Yacht Sales: From Contract to Closing
Contracts are needed to clearly define the process of buying a yacht for both buyer and seller. The path to the closing table and your boats new owner involves many steps and a proper yacht contract should act as a guide as you move from contract to closing.
IMPORTANT CONTRACT POINTS FOR YACHT sellers
Understanding Yacht Sales Contracts
Once your yacht's condition is dialed in and it's priced right for the market, the goal of a contract will eventually be achieved. Making sure you've read your contract to purchase in detail is important, this is a legal document with terms and parameters to guide the process along, and also to spell out buyer and seller roles. Almost all brokerage agreements contain commonalities for steps in the process. Here are the important contract points to educate yourself on and pay attention to.
Yacht Sales Price & Deposit
The signed buyer’s offer on your boat should include a deposit; typically, of 10% of agreed price. In today's world of digital signatures and ease of electronic anonymity make certain you have PROOF of deposit via a check or wired deposit into your broker's escrow account. Trust but verify!
Seller & Buyer Requirements
This is a complex section on the contract, but in its simple form these sections spell out the details of where a contract protects each in case of default.
PRIOR TO ACCEPTANCEThe buyer is responsible to make certain he’s able to buy and insure the vessel. His deposit can’t be returned after accepting the yacht if his finance company decides he’s not a worthy credit risk or does not have enough experience to get insurance. Those are details a buyer needs to have in line before accepting.
PRIOR TO CLOSING
As the seller you need to make sure the yacht is without liens or monies owed to third parties, have information on security interest if financed so that the yacht can be sold and re-titled legally. Having documents ready ahead of time is a must. Issues that often derail or slow a closing can be divorce, estate sales, liens that were paid but not properly recorded, etc. The time to pull out your USCG Documentation or State Title and share with your broker’s closing department is immediately at contract, not two days before your closing date.
As a seller, make sure any issues that would inhibit being able to close are worked on early in the process.
Survey/Sea Trial Obligations
In its simple form, the buyer is paying for the inspection and expertise of the surveyor. The seller is making the boat available and assuming the risk of that process. It’s your yacht still as the seller and while you may run it yourself, hire a captain or entrust your broker to run it, all the risk associated with a mechanical failure - or the fuel burned at survey - is the seller's obligation. See our Survey & Sea Trial Process section to fully understand this most vital step.
Acceptance of Vessel
FULL OR CLEAN ACCEPTANCE
This means there are no concessions on price or fixes that need to be performed by the seller. The buyer is ready to close, and the deposit is forfeited should closing not occur.
CONDITIONAL ACCEPTANCEThis means due to issues at survey/sea trial the buyer is seeking repairs to be made to the yacht or a cash concession in the price. If repairs are to be made, there will be another period of time and another re-inspection or sea trial to prove the repair for a final sign off. If a concession on price, then it simply is negotiated and agreed then onto the closing process.
Exclusions To The Yacht Sale
Your yacht has been photographed, listed, and viewed by the buyer. On the day of the survey, many times it's assumed what’s on your yacht is what’s included on your yacht at closing. An issue arises when personal items that have not been cleaned off–tools, EPRIBS, Dinghy’s, etc.–are part of the boat in the buyer’s mind, but in the seller’s mind, are not meant to be conveying. Make certain you not only provide the information to your broker but specify IN WRITING what is not included.
After Acceptance & Force Majeure
Closing the Yacht Sale
The boaters two happiest days - the day you buy your boat and the day you sell it. While selling a yacht is akin to selling a home, many times the closing occurs remotely with buyer and seller not gathered around the closing table. In most cases, the documents are not being signed by buyer and seller both, but different documents for each. If financing, there will be obligations that are different than in a straight cash purchase. Your broker’s closing department should lay out this step by step process. The closing on a yacht is technically to be done by the date agreed on and occurs when the BUYER'S paperwork has been executed correctly, the SELLER'S paperwork has been executed correctly and SELLER/ESCROW AGENT has received wired funds or been provided electronic proof of loan payoff. Buyer paperwork, seller paperwork & confirmation of all funds = SOLD.