FAQs About Buying a Boat
And even after you find that perfect boat, you're still not done: there's still negotiating the selling price, financing, surveying, sea trial, insuring, documentation, finding a slip and myriad other details. We'll cover these below, but first would like to make a couple of general recommendations:
Buy the book "How to Buy, Own & Sell a Boat Without Going Broke", by Schneider and Woodwell, 1990, published by ProStar Publications, Los Angeles, CA 90034. ISBN 0-930030-55-9. This well-written comprehensive guide works through the entire buying process clearly and in detail; while written in 1990 it's STILL relevant, and available online at Amazon. Speaking of which, Amazon is a fun place to play; search under BOOKS for "buying a boat", or "buying a sail boat" or "buying a power boat" and see what you find.
Another useful (and free!) source is the Reading Room section on the YachtWorld web site (www.yachtworld.com).
Note that the YachtWorld web site offers THE most comprehensive compilation of listings available, PERIOD; most bigger boats (over say 25') are sold thru brokers and ALL brokers support this site (many also support Boats.com, but that site is more focused on much smaller vessels, ski boats for example). YachtWorld is simple to use and offers numerous photos and full specs of most of the boats, so have fun!
Most buyers end up finding their boat locally but some widen their search, usually to Southern California and/or the Pacific Northwest but sometimes nation-wide. That certainly expands the range of choices but it's a logistical hassle to view boats out of the area and then it's expensive to get the vessel here--figure it will probably cost about $8,000 to transport a 38-ish foot boat from Seattle or San Diego to San Francisco, and over $20,000 to ship the same boat here from the east coast.
What's the boat market like these days?
We're hearing this question quite frequently in the wake of the 2020 Covid pandemic but the boat market remains REAL strong--people's plans have been upended with sports and vacations cancelled, and taking to the water gets them out of home quarantine while maintaining the integrity of their "pandemic pods" and social distancing outdoors. It's more of a buyers market for boats older than 1990 (which are almost impossible to finance) and a total buyer's market for "project boats" of all types (especially old woodies) but beyond that clean boats of all types are selling well which will limit buyer's leverage.
What are the benefits of working with a broker?
The right broker helps by (a) listening to your needs and recommending types and manufacturers of boats that potentially meet them and (b) then finding the actual boats for sale.
There are literally thousands of models built by hundreds of different manufacturers, and most people are aware of only a tiny fraction of them whereas a broker will have seen and been on more boats than all but the most dedicated buyer (I've been doing this for over 20 years now and I STILL run across models I've never seen before!). This experience enables the broker to suggest options of which you might have otherwise been unaware.
Determining the most suitable boat in theory is only half the battle--you still need to find a clean example to buy. Brokers have knowledge that you probably don't regarding what's on the market or what's coming onto the market. Also, remember we're looking for a CLEAN example of your chosen yacht, and a broker can eliminate much frustration by screening out those boats that are poorly maintained or that look good on paper but upon closer inspection reveal hidden problems.
Yacht brokers are like real estate agents in that they don't own the boats they're selling. They are facilitators, bringing buyers and sellers together and representing both parties throughout the transaction.
Not all brokers know their way around other markets such as San Diego, Newport Beach, Long Beach and Seattle; if you plan to conduct a statewide or West Coast search, make sure your broker will be able to add value outside of the Bay Area.
Regardless of how or where you find your dreamboat, your broker can make an offer on your behalf. As you're not limited to the listings any one broker personally has, find a broker you're comfortable with and work with him or her, wherever you ultimately find the boat itself..
How do you choose the right broker?
This is an easy one: Visit several brokerage and I promise you'll find someone you like! The brokerage community is relatively small, most of us have been in the business for YEARS and in California, all brokers are required to be licensed by the Department of Boating and Waterways; find someone you're comfortable with and you should be fine...
One final point: brokers are independent agents working on a straight commission, paid by the Seller once the deal is closed. So assuming you're satisfied with the service your broker is providing, PLEASE make your offer through him or her! OK, off soapbox!
How does boat financing work?
This section comes before the sections on actually finding a boat for a reason: it's best to have financing lined up before you begin looking for a boat. It generally takes a couple of weeks to pull together required material and for the loan company to process. This delay could cost you the boat if you're in a competitive situation with someone who is pre-approved. Also, a pre-approved buyer is in a stronger negotiating position with the seller than a non-pre-approved buyer (most sellers won't even consider an offer with a contingency of financing). And finally, there's no point in looking at $250k boats if the maximum you'll be able to afford is $100k!
