This article is relevant to you as a boat buyer whether you reside in the USA or another country. There have been a number of bank failures and bank takeovers in the United States in recent months. This information may help ensure that your money is safe when you decide to buy a boat in the USA.
To purchase a boat in the USA you are typically asked to put down a deposit. On pre-owned or brokerage boats the deposit is 10 percent of the total purchase price with the balance paid upon your Acceptance of Vessel. If you are not a resident of the USA you need to be aware that Letters of Credit are generally not accepted. Nor are cashiers checks or bank checks. Any reputable yacht broker representing a seller will not accept an offer on a vessel unless that offer is accompanied by a deposit in the form of a wire transfer of funds into that broker’s escrow account.
Several states in the USA including Florida and California have very strict regulations governing the use of escrow accounts in the yachting industry. Those regulations can be found here. Make yourself familiar with the use of escrow accounts in the state you are purchasing your yacht. The laws and general practice in the use of these accounts may not be the same as they are in your own country.
Use some caution and investigate the yacht broker you are choosing to employ to purchase your boat. Even with the regulations and laws in place to protect your deposit funds caution is always advised. We will address choosing a US based broker in another article but for now it is up to you the buyer to ensure that the broker you employ is reputable. Seek referrals if you can. You have no obligation to choose as your broker the person who has the listing on the yacht. Commissions are customarily split in this industry between buying and selling brokers and you will not save any money by electing to have one person handling both ends of the transaction. In fact logic would tell you that there is a conflict of interest if your chosen broker is representing the seller as well.
Another option is to instruct your broker to have your deposit funds managed and put into escrow by a law firm that practices admiralty law and also specializes in yacht transactions. I recommend Alley, Maass, Rogers & Lindsay, P.A. in Palm Beach, FL only because of personal experience. You can find them here. They handle US-based as well as international transactions. And they will be happy to work with your legal firm at home or to refer you to a firm in another state if appropriate.
That brings us back to the escrow account and how to determine if your money is secure during the purchase process. You should ask your broker or lawyer the exact name of the bank that handles their escrow account. This is particularly relevant with the turmoil happening today in the financial markets. Here are two excellent sources you can check yourself from home and for free.
The FDIC or Federal Deposit Insurance Corporation in the United States is an independent agency of the federal government. It is funded with premiums that it collects from the banks that they insure. They directly examine and supervise banks that have been chartered by the states or by the federal government. Their website offers reports of the banks that they insure for free. Click on View Reports, and then click on Uniform Bank Performance Report.
Another method is using Bauer Financial, Inc. All U.S. banks and federally insured credit unions are rated by Bauer Financial. No bank pays for this service, nor can they elect to avoid it. They have the ratings on their website here and it’s free!
It is safe to purchase a boat in the United States even in these tumultuous times. Just make sure you do your homework before you part with your hard earned money.
Call me or send me an email if you have any questions.