Like cars, yachts and other pleasure craft are subject to repossession under certain conditions, usually due to a mortgage default. In this instance the boat’s owners have fallen behind in their payments, so the lender takes possession of its floating collateral and puts it up for sale in an attempt to recoup any losses.
If you’ve never purchased a repossessed vessel before, the process is different from buying an unencumbered boat from a dealer or direct from the owner. Here are some facts and conditions that you should be aware of.
There is no asking price
Boats that have been repossessed by a financial institution are generally sold at auction for a price deemed commercially reasonable. Occasionally an evaluation, survey, or blue book price will be stated but such instances are rare because by the time the vessel is picked up, chances are that the former owner will have removed most of the equipment listed on these documents, making the listed valuation invalid. The boat is usually sold as-is, with only the equipment present on it when the auction takes place.
The sale is not always to the highest bidder
Making the highest offer is not a guaranteed win in a bid environment, especially if you also require the seller to do one or more of the following:
- Make necessary repairs
- Supply financing
- Extend the closing date
With repossessed vessels, the seller’s goal is to limit expenditures as much as possible, given the fact that by the time the boat comes to auction, they will have already spent money on moorage, repairs, insurance, and other costs. In this instance, a lower offer with fewer expensive demands could get the prize.
All surveys should be extra-thorough
Buyers of distressed boats, as repossessed vessels are often called, should be extra-thorough when surveying the hull, motor, and other core components. If the original owner was unable to afford the payments, they may not have been too diligent when it came to maintenance. There have even been instances where the former owner appears to have sabotaged the boat, knowing that they were going to lose it, so heightened diligence is recommended.
There are specific terms and conditions for payment
With few exceptions, payment for auction sales must be made in full within 10 business days. Although the auction has closed, backup bids are usually retained, and if you cannot close during the permitted time period or decline to accept the boat at sea trial, the seller may accept an alternative offer.
There are specific titling and documentation requirements
Once the seller receives and accepts your payment, the vessel is yours. The seller will provide you with the following:
- Bill of sale
- Affidavit of repossession
- Forms for state titling or vessel redocumentation
If you are from out of state, you are responsible for redocumenting or titling the vessel. Otherwise, the broker will handle these responsibilities for you. In Florida, the marine documentation team at Howard S. Reeder can assist you with all the paperwork requirements associated with the sale, ensuring a clean transfer with a clear title. When it comes to auction purchases, we specialize in coordinating the needs of the various parties involved to facilitate a smooth acquisition.
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