Deal before survey?

I’m looking at a trawler in WA. The listing broker won’t let me get it surveyed until a price has been agreed on and a deposit made. This is new to me. Is it normal?

Pretty typical - in no small part because of the need to haul the boat, so it is usually combined with the sea trial once an agreement on paper is reached, and deposit posted. Of course, post survey, you will likely modify your offer. That's when the real negotiating begins.

Yup. You need an accepted offer before the "show" begins. First the sea trial and first chance to bug out.

Next the survey and second chance to bug out or bargain.

Once the bug out or bargain has been reached, only then are funds transferred.

Agreed with Delta and Flatswing. Typically the contract has liberal exit clauses if anything the buyer discovers is concerning (which means if they change their mind, they can come up with something to exit the agreement). Study the language and make sure you're comfortable. And make sure you're dealing with a reputable broker who will refund the deposit/escrow if you pull the plug on the deal.

Slightly against the crowd, but I'm not a fan of the ride to the yard being the sea-trial. There is a fair amount to check out on the sea trial and you need a few hour duration. Again, controversial, but I would want a 5-10 minute WOT run which is a frequent place where the boat will fail due to overheat or simply won't get on plane (if semi-displacement or planing hull). Why would you continue to a full survey if the boat fails the sea trial?

There are a ton of knowledgeable folks on TrawlerForum. Comodave has purchased something like 24 boats. You can take his input to the bank. And there are others.

Peter

What the preceding posts said. The Purchase & Sale agreement protects both parties by locking down at least a provisional deal while the buyer conducts due diligence. Properly written, the P&S contract includes an "off ramp," for at least X number of days, during which the deposit is refundable. I happen to agree with Peter about sea-trialing first (with your surveyor on board and on the clock). Then, if the sea trial didn't cure your case of boat fever, schedule the haul out. To be clear, all expenses will be on your dime, so even though your deposit isn't yet at risk, it's not a completely "free" look. Get your money's worth, and whether or not the boat turns out to be what you need, you will learn valuable things from the experience.

djcoul said:

I’m looking at a trawler in WA. The listing broker won’t let me get it surveyed until a price has been agreed on and a deposit made. This is new to me. Is it normal?

Click to expand...

This is to protect YOU as well as the Seller from wasting each other's time. Survey and haul out cost can be $1500-$4000 depending on the boat. Imagine paying all that to survey the boat, taking the time out for the survey, and then find out that the Seller won't sell it for anything less than the asking price. Or, now that they know you are invested in it, the Seller can say he wants $5000 over the previous asking price.

Give it a close inspection, find the soldboats.com comps, find the BUC value of the boat, make a fair offer based on the condition and assuming everything works as it should. Then survey. Anything found on the survey that is not as it should be, or not as it was expected to be, can be renegotiated.

As stated, here are the standard order of operations:

1) View the boat. Here you have a chance to observe the layout and general condition. Certainly inspect anything you want. Some folks feel they can perform a large portion of the survey themselves (I recommend hiring a NAMS/SAMS certified surveyor).

2) Buyer submits an offer in a signed Purchase and Sale (P&S) agreement with good faith deposit. P&S should include contingencies (e.g. subject to satisfactory inspection, survey, insurance, loan approval, sale of existing boat, etc....basically whatever you want.

3) Seller either accepts or rejects offer. If rejected, seller make submit counter-offer in a new Signed P&S.

NOTE: P&S is valid when when both parties sign agreeing on price.

4) Vessel is Surveyed. Surveyor is an agent of the buyer.

5) Vessel is sea trialed. (NOTE: Steps 4 & 5 can be reversed, but most survey first and sea trial second.

6) Sale is either completed, or rejected due to conditions reported in either the survey or sea trial.

7) If rejected, counter offers can be made and a new P&S is signed, or the buyer and seller can simply walk away.

BTW, This process is no different than buying real estate. Nobody is going to allow a home inspection on a property for sale without a signed P&S by both parties. I'm not clear why this is so foreign to people when it comes to a boat. Basically think of a boat more in terms of a real estate and less like buying a car.

Shrew said:

.........

4) Vessel is Surveyed. Surveyor is an agent of the buyer.

5) Vessel is sea trialed. (NOTE: Steps 4 & 5 can be reversed, but most survey first and sea trial second.

Click to expand...

Shrew - in my neck of the woods (California/Florida), sea trial always comes first. Might be a regional thing but doing the sea trial first makes sense as it's very low cost for the buyer.

Peter

I am probably on my last boat. But if ever again after 1 or more looks by myself an offer made is accepted, then a mechanical survey before a regular survey including sea trial.
I was not surprised by either survey report, but doing both, doing the cosmetic survey first after already making an offer on appearance seems unnecessary expense if the mechanical survey with sea trial questions the purchase.

Shrew said:

BTW, This process is no different than buying real estate. Nobody is going to allow a home inspection on a property for sale without a signed P&S by both parties. I'm not clear why this is so foreign to people when it comes to a boat. Basically think of a boat more in terms of a real estate and less like buying a car.

Click to expand...

Good list.