There are many ways to pay for a boat: cash, a home equity loan, margin loan against stock, etc. However, the majority of buyers seek a loan from a marine financing company, using the boat itself as collateral. This allows you to keep cash productively invested elsewhere; in addition, it's often possible to deduct interest expense on the boat loan. Note that the same tax advantages may not be applicable to a home equity loan. For instance, when borrowing against a home owned free and clear, the mortgage interest deduction is limited to interest paid on mortgage debt used to improve the residence-if the money isn't used for the home, the interest expense isn't deductible.
In addition, the home mortgage interest deduction is limited to interest paid on home equity loans up to $100,000, a major disadvantage if you're seeking a boat loan in excess of $100k.
It's important to note that prior approval for a home loan does not automatically translate into approval for a boat loan. If you own or have substantial equity in your home it's generally pretty easy to qualify for the boat loan, but if you've never had a loan comparable to the boat loan you're seeking it can be difficult. This can be a Catch-22 for young professionals who have high incomes but don't want to pay a half-million-dollars-plus for a crackerbox or throw money away on rent: they see a boat as an affordable, desirable housing alternative but can't qualify for a loan because they don't own a home!
Marine financing companies will lend on boats less than 30 years old, and usually finance for 15 years with 20% down at annual percentage rates in the 5.5% range. These figures will vary depending on the age of the boat and credit score of the lendee.
Assuming you qualify for the loan, most lenders will allow sales tax and marine accessories to be included in the loan amount. This is helpful, as the interest rate on the boat loan will be less than the credit card debt often taken on to refit the boat to the new owner's liking.
There are a number of services specializing in boat loans, and it's always a good idea to shop around; Google "boat loans and all the usual suspects will pop up (Essex, Ganis, Trident, etc).
Finding the right boat: new or used?
The major problem with buying a new boat, aside from the fact that new boats are eye-wateringly expensive, is depreciation. Much like a new car, a new boat depreciates most during the first year. A rule of thumb is to expect 10% depreciation in Year One and 6-8% for the following four or five years--the depreciation curve on new boats resembles an upside-down hockey stick: steep for the first 10 years or so years then leveling off. By buying used, you minimize the depreciation hit and eventually, you might expect to actually see slight appreciation in value, especially on a well-maintained, pedigreed boat.
So not surprisingly, most people buy used. The goal then is to find a vessel that has been consistently maintained, and (to a lesser extent, but they usually go hand in hand) extensively upgraded. Look for overall pride of ownership, evidenced by maintenance logs, a well-kept engine room, new running rigging, clean bilge, recent bottom paint, no peeling varnish, perhaps some new electronics or sails, etc.
Note it costs WAY less to keep a boat bristol than to get a boat that's been let go back bristol, so, with very few exceptions (such as being a retired shipwright looking for a project), we almost always advise against buying a "fixer-upper". A well-maintained boat will last almost forever, and, with due diligence, you can buy a used boat with as much confidence as buying an existing home.
Finding the right boat: sloop, ketch, yawl, trawler, motoryacht, express cruiser or something else?
Many books have been written on the subject of various sailing and power boat types, and I'll recommend a couple that I like but first let me say not to worry a whole lot about this--even after doing extensive due diligence, most people end up selling their first boat after a year or so as their skills develop and they learn from experience what's REALLY important to them vs. what they THOUGHT was going to be important. Luckily, you're not limited to one boat a lifetimee so RELAX!
"Stapleton's Powerboat Bible". Stapleton, 1989, published by Hearst Marine Books, New York, NY. ISBN 0-688-08448-6.
"How to Buy the Best Sailboat". Gustafson, 1991, published by Hearst Marine Books, New York, NY. ISBN 0-688-10987-X.
"How to Buy, Own & Sell a Boat Without Going Broke". Schneider and Woodwell, 1990, published by ProStar Publications, Los Angeles, CA 90034. ISBN 0-930030-55-9.
Once you have a general sense of what you might be interested in, it's time to start looking at boats (concurrent with lining up financing, as previously noted). People often spend MONTHS in this phase, mostly on YachtWorld tehn on broker's docks.
Finding the right boat: gas or diesel power?
