Want to buy a yacht?
Tips from a yacht broker
Obviously, before going to choose a yacht, it is necessary to discuss your budget regarding lifestyle. When buying a yacht, you take possession of a “house on water”, but unlike a conventional dwelling, the yacht requires constant care, high-priced service, and professional supervision. It is said that a yacht owner is twice happy–when he buys a yacht and when he sells her. In order to debunk this myth, it is necessary to pay attention to the advantages, which may influence yacht maintenance price and possibly the cost of the whole vessel into the future. Such details as the year built, overall condition, optional equipment or retooling cost, working hours of master motors and generators, engine, and the expiration of the hull warranty are highly important.
When a yacht broker takes a previously used vessel in comparison to new building costs, he is obliged to inform you of all the peculiarities of the transaction, withholdings, and taxation matters, related to this procedure. While negotiating the price of the vessel, it is permissible for you to examine the vessel with other clients of the yacht company. Initial costs depend on whether a yacht has been designed especially for you. Is she an adapted standard model or an established version?
A professional yacht broker is able to assist his client in selecting the best bid, which combines the reasonable cost and high quality of the vessel. Making the offer to purchase for signing is a broker’s responsibility. The purchase offer should contain clearly specified terms and list of obligations of the parties concerned. It gives the conditions of execution which states when the mentioned obligation is considered to be met and the transaction to be complete.
A New Build Purchase
In the case of a new build purchase, you immediately own the warranty maintenance, which applies to the main machines, motors, and vessel hull during a specific period of operation. You should draw up a list of questions, which will be posed to a broker. For example:
- Where and when was the vessel built?
- What kind of equipment is installed on this yacht, and is it possible to refit her with options?
- Does the dealer have the ready-made vessel in stock? If not – how long does it take to wait for the delivery?
- What is the price for the yacht delivery to the desired location?
- What companies perform warranty repair in this region?
- Does the broker/ dealer have his own overhaul depot or mooring berth for technical service?
A Preowned Yacht Purchasing
In case you purchase a previously owned vessel, it is always possible to extend the warranty period of motors, main machines and hull during a specific period of operation at an additional charge. You should draw up a list of questions, which will be posed to a broker. For example:
- Where and when was the vessel built?
- What kind of equipment is installed on this yacht and is it possible to refit her with options?
- Check if the vendor has documents of title and ask if he can guarantee the clear title, certificate, and title deed.
- Choose an experienced ship surveyor in order to check the navigability of a yacht and condition of the hull, main motors, generators and all the electromechanical and electronic onboard equipment.
- With the help of a broker, detect all the inboard and optional equipment, which is covered by the transaction cost and is in the list of equipment.
- Before closing you are required to underwrite a vessel to your name, if you act as the private individual. In case the buy-side is your company, you should title a vessel to its name.
- Check if a vessel is pledged. If she is – verify how the pledge is going to be discharged prior to closing.
- Check the working hours log of master motors and generators.
- Examine if a vessel needs any extra repairs.
- Check what accessories come as the configuration and what ones are held by the vendor.
- Check if a yacht has undergone routine servicing (where and when for the last time).
A yacht purchasing, additional instruction:
- Ask your broker about prepayment terms and subsequent payment stages. Pay 10% as your earnest money. Make sure that it is deposited in a trust account.
- If you purchase a new yacht, you should advance the bid with a 5% discount. If a yacht is previously used, it is fine to attempt to advance a bid with up to a 25% discount. Watch the vendor’s reaction. If he does not turn you down, keep negotiating by advancing the price and demonstrating your willingness to give up. A reasonable vendor is sure to meet you halfway and is likely to make a counteroffer. In doing so, keep conferring with a broker. In the end he will be the one who will help you to buy the yacht you want at a reasonable price.
- Before you sign the purchase and sale contract, make sure that all questions regarding the purchase are included in the written form and will be answered before closing. Confirm the specifications and any extra equipment with the vendor.
- Offer to perform the sea trials. At the same time, it is important that an owner/builder and/or broker should be on board.
- In case you purchase a preowned vessel, amend the purchase and sale contract with the section which specifies compulsory inspection of a yacht by a skilled ship surveyor. Always choose a surveyor independently.
- If you need to take out a loan for yacht purchasing, specify it in the contract.
- After the contract is agreed upon and ready for signing, make sure together with a broker, that a builder/dealer uses a standard contract form.
- After all your questions have been settled and the yacht has been examined, arrange the final payment for the vessel. The remaining sum should be transferred to a dealer’s trust account. Check what stage of payment coincides with your ownership and find out when you obtain insurance liabilities.
