Reply
 
Thread Tools Display Modes
 
Old 02-27-2013, 08:43 AM   #1
Senior Member
 
GarryP's Avatar
 
City: Homosassa River, FL
Country: USA
Vessel Name: Mango Mama
Vessel Model: Krogen Manatee 36
Join Date: Mar 2010
Posts: 114
What is the purpose of a deposit for purchase agreement?

I may be accepting an offer on Mango Mama and plan to use the BoatUs settlement service. They can hold the deposit check. What is the purpose for the deposit check?

It seems boat purchases are always contingent on acceptable survey and the buyer will have an out if they get cold feet. Typically, the deposit is returned.

What is the actual agreement concerning disposition of the deposit? If the intention is to ensure the buyer is serious, it loses it's purpose if the deposit is returned in all cases that the purchase falls through.
__________________
Advertisement

__________________
Garry and Victoria
Mango Mama
GarryP is offline   Reply With Quote
Old 02-27-2013, 08:48 AM   #2
Guru
 
City: North Charleston, SC
Country: USA
Join Date: Sep 2010
Posts: 4,390
Quote:
Originally Posted by GarryP View Post
I may be accepting an offer on Mango Mama and plan to use the BoatUs settlement service. They can hold the deposit check. What is the purpose for the deposit check?

It seems boat purchases are always contingent on acceptable survey and the buyer will have an out if they get cold feet. Typically, the deposit is returned.

What is the actual agreement concerning disposition of the deposit? If the intention is to ensure the buyer is serious, it loses it's purpose if the deposit is returned in all cases that the purchase falls through.
I think the purpose is primarilly to weed out the people who want a free boat ride (sea trial). Of course the meaning of an "acceptable survey " could vary from person to person, but if the survey finds no problems, it would be hard for the buyer to back out.

When I bought my boat, I had to wire $15,000 to the broker as a deposit. Although, in theory, I could have backed out and gotten my deposit back, most non-serious buyers are not going to go to that trouble.
__________________

rwidman is offline   Reply With Quote
Old 02-27-2013, 09:01 AM   #3
Guru
 
twistedtree's Avatar
 
City: Gloucester, MA
Country: USA
Join Date: Jan 2013
Posts: 3,201
Also, once the buyers due diligence period completes and they "accept" the boat, then they are obliged to follow through and close.

But I agree it's mostly to weed out non-serious buyers. Also keep in mind that as soon as the buyer starts doing a survey and hauls the boat, they are spending non-refundable money, so a buyer will likely be serious at that point.

One broker described it in what I though was a nice simple way;

- Initially the seller is obligated to sell the boat, but has no financial exposure.

- At the same time the buyer is not committed to buy, but starts to incur non-recoverable costs as they perform due diligence.

- Once the buyer "accepts" the boat, then both parties are obligated to close the deal.
twistedtree is offline   Reply With Quote
Old 02-27-2013, 09:03 AM   #4
Guru
 
djmarchand's Avatar
 
City: East Greenwich, RI
Country: USA
Vessel Name: Bella
Vessel Model: Mainship Pilot 34
Join Date: Aug 2012
Posts: 2,882
In addition to weeding out the tire kickers, the deposit ensures that any costs incurred during the survey and seatrial get paid. Under marine law an unpaid yard haul out charge results in an automatic lien being incurred against the boat.

David
djmarchand is offline   Reply With Quote
Old 02-27-2013, 09:28 AM   #5
Senior Member
 
Talonewo's Avatar
 
City: San Antonio
Country: USA
Vessel Name: Shintullah
Vessel Model: 55' 1978 Defever
Join Date: Sep 2012
Posts: 102
It is twofold, show commitment and cover any cost during the survey process, for example I looked at a boat last year that had been on the hard for a few years, during our negotiation the seller made the stipulation that he would pay to launch for sea trial and survey, but if I did not purchase the boat I would have to pay to winterize all the systems again.
Talonewo is offline   Reply With Quote
Old 02-27-2013, 09:30 AM   #6
Guru
 
Sailor of Fortune's Avatar
 
City: Saint Augustine, Fl.
Country: Port of St Augustine ,FL
Join Date: Sep 2009
Posts: 1,969
If it is anything like a real estate contract, (I don't know if it is or not) the purchase and sales agreement is not legal until a deposit exchanged between buyer and seller. Weather it is refundable or not is not an issue. $ 1.00 makes it legal!
Sailor of Fortune is offline   Reply With Quote
Old 02-27-2013, 09:33 AM   #7
Veteran Member
 