Most sail and power boats built after the late 1970s have diesel engines. Diesels have a number of advantages over gas: diesel is not explosive at atmospheric pressure, they are more reliable (no points, plugs, condensers, fewer moving parts), diesel fuel is less expensive and diesel engines burn less per hour than do gasoline engines. The disadvantages of diesels are that they are heavier and initially WAY more expensive than gasoline engines.
While we wouldn't automatically disqualify an otherwise-ideal boat that's gasoline powered (and some boats, such as classic motoryacht or high-performance cruisers will often be gas), all things being equal, we'd opt for diesel.
Finding the right boat: fiberglass, wood or metal?
Let's start with the caveat that there is no perfect material from which to build a boat: fiberglass blisters, wood rots and metals corrode. All things considered though, fiberglass is hands-down the best all-around hull material for most pleasure boats: it's strong, economical, and the ONLY material of which modern production boats are built.
How does the actual process of making the offer work?
OK, so you have financing set up, have looked at a bunch of boats and finally found one that's head and shoulders above the rest. It's time to make an offer!
An offer to purchase is accompanied by a 10% deposit, which is held in escrow. The offer is almost always subject to two conditions--sea trial and survey--and if necessary, financing (but an offer is way stronger if the buyer is pre-approved for financing, most sellers won't sign an offer with a contingency of financing).
There are a number of factors involved in determining what an offer should be, and your broker should be in a position to advise you:
*Is the asking price high or low?* Asking prices on boats are just that; the price actually paid is open to negotiation. The question is "how negotiable?", and this of course depends on many factors, the most important by far being condition of the boat. The broker should provide insight on what comparable boats have actually sold for recently. And a boat that has been on the market for more than about nine months is almost certainly over priced--clean, competitively priced vessels sell quite quickly, especially now. As a general rule (though there are plenty of exceptions!), there is usually about 5% difference between the ask price and what the boat ultimately sells for.
*How much in demand is this type boat?* Generally speaking, clean, late model fiberglass production boats in the 32-46 foot range command top dollar. Older boats, wood boats, custom boats, larger yachts, non-traditional layouts and "project boats" are generally more negotiable.
*What's the condition of the boat?* Not surprising, boats in bristol condition command a premium. What's surprising is how few boats there are that are truly bristol. And how many boats that are advertised as bristol but aren't even close! For the most part, people to seem to have more money than time these days, so it's more difficult to sell "fixer uppers" than in the past; if you're willing and capable of taking on a project, good deals can be found.
*How motivated is the seller?* Some boats are priced high by owners who really don't want to sell, but will, at a premium. In other cases, the seller has another boat on the way, is relocating or what have you and needs to sell as soon as possible. Also, sellers are sometimes more motivated during the winter months. However, the business remains fairly robust throughout the year in California, so seasonality is usually not much of a factor. As noted above, you can usually get a 5%-ish discount off the asking price.
Once you decide what to offer, it's presented by your broker in writing to the seller or his agent, who in turn either accepts it or makes a counteroffer. If a counter is made (and it usually is), this will be negotiated until a mutually agreeable position is reached and the final agreement signed by the seller.
The seller is now legally obligated to sell the boat to the buyer at the agreed-upon price (even if the seller was to get a better offer) and the buyer is in the driver's seat: pending satisfactory results of sea trial and survey, the boat is his. Note that the buyer can renegotiate the selling price based on survey findings or bail on the deal without penalty UNTIL HE REMOVES CONTINGENCIES AND ACCEPTS THE BOAT.
The point is this: when you find the boat that's right for you, put an offer in sooner rather than later. It really hurts to look for a boat for months, finally find "The One" and then have someone else make an offer first! Making an offer first does not mean you HAVE to buy the boat, there are plenty of "escape hatches"; what it does is put you in control--the boat is yours to buy or not buy as you see fit.
Once an offer to purchase is signed by both buyer and seller, it is a legal document. As noted previously, offers are made with contingencies (usually sea trial, survey). They're also made with a certain time line to remove said contingencies and accept the boat.
The entire process usually takes two to four weeks; the shorter the lag between making the offer and accepting the boat, the stronger the offer will be in the seller's eyes.
The marine survey:
Having an accepted offer, you now need to line up a marine surveyor. The surveyor works for the buyer to assess the condition of the boat's hull, machinery, electronics, etc. as well as to assign a dollar value to the boat; a thorough out-of-the-water survey is the best guarantee that you're buying the boat you think you are. Also, you won't be able to get insurance (which all marinas require) without providing a written report from an accredited surveyor.
