Escrow on a purchase

[DougSea]

Hey all,

A question about escrowing on a boat sale. My brother is selling his Sabre 34 (sail) and is being asked to escrow about 10% of the sales price to cover anything picked up during sea-trial and survey. The number of items currently on the list seems excessive to me, this is a 20 year old boat and he's already come down on the sales price.

Anyone out there have any experience with escrows? As either buyer or seller? What types of things were subject to the escrow? What kind of criteria did you specify to release the money? In my brother's case I'm suggesting just major drivetrain and running gear components be covered. Anything else - it's a 20 year old boat...

Any feedback would be greatly appreciated. Thanks guys.

[Denis]

Two years ago when I bought my 94 Albin, we put $4,000 in escrow until the weather broke and could go out to sea trial. It was a little open ended in that the money would be used to make any repairs to the engine or drive train if a problem was discovered. All the other items were checked during my survey and I understood that the ones that I could not check, bilge pumps, fresh water, head etc. that had been winterized and could not be checked in the middle of winter were just that, ten years old and were reflected in the price.

[Double Lucky]

there are many scenarios where an escrow arrangement might work to the benefit of buyer or seller or both. However, any amounts put into escrow are an additional complication to the eventual sale. If the seller determines that it is in his best interest to accept the terms of the proposed escrow arrangement to further the sale he will accept the offer including the terms of the escrow. Otherwise, a good move may be to counteroffer with escrow terms that are more to your liking.
Russ

[jcollins]

The buyer may be pushing it a bit if the list is long. Perhaps he expects your brother to counter-offer as to the items in escrow. I wouldn't expect much more than the engine/drivetrain in a 20 yr. old boat. What is on the list? Sails?

[DougSea]

The buyer may be pushing it a bit if the list is long. Perhaps he expects your brother to counter-offer as to the items in escrow. I wouldn't expect much more than the engine/drivetrain in a 20 yr. old boat. What is on the list? Sails?

Thanks for the responses guys...

The list included everything from engine and running gear (acceptable in my book) to the fresh water system, electronics, bilge pumps, galley...figure every mechanical and electrical system on the boat.

My brother ended up calling the broker back and saying 'No deal'.

[jcollins]

Sounds like the buyer was over-reaching in what is affordable. Perhaps he should look at a newer, smaller boat.
Your brother did the right thing.

[Mariner]

Sea trials are typically done BEFORE a deal is reached and surveys before the deal is finalized. I would never do it any other way; regardless of the weather. Bad weather was MADE for sea trials. That's the best time to do it. If the seller has winterized the boat, he's not serious about selling it. A boat that's for sale should always be ready to go on a sea trial.

[DougSea]

Sea trials are typically done BEFORE a deal is reached and surveys before the deal is finalized. I would never do it any other way; regardless of the weather. Bad weather was MADE for sea trials. That's the best time to do it. If the seller has winterized the boat, he's not serious about selling it. A boat that's for sale should always be ready to go on a sea trial.

Have to disagree with you there. Here in the Northeast where a typical winter (unlike this weird one) has several months of deep freeze the boat MUST be winterized. Deals are often reached pending survey and sea-trial. And surveys need to happen only after there have been several days of above freezing weather, otherwise your hull moisture readings are worthless. In this particular case however the buyer (or the broker) was over-reaching on the number of items to make subject to escrow on an older boat.

[Mariner]

If it were me, in that case, I would simply wait for the weather to break before buying or selling a boat. Putting money in escrow for repairs is essentially giving it up. You may as well just knock the money off the price because you know darn well the buyer is going to come up with bills for that stuff.

I'm an "as-is" kind of guy. You either take it as-is or find yourself someone else to do business with. And I expect exactly the same when buying. I have no problem with inspection contingencies because they come BEFORE any money changes hand. But you know that if you set aside money for repairs after the fact, you can kiss it goodbye. And when that's the case, I see no reason for even going to the trouble.

