For buyers, the anticipation and excitement experienced in acquiring a new yacht can be one of the pleasures of yacht ownership. For sellers, saying goodbye to a currently-owned yacht and moving on to owning a different vessel is often a bittersweet experience, involving mixed emotions. However, in both cases, a key objective is to manage the transition in a way that assures you’ll remember it with pleasure.
That’s where the team at Seattle Yacht Sales comes in. We can provide you with the benefit of more than a century of combined experienced in yacht brokerage to guide you around the potential shoals in yacht buying and selling, and assure that you reach your destination, safe, sound, and pleased with having taken the journey.
To help you prepare for the trip, we’ve compiled answers by our in-house professionals to the following frequently asked questions (FAQs) concerning both buying and selling a yacht. But please, feel free to call or email us with any questions or issues that may still be of concern to you.
For Yacht Buyers:
1. Should I use a yacht broker?
Although legally you don’t have to, there are several advantages to doing so. But not just any yacht broker.
First and foremost, you need a yacht broker whom you can trust and rely upon to put your best interests ahead of simply making a sale.
Additionally, your broker of choice should be someone who is personally familiar with the type of yacht you’re seeking or if you haven’t yet decided, someone familiar with the kind of yachting you envision doing. In other words, if you’re considering doing some longer-term cruising, you’ll be best served by someone who is experienced in cruising and cruising yachts. If you’re interested in catamaran sailing yachts, your broker of choice should have experience not only selling, but sailing that kind of vessel.
The primary advantage gained in working through a broker is the informed and experienced advice you can receive. Consequently, your selection of a broker is just as important as your eventual selection of a yacht
2. Where do I start my search for a yacht?
Where to best start your search depends on a number of factors, including the level of your yachting experience, whether you currently own a yacht, what you envision as your primary waters of operation, whether you're interested in a power or a sailing yacht, what you want to be able to do when you’re aboard, how much you have or are willing to spend, how many people you expect on average to have aboard, whether your plans are for day-use only or whether you want to overnight on the yacht, and so on. The more you can detail your essential needs and requirements, the better your chances become for a successful search.
If you’re new to yachting or if your experience is very limited, you should spend some time speaking to your broker about his or her experience. You should also take the time to read as much as you can about yachts and yachting. And you might even consider chartering for a weekend or even a week at a time one or more yachts of the type you think you might like to buy.
3. What needs do I have with what I’m choosing?
Identifying your needs and requirement in a yacht purchase is something you have to do pretty much for yourself. An appropriately-experienced broker can help guide you in compiling a list of key requirements based on your objectives and anticipated use. But ultimately, you have to decide what on that list is essential, what is important, and what would be nice to have but which you’d give up if you had to.
Much of this is a matter of personal judgment, although you can often gain clarity about your own preferences and desires by discussing the issues with a good broker who exhibit the patience and understanding to walk you through the various stages of search and selection.
4. What can I expect in negotiations?
Unless you’re prepared to pay the asking price without discussion or hesitation, you can expect one or more rounds over the agreed sale/purchase price. You might also expect some discussion to take place over which questionable or problem items on the yacht will be repaired or replaced before the transaction is closed.
Beyond that, agreement will have to be reached on 1) how much deposit will be paid pending the close of the transaction, 2) how much time the buyer will have to survey the vessel and indicate his or her acceptance or rejection, 3) how much time the buyer will have after acceptance to pay the balance due on the purchase price and close the sale.
And not to be forgotten, you’ll have to negotiate agreement on the location of final delivery, how and where a final walk-thru will be conducted immediately prior to closing, who will act as the closing agent (i.e., hold the buyer’s closing funds in trust until the seller has delivered good and clear title and a properly executed Bill of Sale and any other required paperwork, and hold the seller’s executed paperwork until the buyer’s closing funds have been delivered and available for final closing of the transaction).
5. What do I need to do about registration?
In the U.S., a yacht of five or more Net Registered Tons may be documented federally with the U.S. Coast Guard. (Registered tonnage is a volumetric measure that is a holdover from measuring cargo capacity on commercial ships for the purpose of assessing harbor fees.) However, you are not required to federally document a vessel, if you choose to register that vessel with a state government.
You can federally document a U.S.-flagged vessel and also register that vessel with a state, usually the state that borders the vessel’s primary waters of operation. Indeed, even if you federally document a yacht with the U.S.C.G., you must also secure a sales and use tax receipt from the state contiguous to the yacht’s primary waters of operation. But if you obtain federal documentation for your “new” yacht, you are not required to actually “register” the yacht with any state, provided you have paid any required sales and use taxes to the state contiguous to the vessel’s primary waters of operation.
There are a number of advantages to federally documenting a yacht, not the least of which is that documentation records provide a way of registering liens against the vessel which, in turn, helps a buyer search for any outstanding liens when later you go to sell your yacht. As well, many lenders, particularly in the matter of larger, more expensive yachts, absolutely require that the yacht involved in a loan be documented with the USCG.