Your broker will know all the local surveyors by reputation and can recommend several. The survey will run about $20 per foot, with the boatyard charging about $15 per foot for the haulout. The buyer is responsible for these fees, which are due upon completion of the work (meaning bring your checkbook on the day of the sea trial and survey).
If at all possible, you should be present at the survey--you'll learn a lot about your prospective boat, have any questions you might have answered and will get an immediate assessment of the vessel. Being present at the survey will provide nuance not necessarily seen in a written report.
After completing the survey and discussion with the surveyor, you can (a) determine that the accepted offer price is fair, (b) ask for a survey allowance. For example, "Raytheon 24 mile radar" is listed on the spec sheet, but the survey determines it to be inoperable. If a new radar is $3,000, a fair request might be for a $1,500 survey allowance. You wouldn't normally expect the seller to outright replace an old unit with a new, unless it was listed as new on the spec sheet. Common sense usually prevails, and deals are not usually lost over minor survey issues. Even major unexpected problems are usually worked through--the seller is going to have to address major issues before the boat can be sold regardless--but if not the buyer can bail on the deal without penalty and the deposit is refunded (less payment to surveyor and boatyard of course).
Note that the marine surveyor is not omniscient. He or she has a few hours to inspect a boat to determine condition and identify problems; once you buy the boat, you'll have years! Rest assured, if you spend enough time, you'll find items (hopefully minor) that the surveyor didn't. Also, boats are in a constant state of deterioration and what works fine today might break down tomorrow (and probably will!).
The sea trial: The sea trial or test sail allows you to see that all of the boat's equipment is operable and that she handles as you expected and is appropriate for your needs. The sea trial takes place after your offer has been accepted, lasts an hour or so and is usually attended by the buyer, surveyor, broker and ideally the seller.
The sea trial is normally completed before hauling out for survey; figure sea trial and survey together will last most of the day.
How do I register my boat?
Boats are either state registered through the DMV or federally registered ("documented") through the US Coast Guard, with documentation favored in most cases.
Before you can close, the broker or a documentation company will run a title search on the boat to make sure there are no liens against it, and also handle the paperwork involved in changing the registration to the new owners name and changing the vessel name if so desired. Documentation fees generally run about $300.
What about insurance?
If you're buying a boat larger than about 25 feet, you'll want a true Yacht Policy (it is always referred to as such). Yacht Policies differ from other types of insurance and it's generally not a good idea to insure your boat through the same company that insures your home or car.
Yacht Policies are underwritten by six or eight carriers, and placed through independent licensed agents. These agents are knowledgeable about the different policies available, and can recommend the one that best suits your needs. Get competitive quotes from several different agents as rates vary significantly, with your broker providing recommendations.
Competitive rates generally run about 1-3% of the value of the boat per year, with the value determined by the marine survey.
You can insure almost any boat, including classic, multi hull, ultra-lights and racers, but rates will vary widely based on age and loss history. For example, sailboat base rates will be 15-20% less than powerboats, and expect to pay a slight premium paid for powerboats over 10 years old and sailboats over 15 years old. Make sure your policy provides coverage if your boat is damaged by an uninsured boater, against oil spill liability and that your marina is named as an Additional Insured.
Policies generally establish what waters the vessel will be covered in ("San Francisco Bay and Delta, for example). These are based on the boat's home port and are fairly standard across underwriters. If you want to cruise outside of the specified waters, you'll need an endorsement to do so. These vary in price depending on the distance and nature of the trip, and cost can range from nominal to prohibitive.
Who's responsible for taxes?
The buyer is responsible for paying sales tax. This generally runs about 10% of the selling price (it's based on the rate prevailing in the county where she's going to be kept by the new owner), and is assessed by the State Board of Equalization. Sales tax is NOT generally collected but you WILL eventually get a bill from the County so be sure to accrue for this!
Buyers often inquire about the possibility of avoiding sales tax by taking offshore delivery; this is usually not practical unless you're heading off cruising--the laws change, but the gist is that you take delivery of three miles offshore, then have 30 days to get the boat out of the US for a year, and it's not practical or cost effective for most people to have their boat out of the country for that long.
There's also property tax, which buyer and seller split on a prorated basis. Tax rates vary from county to county, but figure about 1% of the selling price of the boat.
How much should I budget annually for maintenance?
Maintenance costs depend on the size and age of the boat but figure somewhere around $5,000 per year for the average 36--42 footer; some years you'll spend more and some years less but that's a good ballpark estimate...
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