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05/19/2015

The Benefits and Risks of Boating in the Online Marketplace

By Andrew High, Partner and Co-Founder at Luxury Law Group

Andrew High As we survey the state of the boating industry in 2015, one thing is becoming increasingly clear.  Boat sales, much like nearly every other industry, is becoming increasingly reliant on digital mediums both for listings and for sales.  There are more and better digital listing services for boats than ever before and brokers continue to expand sales through the use of online services. 

Thousands of deals are already closed each year through online marketplaces such as EBay and Craigslist and as the Facebook Marketplace and Amazon continue to evolve we expect this trend in online marketplaces to continue to grow.  Just last month, Haute Living published a story that the online marketplace Snapdeal is now selling nine brands of new construction yachts in its partnership with India’s largest yacht company, West Coast Marine Yacht Services.  The benefit to the brokerage community is obvious.  Online listing and marketing allows your boat to reach millions of potential customers that would not otherwise be reachable through traditional paper marketing.  But along with new frontiers in boat sales come new and different risks for both brokers and buyers to be aware of prior to closing a deal. 

First, it is important to know who is selling the boat and who is buying.  This may seem like a simple thing, but it’s not necessarily cut and dry when dealing with people online.  As it relates to the seller, you want to make sure that the person selling the boat is not only who they say they are, but also that they hold legal title in the vessel.  The seller should provide photo identification as well as any paperwork showing title or registration.  In the event that a seller is a company the beneficial owner of the company should provide his or her photo identification as well as any corporate paperwork supporting the ownership.  This information is important not only to make a proper transfer of title but also very relevant to taking a listing.  Brokers need to know they’re getting permission to sell a boat from the boat’s actual owner and consent to the price.  Listing a boat without permission or with an unauthorized price could lead to a lawsuit against a broker. 

As it relates to the buyer, again you want to be sure you know who you’re dealing with starting with photo identification.  Since it is the buyer that will be providing closing funds online deals are subject to the same “know your client” requirements as any other deal.  However online deals face heightened risks because you may not have physical communication with the buyer.  Taking the proper precautions to assure funds come from a legitimate buyer and legitimate source can limit that risk. 

Second, when handling an online deal, you want to make sure you perfect the title transfer.  It is important to create expectations early on in the deal as to what documentation will be expected by both buyer and seller in order to complete the transfer.  The nature of online deals is such that much of the communication and paperwork occurs electronically.  Where originals or notaries are necessary make sure that they are sent to the appropriate party at closing.  Both parties need to be clear in where the boat will be delivered and when money will change hands.  In addition the buyer needs to make sure that the seller will be reachable in the event that any items remain outstanding after the closing. 

Finally, take steps to ensure that boat parties are getting what was bargained for.  Not only is it important to make sure that the boat meets the buyer’s expectations but also that the buyer receives physical possession of the boat commensurate with tendering closing funds.  Whenever possible the buyer should have a chance to physically inspect the boat, including a survey and sea trial, prior to closing.  If the buyer waives the right to inspect then this should be noted, in writing, prior to closing.  

Lastly, at closing it is helpful to have the buyer acknowledge in writing that the boat conforms with his or her expectations.  In an online transaction, where nearly everything may happen electronically, the brokers and both parties benefit from written confirmation that expectations are being met on both sides of the deal. 

The online marketplace presents incredible opportunities to grow the boating industry.  Sellers, buyers, and brokers alike should embrace this new technological frontier, but with an appropriate level of caution.  Taking the steps described in this article can allow everyone to enjoy the benefits while mitigating the risks to the greatest degree possible. 

 

Andrew High is a partner and co-founder of the Luxury Law Group, a boutique law firm specializing in yachts, jets and other luxury assets. Luxury Law Group has offices in Florida, New York and Washington, D.C.  The author can be reached at ahigh@luxurylawgroup.com or 800-278-7366.  For more information, visit luxurylawgroup.com.

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