City: Wausau,WI
Country: USA
Join Date: Apr 2012
Posts: 54
Quote:
Originally Posted by GarryP View Post
I may be accepting an offer on Mango Mama and plan to use the BoatUs settlement service. They can hold the deposit check. What is the purpose for the deposit check?
My interpretation of Earnest Money, it is part of a contract to demonstrate the buyer is serious, and to ensure the seller does not accept a competing offer.
theran5317 is offline   Reply With Quote
Old 02-27-2013, 09:37 AM   #8
Guru
 
bobofthenorth's Avatar
 
City: Cowichan Bay, BC
Country: Canada
Vessel Name: Gray Hawk
Vessel Model: Defever 43 Offshore Cruiser
Join Date: Oct 2009
Posts: 570
Quote:
Originally Posted by GarryP View Post
What is the actual agreement concerning disposition of the deposit? If the intention is to ensure the buyer is serious, it loses it's purpose if the deposit is returned in all cases that the purchase falls through.
The terms are whatever you can negotiate and persuade a potential buyer to sign. If its fully refundable and contingent on the buyer accepting the survey then it is also meaningless.
__________________
R.J.(Bob) Evans
www.rjevans.org
www.travellingwithgeorge.blogspot.com
bobofthenorth is offline   Reply With Quote
Old 02-27-2013, 11:50 AM   #9
Guru
 
Northern Spy's Avatar
 
City: Powell River, BC
Country: Canada
Vessel Name: Northern Spy
Vessel Model: Nordic Tug 26
Join Date: Feb 2012
Posts: 2,672
Quote:
Originally Posted by twistedtree View Post

One broker described it in what I though was a nice simple way;

- Initially the seller is obligated to sell the boat, but has no financial exposure.

- At the same time the buyer is not committed to buy, but starts to incur non-recoverable costs as they perform due diligence.

- Once the buyer "accepts" the boat, then both parties are obligated to close the deal.
Good summary. Thanks for sharing.
Northern Spy is offline   Reply With Quote
Old 02-27-2013, 12:16 PM   #10
Guru
 
twistedtree's Avatar
 
City: Gloucester, MA
Country: USA
Join Date: Jan 2013
Posts: 3,201
Quote:
Originally Posted by Sailor of Fortune View Post
If it is anything like a real estate contract, (I don't know if it is or not) the purchase and sales agreement is not legal until a deposit exchanged between buyer and seller. Weather it is refundable or not is not an issue. $ 1.00 makes it legal!
That's a really good point! It's called "consideration" and is a required element in a contract.
twistedtree is offline   Reply With Quote
Old 02-27-2013, 12:31 PM   #11
Guru
 
psneeld's Avatar
 
City: Avalon, NJ
Country: USA
Vessel Name: Freedom
Vessel Model: Albin 40
Join Date: Oct 2011
Posts: 15,920
Quote:
Originally Posted by bobofthenorth View Post
The terms are whatever you can negotiate and persuade a potential buyer to sign. If its fully refundable and contingent on the buyer accepting the survey then it is also meaningless.
agreed...I have seen all kinds of "exceptions" to full refund.
psneeld is offline   Reply With Quote
Old 02-27-2013, 02:18 PM   #12
TF Site Team
 
Larry M's Avatar
 
City: JAX, FL
Country: USA
Vessel Name: Hobo
Vessel Model: Krogen 42-120
Join Date: Nov 2008
Posts: 5,745
Quote:
Originally Posted by bobofthenorth View Post
The terms are whatever you can negotiate and persuade a potential buyer to sign. If its fully refundable and contingent on the buyer accepting the survey then it is also meaningless.
When we sold our last boat in North Carolina, we had a potential buyer from Colorado. He made an offer and we asked for a $1,000, non-refundable deposit which he paid. We would take the boat off the market, it would be 3 weeks before he could do the survey & sea trial and hurricane season was quickly approaching. He did end up buying the boat.
Larry M is offline   Reply With Quote
Old 02-27-2013, 02:33 PM   #13
Guru
 
Alaskan Sea-Duction's Avatar
 
City: Inside Passage Summer/Columbia River Winter
Country: USA
Vessel Name: Alaskan Sea-Duction
Vessel Model: 1988 M/Y Camargue YachtFisher
Join Date: Jul 2012
Posts: 3,155
Make sure you read the contract IN FULL. There may be stipulations on a broker fee if you back out of the deal. When I get ready to purchase and commit a large sum of $$$, if the deal goes sour, I am going to set it up where I get my full deposit back. After all its my money.
__________________
1988 M/Y Camargue Yacht Fisher
Alaskan Sea-Duction
MMSI: 338131469
Blog: http://alaskanseaduction.blogspot.com/
Alaskan Sea-Duction is offline   Reply With Quote
Old 02-27-2013, 03:56 PM   #14
Senior Member
 
GarryP's Avatar
 
City: Homosassa River, FL
Country: USA
Vessel Name: Mango Mama
Vessel Model: Krogen Manatee 36
Join Date: Mar 2010
Posts: 114
This was very prompt and helpful. There were a couple of considerations I would not have though about. I also found some standard purchase and sales agreement forms online which specify how the deposit is handled.