[Denis]

I would rather get all the testing out of the way before any real money changes hands. But just as an example, when I made the offer on my boat, I had to shovel three feet of snow out of the way so I could set up a ladder to climb in. The temp. was in the single digits, the boat was shrink wrapped and blocked in by several other boats. I looked the boat over very well myself, I had the surveyor check it out the best he could and I rolled the dice based on the survey that was done twelve months before for the second owners, a letter written by the marina it was stored at covering all the work done on the boat in the last twelve months and the survey done by my agent. I was pretty comfortable with my decision pending a sea trial. I had no reason to believe the marina, my broker, their surveyor, my surveyor and myself could have missed much. Besides, my broker held 4K until we could launch and sea trial. I understood I was buying a used boat but you also have to be reasonable and trust your judgement and the word of the people around you. Who knows, I could have sea trialed the boat, had it run perfectly and had the motor blow wide open while my captain was delivering it to me two days later. Thats boating, no guarantees. You need to try to protect yourself but at certain times there is a limit. Just my opinion. Denis

[Mariner]

This is just my opinion, but it seems crazy to me to buy a boat that I haven't had the opportunity to try out.

If I were selling a boat in the northeast, and I was serious about wanting it sold, but needed to do so in the dead of winter, I'd plan ahead and take it south on the ICW in the late fall and list it with someone down there.

You guys are so lucky to have that waterway and yet don't take advantage of it. If I had the ability to take the boat to San Francisco in the winter without ever leaving protected water, you better believe I'd do it each and every year. To spend over $100,000 on something and only use it half of the year is down right ludicrous in my eyes. Do they not have marinas in North Carolina?

[jcollins]

I can see both of your points.
I live in Maryland. I couldn't leave my boat in the creek. I've posted pictures of how low the tide gets. So, my choices are to move to a marina down south. The question is would I ever use the boat? Maybe once or twice. Given the holidays, work schedule, life in general, etc., I just can't see me driving 200 miles south for a weekend on the boat. (or flying)
A marina in the inner harbor would be nice but when it ices in, I'm not going anywhere. I really love the convertible but this time of year the pilot house would be nice. This winter is unusual. Normally it's cold, blustery, snow, and ice. (like now) Even the live-aboards have framed tarps over their boats.

Sea Trials? Not really out of the question but it's gets tough if the boat is blocked in. If a seller lets the marina know it's for sale they try to leave it accessible. Normally the agreement is that the buyer pays for the launch and haul. DE-winterizing is negociable.
I did my sea trial and purchase in the middle of December in Annapolis. Coming home the ride up the bay was beautiful. But, I was breaking ice to get into the slip. It was the first time I ever backed a single screw into a slip. It took a few tries but there weren't any other boats (or boaters) around.

Mariner - Your right. I kick myself every month when I send in the payment for a boat that is sitting on land.

[Denis]

I must say by the end of summer, I am kind of glad that I must take the boat out of the water and move onto other things in my life. The boat is all consuming both in time and money. When the weather is good and the boat is in the water, it takes up a major percentage of my time and money. My house, my friends, my family, my business and pretty much everything else in my life gets neglected when the boat is in. I love boating but Im glad when I can concentrate on other things in the off season. Having an off season makes the boating season much more special. Denis

[jcollins]

Denis,
I just tell my friends to not have any parties, weddings, or funerals between May and Sept. I also tell my clients that I will work Monday-Saturday during the winter but Monday-Thursday during the summer.
It all works out.

[Mariner]

I'm surprised that you get significant ice as far south as Maryland. I always thought the DC/Chesapeake area was pretty warm year-round. People are always talking about the sweltering heat there so I just assumed.

I get spoiled by our mild climate and forget that most of the country is not so lucky. It's cold out here today (low 40's), but clear and sunny. A GREAT day for boating so long as you've got a jacket and maybe some gloves.