The Pre-Purchase Marine Survey

I’ve been busy showing boats and writing contracts over the past 10 days – a refreshing change that has unfortunately slowed down my blogging a bit. Since I’ve been helping some clients set-up surveys, I thought I would share some thoughts on that topic.

Once a buyer and seller have agreed on an asking price and signed a contract, the pre-purchase marine survey is the next hurdle to clear. Similar to a home inspection, the survey is done by an expert working exclusively for the buyer, so that he can provide an objective and technical evaluation of the boat’s condition. Even if the boat you’re buying is less than a year old, your insurance company is going to want to see a survey.

When it comes to choosing the right surveyor, I always advise my clients to seek-out referrals, rather than just choosing blindly from a directory. If you’re working with a broker that you really trust, he can provide you with a list of surveyors that are well-respected in the field. When I do this for my own clients, I include the caveat that they cross-reference the names I give them instead of just “taking my word for it.” Yacht yards, owners, and online owner’s groups are all great places to ask about a particular surveyor’s reputation.

The three criteria to consider when choosing a surveyor:

- has experience with the make of boat that you are purchasing
- accredited by SAMS or NAMS
- is able to communicate clearly, answer your questions, and explain what you should expect from the survey

The best surveyors have first-hand knowledge of the enitre build history for that model or manufacturer, and a technical or engineering background. Expect the survey to report major structural/operational problems with the boat, engine, and related gear. Here are the headings you are likely to see in a surveyor's report:

- inventory of equipment found onboard
- hull composition and structure
- propulsion and machinery
- tankage and plumbing
- rigging
- electrical systems
- electronics/navigation equipment
- head
- deck equipment
- safety equipment
- summary of findings/recommendations

After the Survey

Ideally, the survey report will come back with no major issues, and both parties will proceed to the closing. But sometimes there is a more significant issue that prompts the buyer to ask for a concession – a reduction in purchase price, or repair/replacement of the problem. At this point, the seller can walk away from the deal, or make the concession (a broker can be very useful in helping both parties resolve the issue).

Cost

Here in the Northeast, the top surveyors might charge as much as $20/foot, which includes the out-of-the-water portion of the survey and the sea trial. The process usually takes most of the day, but for complex boats over 45’ it can be a two-day affair. The buyer will be responsible for any yard charges, include a "short-haul" and power wash to facilitate inspection of the bottom.

I have two surveys taking place over the next 6 days - it will be a busy week!

Spring?

The yard was launching boats this week, and a few of those boats even went sailing. I've been busy with showings, but unfortunately nothing solid is in the works yet. Looking over my records since January, I see that I've written up six offers so far this year, none of which have been accepted (for various reasons). Not a big surprise in this climate.

Luxury Tax Update: Take Action Now

Governor Paterson's proposed 5% tax on boat sales over $200,000 remains on the table, and if you're a NY state resident, now is the time to contact your state representative (see contact info below).

As I've written here before, this tax is only going to take money out of the state's coffers by discouraging yacht sales. That means less work for boat yards, less work for manufacturers, the list goes on. Here, courtesy of Howard McMichael, are six reasons why the tax is a bad idea:

1. The previous federal luxury tax in the early 1990s of 10% proved people stop buying boats when taxes drive the price beyond what they are willing to pay. It was repealed because it failed miserably.

2. When a buyer adds the luxury tax to the sales tax the effective tax is 12-13.6% depending upon where the buyer lives. Buyers will wait until it is repealed or simply invest their money in competing lifestyle experience.

3. The luxury tax will eliminate sales that would produce sales tax revenue causing sales tax revenue to decrease by more than the amount collected by a luxury tax producing a NET LOSS of taxes.

4. New boat owners spend more money maintaining and upgrading their boats than do people with old boats. This directly affects thousands of employees and hundreds of businesses in the marine service industry thru-out the state.

5. These same businesses have a vested interest in improving water quality for recreational boating and fishing. Investment in their infrastructure and water filtering will be curtailed due to lack of profits from boat sales.

6. Many new boat sales companies have 2007 and 2008 inventory in stock with bank loans running out. This inventory has caused large companies like Brunswick to curtail 2009 manufacturing. If existing inventory has an additional 5% added to the already distressed sale price the inventory will bankrupt many businesses. Sort of like telling General Motors you are taxing car sales to help them move product.

Find your State Assembly person quickly via zipcode:
http://assembly.state.ny.us/mem/

Assemblyman George Latimer (Westchester County):
LatimG@assembly.state.ny.us
518-455-4897 Albany office

Suzi Oppenheimer (37th Senate District)
oppenhei@senate.state.ny.us
(518)455-2031 Albany office

Spring Seminars

Things have gotten pretty busy here so this will be quick, but I wanted to post a sampling of some of the seminars the local clubs are hosting over the next few weeks. Call or click for details and to confirm dates; note that most of the events require registration.

March 25th 7:30 pm Racing Tactics with Kerry Klingler (UK) City Island YC
April 8th 7:30 pm Marine Diesel and Electronics with Precision Marine City Island YC
April 15th New 2009 Racing Rules with Butch Ulmer (UK) City Island YC
April 16th 7 pm Rules with Paul Beaudin (Doyle Sailmakers) Harlem Yacht Club
April 22nd 7:30 pm Sailboat Rigging with Jeff Lazar (Performance Yacht Mgmt) City Island YC
April 23rd 7:30 pm New 2009 Racing Rules with DAVE PERRY Cedar Point YC
April 23rd 7 pm Trim with Paul Beaudin (Doyle Sailmakers) Harlem Yacht Club

What Can the Bowsprit Do For You?

Last week I got the chance to hear designer Mark Mills (he drew the King 40 and Summit 35, among others) discuss the relative merits of a bowsprit with asymmetric spinnaker vs. a traditional spinnaker on a pole.

As a J/Boat guy, I’m fully onboard with the advantages of a sprit, specifically the ease of use, lower crew requirements, and increased fun factor. But Mills took a more scientific look at the advantages of either configuration under IRC in specific wind ranges.

A traditional spinnaker can operate like an asym with the pole all the way forward, however the sail by necessity has less area. With a longer luff length, an asym flying from a bowsprit will offer roughly 15% more sail area on the same boat – and IRC is pretty forgiving of this increased downwind sail area.

The final analysis? According to Mills, an asymmetrical kite on a sprit will be at an advantage at or below 12 kts under IRC; above 12 kts, the versatility of a traditional pole comes into its own. As always, individual results may vary; consult your yacht broker/sailmaker/tax advisor before making any changes to your sailing diet.

Now THAT'S a spinnaker! (King 40 at KWRW)

Luxury Tax Update: Not Much to Report

Governor Paterson's proposed 'luxury tax' is still being debated in the state assembly and there is very little in the way of updates. At this point it seems unlikely that the budget will be passed by April 1. The last recorded action on the bill was on 1/21/09, when the assembly amended and referred it back to the ways & means committee. It would be helpful to know if the luxury tax portion of the bill was amended, so that we could all get on with buying our luxury cars, yachts and planes.

You can keep up-to-date on any specific bill at the website for the state assembly:
http://assembly.state.ny.us/leg/. Enter A00160A for the assembly bill number, S00060A for the senate bill number, and thank your 8th grade civics teacher.

Finally, McMichael's Sales Coordinator and all-around detail guru Tish Fontanella will be in Albany next week, and will have the oportunity to get some clarification on the status.