One thing the standard form does not address is consideration for taking the boat off the market or other inconveniences. In my case, if the boat isn't sold by in a certain amount of time, I will have added expenses making arrangements from another state that I could be making now before we move.

Thanks everyone.
__________________
Garry and Victoria
Mango Mama
GarryP is offline   Reply With Quote
Old 02-27-2013, 04:05 PM   #15
Guru
 
psneeld's Avatar
 
City: Avalon, NJ
Country: USA
Vessel Name: Freedom
Vessel Model: Albin 40
Join Date: Oct 2011
Posts: 15,920
Quote:
Originally Posted by GarryP View Post
This was very prompt and helpful. There were a couple of considerations I would not have though about. I also found some standard purchase and sales agreement forms online which specify how the deposit is handled.

One thing the standard form does not address is consideration for taking the boat off the market or other inconveniences. In my case, if the boat isn't sold by in a certain amount of time, I will have added expenses making arrangements from another state that I could be making now before we move.

Thanks everyone.
As you know it's kinda a buyers market...more for some boats than others and yours is more of a niche boat so you can do better at negotiating than many....BUT...don't scare off or offend too many buyers with too many non-refundable clauses....
psneeld is offline   Reply With Quote
Old 02-27-2013, 04:15 PM   #16
TF Site Team
 
dwhatty's Avatar
 
City: Home Port: Buck's Harbor, Maine
Country: USA
Vessel Name: "Emily Anne"
Vessel Model: 2001 Island Gypsy 32 Europa (Hull #146)
Join Date: Sep 2008
Posts: 2,733
Quote:
Originally Posted by twistedtree View Post
That's a really good point! It's called "consideration" and is a required element in a contract.
Well, it may depend on the jurisdiction.

In Maine, at least, the mutual written promises of the Seller to sell and the Buyer to buy are deemed to be sufficient to satisfy the element of consideration. No "earnest money" necessary.
__________________
David Hawkins
Deer Isle, Maine
dwhatty is offline   Reply With Quote
Old 02-27-2013, 06:41 PM   #17
Senior Member
 
Papa Charlie's Avatar
 
City: Everett, WA
Country: USA
Vessel Name: Paloma
Vessel Model: Bayliner 4588
Join Date: May 2012
Posts: 127
Quote:
Originally Posted by GarryP View Post
This was very prompt and helpful. There were a couple of considerations I would not have though about. I also found some standard purchase and sales agreement forms online which specify how the deposit is handled.

One thing the standard form does not address is consideration for taking the boat off the market or other inconveniences. In my case, if the boat isn't sold by in a certain amount of time, I will have added expenses making arrangements from another state that I could be making now before we move.

Thanks everyone.
Generally speaking this is a risk that seller takes. Possibly during the boom around 2007 when you couldn't find a good used boat you may have been able to write something in. But today this would more than likely cause a buyer to not enter into the agreement. There should be a date for each of the steps to be completed by or cause the buyer to forfiet the deposit. If the standard agreement that you are using does not include completion dates for sea trials, hull survey, machinery survey and completion of the agreement (to name a few), then you should consider using a different agreement.

If you like, PM your email address and I will send you one that I have used. An extract from the purchase of our last vessel through a very good broker.
Papa Charlie is offline   Reply With Quote
Old 02-28-2013, 06:36 AM   #18
FF
Guru
 
FF's Avatar
 
Join Date: Oct 2007
Posts: 16,531
In most cases the deposit is the brokers fee , holding it assures that the broker will get his payment if the sale is completed.
FF is offline   Reply With Quote
Old 02-28-2013, 08:47 PM   #19
Per
Guru
 
Per's Avatar
 
Join Date: Jan 2011
Posts: 613
i did not have any problem getting my deposit back after I had made an offer which was declined.
though later on, another sale on the same boat fell through and i made another offer which was accepted and is now my boat for 3 years.
i would recommend anyone to verify the broker is legit and in good standing with the state brokers association.
__________________

Per is offline   Reply With Quote
Reply

Thread Tools
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off





All times are GMT -5. The time now is 03:08 AM.


Powered by vBulletin® Version 3.8.8 Beta 4
Copyright ©2000 - 2017, vBulletin Solutions, Inc.
Search Engine Optimization by vBSEO 3.6.0
Copyright 2006 - 2012