What are the best practices for escrowing funds when selling for sale by owner?

One of the most uncomfortable aspects for a buyer and seller in a for sale by owner catamaran transaction is the escrowing of funds. We see that purchase and sale paperwork is formalized and examples are available online. Closing paperwork is easily handled by a marine documentation agent for a reasonable fee. But escrow services has more complicated options, costs, and risks involved.

In a for sale by owner situation, escrowing can take many forms. A buyer may not provide a deposit which then exposes the seller to costs incurred in the case the buyer disappears without paying the haul out, survey, or any other costs as agreed upon. A second dangerous scenario is when the buyer provides his or her deposit directly to the seller for safe keeping. But if this deposit is agreed as refundable, the incentives in the transaction weigh heavily against the interests of the buyer and towards the seller. If there is any disagreement about the transaction, the seller is holding funds and seeing the dispute from his point of view. The seller is not a neutral third party to decide what is fair. This situation option puts both parties in difficult positions.

What we see working best is the budgeting in a for sale by owner transaction of some type of mutually agreed upon third party service and thanks to the internet many are available. Here are a few options.

Escrow.com

The simplest option is Escrow.com which has straight forward pricing of 0.89%. This service is simple software that helps handle the flow of the transaction. The downside is that it is not marine specific. The nuances of a catamaran transaction will not be specifically addressed, and you will have to find your own purchase and sale paperwork as well as closing paperwork to handle title transfer. CatamaranSite.com can recommend a documentation agency to help with that part.

Marine Title Agency

No matter what, you will likely appreciate the service of a documentation agent. Some documentation agents also act as title agencies and provide escrow service. One that we have seen multiple times provide this service to for sale by owner transactions is Pacific Maritime Title. The fees will be higher than escrow.com, but they are marine specific and will also handle closing paperwork. The integration of the escrow and closing paperwork makes for a smoother transaction. This is probably the most common third party approach.




Maritime Attorney

A regular or maritime attorney. Escrow is a basic service they may provide. Maritime is probably best as they understand the unique complexities of boat transactions and may have connections to handle paperwork such as a referral to a reputable marine documentation agent. Fees widely vary here from our experience.

Yacht Broker

The most expensive option is a broker and while you should find a yacht broker who will do the transaction for less than the standard 10% catamaran commission, their fees are likely to be higher than a documentation agent as they will have to refer you to the documentation agent for the closing paperwork. A suggestion would be to negotiate the best price possible which should be less than 5% of the transaction or if the catamaran value is a high price then some sort of fixed fee. They may provide the most support including purchase and sale paperwork, deal flow management, escrow service, and referrals to local yards, surveyors, and other support groups. But when you can gotten this far selling by owner, it can be annoying to bring in someone else with other incentives. A broker may see the failure of the deal as an opportunity to sell the buyer a higher commission catamaran or to capitalize on the seller’s frustration and disappointment to score the catamaran as a new brokerage listing. Bringing a broker in can result in complications. We recommend you find a highly regarded broker that you have had personal experience with in the past and know you can completely depend on to be a third party and respect the FSBO situation.

Bottom Line

Handling escrow is an important discussion item for a FSBO buyer to protect his deposit or a FSBO seller to prevent liens from a disappearing buyer. A third party service provides the smoothest transaction and there are many options outlined above. Webmasters at CatamaranSite.com can provide advice on what to do and referrals to support groups for escrow services.

Richard

By Richard

Vagabond and webmaster # 2 of CatamaranSite.com

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