.
From homes to boats to cars, I have never hesitated to ask, and have built some very good friendships over the years with these deals.
Out of 6 homes, I have had 5 that were, at least in part, owner financed. Because I asked. Out of 9 boats, 6 were financed by the owner.

[Stillraining]

SS:

If you dont find a willing seller..I have a 30' power boat..I'd finance for you.

[SweetSurrender]

Originally Posted by Stillraining

SS:

If you dont find a willing seller..I have a 30' power boat..I'd finance for you.

Thanks Stillraining, but we're sailors now.

[SweetSurrender]

Originally Posted by Chuck Baier

if you guys hook up with a good broker in your area he will work with you to either determine that you can be financed through lending institutions that he uses or that you are not going to qualify. Remember these guys deal with financing every day and there are lending institutions making loans on boats every day. They are going to continue albeit with tighter requirements for the borrower such as higher down payments, interest rates and credit scores. NEVER apply for a loan, insurance or anything else as a live-aboard. You can be a casual owner the day you buy your boat and suddenly become a live-aboard two days later but stay away from this area for loans, etc.

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

I am a bad liar.

[Ex-Calif]

Originally Posted by MV

We even re-negotiated a lower final price after the termite / V berth fiasco emerged about 5 months after signing the contract.

Michael - Always enjoy your posts and this is not aimed at you. I know you are the number one termite fighter on the forum...

However, You have raised a huge issue with owner financing. The buyer now has leverage over the seller for the term of the loan.

Man that would be scary as the seller.

[SV Someday Came]

Originally Posted by Ex-Calif

Michael - Always enjoy your posts and this is not aimed at you. I know you are the number one termite fighter on the forum...

However, You have raised a huge issue with owner financing. The buyer now has leverage over the seller for the term of the loan.

Man that would be scary as the seller.

I am slow. What issue did I raise??? I do not understand how a buyer has leverage over the seller?

[TaoJones]

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.

Misrepresenting the facts on your application may void your insurance contract, and in the event of an otherwise-covered loss, you might receive nothing on your claim beyond the reimbursement of your already paid premiums. For a total loss, this could be a life-changing experience, especially if you are financing the purchase inasmuch as you must still make the payments on the loan.

TaoJones

[Ex-Calif]

Originally Posted by MV

I am slow. What issue did I raise??? I do not understand how a buyer has leverage over the seller?

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.