By Tish Fontanella, Sales Coordinator at McMichael Yacht Brokers, Ltd.
Buying and selling a boat can be a pleasant experience, but it must be done in a professional manner by someone that knows the shoals or you can end up on the rocks with the local marine authority and Department of Motor Vehicles. Your yacht broker should ensure that important papers do not fall between the cracks and cause a delay in the transfer of ownership that could stall the start of your boating season.
As an example of the headaches one can encounter when the paperwork has not been properly coordinated, I cite a buyer who was too anxious to close on a powerboat. The new owner had lined up a captain to move the boat to Canada on a specific weekend. Not all of the documents had arrived, and we advised him not to close (pay all of his money) prior to receiving the documents.
One of the documents required was a Letter of Deletion from the Coast Guard. This would show that the boat was no longer documented to the sellers. The buyer felt our advice was overcautious and closed anyway, using his savings as interim funds until he got the boat home and had time to finance it with a marine loan, using the boat as the collateral. As it turned out, he could not get the loan until his bank received the Letter of Deletion.
The sellers had retired their loan several years prior to this sale, but never received a Satisfaction of Mortgage from the bank they financed with. Therefore, no Satisfaction of Mortgage was surrendered to the Coast Guard to remove the lien from the boat. The Coast Guard would not issue a Letter of Deletion until the Satisfaction of Mortgage was received. When the sellers tried to get a Satisfaction of Mortgage, they discovered that their bank had been acquired by another bank, and that bank had been acquired by the FDIC. Where was that file that showed all the payments had been made? Each institution had requirements and forms to be filled out, processed and approved. It took over three months with our constant monitoring and follow up with all the banks involved to satisfy the many requirements and regulations. This is not an isolated problem and most people don’t realize how important these papers will become when they want to transfer title to a new owner.
The brokers at McMichael Yacht Brokers, Ltd. have depended on me for over 30 years to make certain that every transaction goes through the proper steps. These may include a written contract outlining the conditions of the offer, survey adjustments if any, escrow agreements and Bills of Sale. State registration or application for a Certificate of Documentation should be discussed with your broker to keep you headed in the right direction. I offer the following three general tips, with the hope that the process is a pleasant one for the buyer, seller and broker.
1. Know your broker/brokerage company and the facilities and services they bring with them. Sorting through the “proof of ownership” and “chain of title” papers, and being able to recommend the right steps to keep the paperwork flowing is very important. It should make your trip to the local license bureau a one-time event. This attention to detail should be part of the work a broker does for you.
2. Start a boat file when you buy a boat and know what will be necessary in your state to transfer ownership when you decide to sell. The file should contain your title (if your state issues them), a copy of your registration (keep the original registration on your boat), your Certificate of Documentation (if boat is documented with the Coast Guard), copies of the documents transferring the boat to you, and copies of Satisfaction of Mortgage that were sent to the Coast Guard when you paid off your loan. When selling, provide a copy of your ownership papers to your broker prior to closing. If your boat is documented, information can be obtained from the Coast Guard by the potential buyer for the transfer of ownership.
At the time of a sale, if you had a lien on the boat that has been satisfied, know where your Satisfaction of Mortgage is and if it was sent and filed with the Coast Guard. The bank that holds the lien issues a Satisfaction of Mortgage when a mortgage has been paid off. A buyer may need an Abstract of Title and/ or a Letter of Deletion from the Coast Guard if the boat was documented. Your broker or their office sales coordinator will be able to assist you with all of these details. Insist on it, and don’t close until you have all the necessary papers to transfer title. When you finance a boat, many of these details are taken care of by the agent representing the finance company because clear title is necessary in order for a bank to approve the financing.
3. Use the proper forms when contracting to buy or sell a boat. Brokerage companies affiliated with the Yacht Brokers Association of America work within its guidelines and ethical standards to make sales move smoothly and fairly. The YBAA contracts have been drawn up to deal equitably with all parties involved. Please, don’t rewrite the contract because you will then requiring the other parties to hire their attorneys to interpret your changes and to make their changes.
The following checklist should be reviewed, with appropriate amendments made to comply with the regulations of your state.
For state registration of a new boat, you need:
- Manufacturer’s Statement of Origin
- Original Bill of Sale from the dealer or builder (showing the sales tax collected, if applicable)
- State Boat Registration/Title Application
- Application fee
- Proof of Identity
For registration of a used boat, you need:
- Signed over title (proof it’s the sellers to sell) or
- Signed over transferable registration
- Original Bill of Sale from owner (shows dollar value, for sales tax purposes)
- Original Coast Guard Bill of Sale (if the boat is documentable)
- Copy of Coast Guard Certificate of Documentation (if boat was documented)
- Satisfaction of Mortgage for the Coast Guard, if the boat was financed by the seller and a lien is still on recorded at a bank
- State Boat Registration/Title Application
- Statement of Transaction (for sales tax calculation purposes)
- A rubbing of the Hull ID# (in most states)
- A “Letter of Deletion” from the Coast Guard, if the boat was formerly documented and will no longer be documented by this owner ($15 fee to the Coast Guard)
- Proof of Identity
As states have worked to ensure that boats are properly registered, owners protected and sales tax collected, the necessity for thorough paperwork has become critical to the completion of the sale. Experienced brokerage companies will supply these services, and both buyers and sellers should take advantage of the many years of experience they offer.
Tish Fontanella has managed all brokerage and new boat closings at McMichael Yacht Brokers in Mamaroneck, New York since 1981. She and her husband are experienced sailors and have cruised extensively as members of The Cruising Club of America.