The Documents Required for the Transaction Proceeding
An experienced broker is familiar with all documents required for the sales transaction, from the primary offer to purchase and bill of sale to licensing, property registration and safeguards agreement. In other words, cooperation with an experienced broker means he will handle all paperwork.
For example, you are required to fill in more than 20 forms to complete the sales transaction of a vessel in Florida. It takes a professional to make sense of the rights to yacht possession, which are specific for each type of a vessel, cost agreements, transaction reports, requirements for deposit and escrow accounts, which are necessary for the safe keeping of money.
While closing the deal you will be supplied with the following documents:
- yacht registration certificate;
- vessel service and operating manual guaranty;
- service and repair bills;
- commercial invoice and payment voucher;
- title deed signed by all the owners (in case there are two or more of them); and
- closing statement listing progress payment (which includes prepayment).
Yacht Purchase Credit and Maritime Insurance
Atlantic Yacht & Ship Inc offers its clients the opportunity to make use of all available banks that issue loans for yacht purchasing. Our reputation is unblemished, with 50 years of experience in the yacht business market. This gives us the advantage over searching for the lowest cost option while obtaining credits. Our specialists have long experience in dealing with the most reliable insurance companies in the US and Europe.
Closing of a Sales Transaction
It frequently happens that some disputes arise between a purchaser and vendor. It is quite natural, as either party makes its points, but one thing may interfere with the successful implementation of closing. This is “the human factor.” A skilled broker may avoid this issue. He will do his best to make negotiations as smooth as possible, acting as the third party and not an otherwise involved person.
Financial Security of a Client Upon Closing a Sales Transaction
You must deposit the estimated prepayment. This deposit is transferred to a trust/escrow account and serves to show your serious intentions and also allows starting sea trials and vessel examinations.
In order to maintain financial security a broker keeps his client’s money in the escrow account. Upon closing, he is obliged to make sure that all credits issued on the pledge of the vessel are liquidated and other encumbrances are discharged. These safety provisions are highly important for both a buyer and vendor. In case these procedures are overlooked when closing a deal without a broker’s assistance, it may cause serious issues.
Performance of Sea Trials and Vessel Examination
Neither a broker, nor a vendor or surveyor may guarantee that a yacht is going to be in perfect condition. You are responsible for making the final decision regarding the condition of the yacht. Thus, you should look for all the possible risks before purchasing. If you buy a previously used vessel, assure yourself of the condition of the yacht. Arranging a technical evaluation should involve a ship surveyor. He will execute detailed yacht examinations (with the possibility of hooking the vessel), sea trials, and concealed and visible fault diagnosis of a vessel, her parts, and devices. It is necessary to engage an engine engineer to perform main motor and generator tests.
Your broker should be present during sea trials and examination. He will assist you with asking the right questions that develop during these procedures. He is also going to help you to determine how much time it takes to repair defects. With the help of a broker, you will properly estimate the cost of materials and equipment. A service inspection report is a binding instrument upon obtaining bank credit, insurance and vessel registration. The survey is the first encounter with a yacht, so make sure that this process will take place under the broker’s control. It frequently happens that even though a vendor is aware of all the problems of his vessel, he is not interested in interacting with a buyer immediately before the closing.
Extra Expenses on Yacht Running
Running a vessel requires some extra costs. That is why you should take into consideration the following expenses:
- Yacht registration;
- Yacht insurance;
- Tax and VAT expenses;
- Payment of a berth slot and docking including expenses on dry-docking and natural discharges (e.g. electricity, freshwater, sanitary sewage takeoff). Take into consideration the average cost amounts to $2.50 for every foot of a vessel per day. For instance, it would take $295 a day to service a 118-ft. vessel.
- Equipment (life vests, fire extinguishers, flares, maritime radio stations, anchors and mooring lines);
- Utility equipment for the vessel: spare parts for electrical and mechanical devices, oil and transmission fluids, cooling fluids and additional chemical agents to clean an engine room. Tools for servicing the vessel;
- Inner and deck supplying: range of necessary chemical agents and common inventory for maintaining the cleanliness of inner facilities, sanitary equipment, Jacuzzi and replacement of domestic utensils;
- Technical service of a vessel;
- Certification of a vessel; and
- Payment for salaries of a captain, engineer, cook, chief assistant, chief steward and crew expenses (if any).
Broker’s Services After Closing of the Transaction
A yacht broker will help you to relocate your vessel at the moorage, supply her technical servicing and maintenance, engage a repairman and search for necessary equipment. He may also help you to master the conning. Your broker will be the first person to see your first heading. He will show you the secrets of navigation and share his knowledge regarding yacht clubs, ship-owners, racing and sailing regattas, sea manners and other courtesies which are invaluable knowledge. But the main consideration is that you will find a friend and like-minded supportive person.