At one time, yacht buyers and owners sometimes attempted to avoid paying sales tax by federally documenting their yacht and declaring its primary waters of operation to be in a state that did not have a sales tax, for example, Delaware.
However, unless the declaration of “home waters” was truthful, such buyers and owners ran the risk of being fined (or even jailed) for making a false declaration or affidavit. Moreover, in recent years, many states have set caps on the sales tax due and payable irrespective of the total sales price. For instance, Florida currently caps sales and use tax on yachts based in Florida waters at 6% or purchase price or $18,000.00, whichever is lower. This has made yacht purchasers and owners less likely to attempt to avoid paying the sales and use tax.
When considering sales and/or use tax, you should keep in mind that you only have to pay such taxes once on a given yacht. For example, if you paid 6% sales or use tax in, say, Michigan, then move your yacht to Florida, the Florida sales and use tax will be waived when you provide proof of prior payment in Michigan. If the tax in Michigan was 4%, then Florida will credit what you already paid in Michigan against what you need to pay in Florida, and you will only have to pay the difference.
An experienced professional yacht broker will be able to help you understand the advantages and disadvantages of the different scenarios for federally documenting and/or state registering your yacht.
6. What about insurance?
If you currently carry yacht insurance, securing coverage for your “new” boat will likely be simplified, assuming your claims record is reasonably clean. However, you will want to review your new requirements with your insurance agent or broker.
If you’re significantly stepping up (or down) in size or value or changing your primary waters of operation, you’ll likely want to review all aspects of your current coverage from price to the number of months per year the yacht will be in operation to whether you will need an insurance or condition/valuation survey before the underwriter will issue a policy on your “new” yacht.
Your yacht broker can help point you in the right direction concerning insurance but ultimately, you’ll want to deal with a licensed insurance agent or broker who has an established specialty and experience in writing yacht insurance. You will also want to deal only with an agent or broker who can issue an immediate temporary binder pending a final decision and response from the insurance underwriter.
One tip to keep in mind: Always insist on an “agreed value” policy. This is a policy in which the underwriter and the insured agree on what will be paid to the insured in the event of a (constructive) total loss, with no deductions for depreciation or adjustments for “actual cash value.”
For Yacht Sellers:
7. How do I select the best broker for my needs?
Check out not only the prospective broker’s record and experience, but also that of the firm and the team with whom he or she works. Look for background in dealing with yachts of the kind you’re interested in. And see if the prospective broker has a beneficial working relationship with people in the firm who can supplement his or her knowledge and skills and provide back-up. Remember it’s not only the abilities and background of the prospective broker him- or herself but of the firm and the team who back him or her up.
8. How can I tell if it’s a buyer’s or seller’s market?
An experienced active professional broker is likely to be your best guide to the current state of the market. But keep in mind that whether it’s a buyer’s or seller’s market currently does not necessarily tell you anything how the seller of the boat you really want to buy or how any given potential buyer of the boat you want to sell will react.
There are many more factors other than the general state of the market that influence how buy/sell negotiations might go. You can, for example, be in the midst of a buyer’s market, yet find the seller of the yacht you really, really want to buy to be intransigent about the price because he or she is not feeling particularly pressed to sell. Then again, you might be in the midst of a seller’s market yet find a prospective buyer is stretching against a fixed budget and so cannot meet your selling price no matter how much he or she wants to.
9. How is the broker pricing my yacht?
Your broker should not be pricing your yacht for sale; you should be. Of course, an active, experienced professional broker can be invaluable in guiding you to set a realistic asking price that is most likely to result in a sale in the least amount of time.
Something to always factor in is the per month dockage, maintenance, and insurance costs just to keep the yacht you’re seeking to sell. And to realize that if for instance, that cost is $2,000 per month, keeping the yacht for a year at a higher price actually lowers what you get at the end of the year by $24,000. Sometimes it’s better to lower the price slightly to facilitate a faster sale. What counts is what you net out on the sale.
10. What should I do to get my yacht ready for sale?
Exactly what you do to prepare a yacht for sale depends heavily on the condition and age of the yacht itself, how much you’re looking to get compared to what similar yachts on the market are selling for, and how old your yacht is.
At the very least, you need to make sure that all critical operational equipment is in working condition and that all safety-related equipment is present and in usable condition.
It’s wise generally to avoid investing too much in refurbishing a yacht you’ve decided to sell. Improvements that you choose to make might not coincide with the improvements a buyer might choose to make and that potential buyer might have appreciated a reduction in the sale price more.
It rarely pays, for example, to have a yacht repainted solely for the purpose of selling her — especially when a wax and buff job might improve her appearance sufficiently to present a good first impression.
Best approach is to conference with your professional broker and ask him or her to give you a list of what he or she thinks should be done to facilitate a timely sale at a price close to what you’re asking. The cost out the list and prioritize it in terms of which refurbs or repairs will likely yield the greatest positive impact. And unless you commit to a full refit or refurb, be prepared to give away to the buyer some of your asking price to cover critical items you’ve chosen not to service or replace prior to negotiating a purchase/sale agreement.