As always I think to a certain extent it depends on the size of the boat and the deal. I've bought and sold lots of boats on the car model, but they've been broadly in the car price range.

I'd also point out that on a remote deal, it may be advantageous to engage a surveyor to do step 1 on your behalf. Maybe that's what the OP is thinking. Instead of getting on a plane before making an offer have a surveyor do a walk around and act as your agent before negotiations start. I know several surveyors who will act in this capacity, and the broker shouldn't object.

The agreement should protect your interests... imagine if you paid for a survey and seller announced boat.was sold to another buyer. Agreement.should include time for various steps before agreement "expires" and seller free to accept other offers.

mvweebles said:

Shrew - in my neck of the woods (California/Florida), sea trial always comes first. Might be a regional thing but doing the sea trial first makes sense as it's very low cost for the buyer.

Peter

Click to expand...

I think you are balancing cost against where you most suspect there might be issues. If there is a particular aspect of the boat that you are concerned about, it might make sense to start there. Either way the goal is to find deal-killer issues early in the process when you have spent less money, vs later in the process when you have spent more.

My first big boat survey happened first and my surveyor spent 7 minutes and said "you don't want this one". I loved the boat and made a low ball offer which was refused. My last two boats I did the mechanical and the engine survey sea trial virtually simultaneously. In the first case I knew there were cosmetic issues that had me lower the asking price substantially and it was accepted. It wasn't until after the sea trail was over that there was smoke coming from the engine room. I asked my engine surveyors what was going on, they said "excessive blow by". So the this boat had been under utilized for a few years and my broker said "hey, just use it and it will clean up." Well I had the PO run it and use some solutions and it cleaned up 50%, not enough for me so I bailed. The good news was that the next potential buyer bought my survey for a discount saving me some money. My current boat, everything went really well. Some issues found were corrected by the PO and some we shared. I love my boat even if she waves a red flag now and then. Knock on wood, right now I have her almost perfect. Oh, man, that is gonna cost me. What's next???

djcoul said:

I’m looking at a trawler in WA. The listing broker won’t let me get it surveyed until a price has been agreed on and a deposit made. This is new to me. Is it normal?

Click to expand...

As others have said, yes, this is typical. In fact, when dealing with a broker, most won’t even start the engine without a signed agreement.

If I were the seller and a prospective buyer wanted to survey my boat before signing a PSA, I would regard that as strategically advantageous, since the buyer's several thousand dollar investment in a survey I will give more leverage when it comes time to negotiate price. It is important to recognize that a PSA is binding on the seller, but leaves the buyer with the option to back away. The seller really gain nothing by entering into a PSA (other than not wasting time with lookie loos, but anyone investing in a survey is making a serious commitment).

I MO the PSA is also (maybe more importantly to them) a way for brokers to protect their interests. In many / most cases the sellers identity and specific location of the boat is not included in any advertising. Brokers don't want buyers dealing directly with sellers so that info is rarely divulged early in any dealings. It is not coincidence that the "standard" PSA deposit is essentially the brokers commission. They get their $ upfront and yes, it is (should be) held in escrow but they control it.
I doubt that sellers demand many of the " std practices" imposed by brokers.

This is where good brokers earn some of their commission. If you can't come to an agreeable price up front, then you don't want to go any further. Many long-distance transactions are negotiated without seeing the vessel first. Most brokers know the sellers bottom line and don't want funds unless the offer is accepted. A good broker will be up-front about boat condition and what to expect. The last thing they want to do is go through a lot of paperwork and coordinating surveys etc and then have the deal fall through. They'll present the offer and if accepted then a 10% deposit is put in the broker"s escrow. It is fully refundable pending inspection by the purchaser. Work with good, well-known broker houses.

mvweebles said:

Shrew - in my neck of the woods (California/Florida), sea trial always comes first. Might be a regional thing but doing the sea trial first makes sense as it's very low cost for the buyer.

Peter

Click to expand...

YMMV, that's why I put a caveat in there that the order isn't in stone in a attempt to avoid a pedantic response.

TBill36 said:

This is where good brokers earn some of their commission. If you can't come to an agreeable price up front, then you don't want to go any further. Many long-distance transactions are negotiated without seeing the vessel first. Most brokers know the sellers bottom line and don't want funds unless the offer is accepted. A good broker will be up-front about boat condition and what to expect. The last thing they want to do is go through a lot of paperwork and coordinating surveys etc and then have the deal fall through. They'll present the offer and if accepted then a 10% deposit is put in the broker"s escrow. It is fully refundable pending inspection by the purchaser. Work with good, well-known broker houses.

Click to expand...

I'm still waiting to meet this good broker.. lol

The amount and level of misrepresentation of condition I'm seeing from brokers is astounding. Even down to using photos of other vessels, sometimes with weak watermarks to say they are of another vessel, sometimes not...

TBill36 said:

This is where good brokers earn some of their commission. If you can't come to an agreeable price up front, then you don't want to go any further. Many long-distance transactions are negotiated without seeing the vessel first. Most brokers know the sellers bottom line and don't want funds unless the offer is accepted. A good broker will be up-front about boat condition and what to expect. The last thing they want to do is go through a lot of paperwork and coordinating surveys etc and then have the deal fall through. They'll present the offer and if accepted then a 10% deposit is put in the broker"s escrow. It is fully refundable pending inspection by the purchaser. Work with good, well-known broker houses.

