How to Buy a Boat
Part two of a two part article on buying a boat. Learn how to properly inspect a boat for engineering problems and a clean title before purchasing.
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In Part One, I discussed how a new boat buyer can protect himself or herself from the boat yard's financial trouble and from the catastrophic loss of the boat while building. This article supposes you have found a used boat you want to buy.
There are two areas of possible trouble with buying a used boat: the boat could have engineering issues, and the boat could have bad title.
Engineering issues will be addressed by your own inspection, by survey, by sea trial, by warranty, or by some combination of the four.
First, Inspecting the Boat
Anyone buying a boat will give it a careful inspection, sighting down the hull in good light for evidence of significant repairs, inspecting the bilge for evidence of flooding or bad leaks, giving the rudder a hard shove to see if it moves much in the bearing, etc. General housekeeping is a good indicator too, for if the owner was a slob about the visible stuff there's a good chance he ignored the preventive maintenance too.
Maine law says the seller who knows the boat was damaged or sunk is under no duty to volunteer the information – but if you ask, he or she must answer honestly. So ask the owner very plainly whether the boat ever flooded or sank, or ever was involved in a collision, fall or fire. You may learn something that gives you pause, and if the seller answers in the negative and you later learn that there was such an incident, you may have a case for fraud or misrepresentation.
Include a Survey in the Purchase Contract
If you like the boat and it passes your inspection and you and the seller come to terms, you and the seller should sign a purchase and sale contract. The contract should identify the boat, state the price, the terms, the closing date, and whether your obligation to buy the boat is subject to satisfactory survey. That language, generally but not always included in the purchase and sale contract, gives you a set amount of time to arrange for a survey of the boat. If you are happy with the survey – or if the survey deadline passes and you didn’t get the survey done – you commit to closing the sale or forfeiting the deposit. With most contracts, if the survey turns up anything you don't like, anything at all, you can walk.
Read and understand the contract before signing. You can expect to pay a deposit. The Yacht Brokers Association of America (YBBA) has a good contract, and if a broker represents the seller you will probably see a YBBA contract.
A full discussion of the terms of a solid purchase and sale contract is beyond the scope of this article. However, understand whether you are buying the boat as is, with no warranty except as to title, or with some sort of warranty. "As is" is typical for a used boat sale. However, if, holding your nose, you are buying a boat without operating it, perhaps the seller will agree to give you a 30 day warranty from launch on the engine and drive system.
Choosing a Surveyor
In choosing a surveyor, keep in mind that some are experts in steel or aluminum, some - not so many - in wood, and some in glass. SAMS, the Society of Accredited Marine Surveyors, is a good credential to look for. There are two levels of SAMS credentialing: Accredited Surveyor and the less experienced Survey Associate. Locally, you may find surveyors who are not SAMS members but who are quite competent, but ask around carefully, and be sure your insurance company approves of the surveyor.
Surveyors are good, honest professionals but you might not want to use one who regularly gets survey referrals from your seller's broker. If you are spending real money on a boat it may be worth your while to hire a surveyor from outside the region, just to make sure the survey is entirely objective. Finally, keep in mind that the survey will not normally include a survey of the engine, drive train and generator – if you want those inspected, consult a servicing dealer or similar source. SAMS also has a special designation for engine surveyors.
You Want the "Condition and Value" of the Boat
The survey you want is for Condition and Value ("C and V"). The survey will offer an opinion as to the market value of the boat, and your insurance company will need that. The survey will include a list of recommendations, and the insurer will require you to correct those before binding coverage. The survey may reveal such hidden and important defects as justify renegotiation of the sales price, but unless the defects are both significant and unexpected it is poor form to try to leverage them into a discount.
By the way, a survey should be performed even of a new built boat. It is rare that the survey won't turn up something that was overlooked or that might have been done better, and it could be something vital.
Skipping a Formal Survey for Small, Inexpensive Boats
If the boat is relatively small, simple and cheap and you are knowledgeable you may dispense with a formal survey, but let me emphasize the necessity of a sea trial in the purchase of anything larger than a canoe. Running up the engine pierside is no substitute for a sea trial, yet several times a year disappointed buyers come to me who did no more than that and then discovered the boat won't go. A simple sea trial will normally include going from full ahead to full astern, steering from hard over to hard over, and a full power run for a few minutes. Surveyors offer this service.
Next, Check for a Clean Title
Let's say you found the boat, signed the contract and want to close. Now you need to check the title. If the boat is documented, you will check title with the National Vessel Documentation Center, a branch of the Coast Guard. Reach them at 800-799-8362 and ask for an abstract of title for the boat. Have the official number handy – it is engraved on the ship's main beam or equivalent, and is on the ship's papers. The NVDC people are highly competent and very helpful. They are sticklers, and they should be.
Read the Abstract of the Title Carefully
The abstract of title begins with the builder's certificate, which is a boat's birth certificate, and contains a chronological and interesting list of sales, mortgages, liens, name and home port changes, arrests and other events in the life of a ship. In the case of an older commercial craft the abstract may be many pages long. You need to study the abstract to confirm that all mortgage and liens are discharged. If you can't confidently read the abstract, consult a professional.
Be Aware of I.R.S. and "Hidden" Liens
Even if the abstract of title is clean, there is one more place to look: the Secretary of State's office of the seller's residence and the ship's state of registration. There is only one lienholder which records liens with the Secretary of State, but its initials are I.R.S. Take this extra step unless you want to buy a boat with a big fat tax lien.
Finally, there are the dreaded hidden liens. When a yard does work on a boat, or a fuel dock pumps it full of diesel on credit, or one boat crunches another while coming alongside, the yard or supplier or damaged boat gets a maritime lien on the boat. Generally the lien will be recorded with the Coast Guard, but the lien does not have to be recorded to be effective. If I have a client who is closing on a boat which by appearances may just have an unpaid fuel or yard bill on it, I tell the client to ask around. The seller, in the bill of sale and in the contract, promises that the title is clean, but you don't want a lawsuit against the seller, you want a boat with clear title.
For a state registered vessel, you will check only with the Secretary of State for the seller's state of residence and the state where the boat is registered. The risk of hidden liens applies here too.
The further intricacies of title, closing and registration or flagging are beyond the scope of this article, but I’m happy to take your call. It does seem appropriate to here say that this article is for your general information, and is not legal advice.
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