Click to expand...

We had a buyers broker who we know help us find a boat. He found one in Florida with great potential. His associate went to the boat and inspected it. We negotiated a price and had a contract contingent upon our viewing the boat, sea trial, mechanical survey and hull survey. Had the contract signed before we got on the plane. Deposit meant we were serious. Didn't start paid surveys until after we toured it and decided we wanted to pursue it. Final negotiated price was about $40k less than original due to issues found during survey.

MYTraveler said:

If I were the seller and a prospective buyer wanted to survey my boat before signing a PSA, I would regard that as strategically advantageous, since the buyer's several thousand dollar investment in a survey I will give more leverage when it comes time to negotiate price. It is important to recognize that a PSA is binding on the seller, but leaves the buyer with the option to back away. The seller really gain nothing by entering into a PSA (other than not wasting time with lookie loos, but anyone investing in a survey is making a serious commitment).

Click to expand...

Yes, I think you have a good point. The only down side is whatever time and cost you incur as the seller, which may be very little, or perhaps none.

This has been the process for all the boats we purchased. I had the opportunity to negotiate at each stage to get the price down. After the survey, you have a good idea of the defects, and one interesting piece of data is the market price. I never bought a boat over that price. One of the reasons is that insurance will not cover the boat over that price.

Interesting. Lots of ways to buy/sell a boat, a lot depends on the boat itself and how much you trust the seller/buyer and broker.

Generally, it's a good idea to nail down a price prior to getting too far along the process, spending a lot of money and time.

I have a few rules when I buy/sell (anything).

First, any deposit I make will be held by my attorney or trustee, NOT a broker.
Second, if selling, I will determine when the buyer sees/inspects the property, not the broker. Some of the least qualified looking folks, end up buying.
Third, I what the right to talk with a seller no matter what (they often have a different story than the broker has.) That has killed a few deals, however.

In some cases, I've purchased houses and planes sight unseen without any issues at all. Not a boat, yet.

When buying, I want to do things quickly. If really interested, I'll line up my inspections and inspector/surveyor early to get on their schedule, especially is the boat is a distance to minimize trips. That has worked well.

I've done a lot of business with brokers, some good and some not so good, so I could argue trust, but verify.

I'm on boat purchase 22 now... shopping. Didn't have any deals go bad, and have made a few friends from folks I've bought from or sold to. My best deals were from people I knew or boats I knew of or referred to me by friends.

I've had a few "crazy deals". One was for an airplane that I purchased and negotiated the deal on and off almost a year. Got to be friend over the phone with the seller, who was on the other side of the country. Ended up buying it and it was way under represented. Flew it for a few years and sold it for a handsome profit.
Another one the guy left the title and keys on the seat and I picked it up. Flew it for 800 hours and sold for more than I paid for it.

I agree with most of the opinions offered. In my current boat purchase I was finding several boats I liked but another buyer was going around and signing a contract and paying a 10% deposit. on the same boats, thus locking up boats I had an interest in. This finally stopped . I quess he found his boat.!

I am currently hunting for a trawler (DeFever leads the pack) and have found a couple to begin discussions with brokers. Maybe I am a reading them wrong but it seems like the brokers have been over stating the deficiencies in the boats rather than under stating. It is almost as if they are dissuading me from pursuing them haha. However, the boats have their flaws and I am trying to get through those conversations to see if an offer is warranted. The process of offer, contingent acceptance, personal visit to include surveys and inspections are what I believe is the proper process. Definitely learning along the way.

I just uploaded a "Sea Trial" checklist onto the Resources section of TrawlerForum. Might help you think through some of the systems to evaluate.


Peter

Brokers are either trying to up sell you or this boat has failed an inspection. Broker’s don’t like it when deals come unraveled during survey. They to have time and money invested and don’t like to see either of it wasted 0n hidden deficiencies.

Good surveyors are sensitive to this and will point out deal killing issues to both parties before a write up. I was recently assisting a good friend with a boat purchase. He was using my surveyor. Immediately after pulling the boat we discovered massive corrosion on the outdrives. I pointed this out to my friend and recommended he save his money and cancel the survey on the spot. The surveyor agreed and they negotiated a cancellation price. The surveyor then explained to the broker what had just happened but made it clear he had made no opinion on the boat. The broker understood the situation and admitted he had never seen the boat out of water and was unaware. I believe him as he had to commute 1 hour to the boat, then 1 hour delivering the boat to the haul out, then waiting 2 hours for the yard. I don’t think he wanted to go through that again.

Neither broker have directed me toward another boat. However, maybe that is because there are no current listings that match the checklist. It is definitely appreciated when they do not waste time for buyer and seller especially when this is a long-distance purchase.

With a long distance purchase brokers are more upfront about the deficiencies. They don’t want to risk being sued for travel expenses because they failed to mention obvious deficiencies.