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Buyer Beware

One family's ordeal with a questionable broker

As a longtime cruiser who has rebuilt and refit several sailboats, I thought I was well-prepared to look for a larger, more family-friendly boat to replace our Pearson 365 ketch.

The Schoenberg family discovered that their Whitby 42 had a failed transmission - a problem the listing broker was aware of but didn't tell them about.

We had done our homework and put together a checklist of what to look for in a used boat. Knowing that prices were falling and it was a good time to buy, we researched dozens of possibilities online. After two months of looking and dragging our three kids all over New England, we decided to make an offer on a 1980 Whitby 42 we found south of Annapolis, Md. We drove down twice to go over the boat before starting negotiations.

The owner lived in Australia and was unavailable for consultation, except for a few questions relayed through the listing broker, so we relied on observations from a previous survey and information passed on by the broker. We agreed on an initial price, contingent on a survey and sea trial. However, we found out the boatyard where the Whitby was stored was overhauling its launch area, so we would not be able to perform the sea trial until after the sale.

We did a land survey that included hull and systems evaluations, but we couldn't do the rigging and engine survey, other than to make sure the engine ran. We agreed to an escrow addendum that would secure about 10 percent of the selling price to address some issues we'd found and any others we might find after the sea trial. Based on the land survey, we went forward with the purchase.

On the day of the closing, the entire family came to the boat - 12 hours from home - with the intent of making some initial repairs and upgrades, performing the sea trial and beginning the adventure of moving it from Chesapeake Bay to a marina close to our home in midcoast Maine. When we got to the boat - it had been launched the night before - we found her filling with hundreds of gallons of water.

With the spare bilge pump I had brought and a high-pressure pump from the yard, we dewatered the boat. The holding tank had ruptured and back-siphoned, filling the boat with the residual contents of the tank and water. We spent the next five hours bleaching the inside and cleaning the boat, since we planned to sleep on her for the next week.

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We had almost finished this truly disgusting task when there was a knock on the hull. I came up to investigate and found a scruffy-looking gentleman standing on the dock. In his country drawl, he asked, "Are you buyin' this here boat"?

I was a little defensive at this point, so I said I was thinking of it and asked why he was wondering. He then asked what I planned to do about the transmission, since the boat didn't have a working one. I asked how he knew this, and he said he worked for a local diesel mechanic who had quoted the previous owner $10,000 to replace it. Instead of fixing the transmission, however, the owner hauled the boat and put it up for sale.

We walked over to his boss's shop - a shack with about 50 diesel engines and a flock of chickens in the yard - and I found out that, in fact, the story was true, and as far as these men knew the transmission had overheated and seized. I had taken a sample of the transmission oil during the land survey and sent it out for analysis. The test results showed the oil was fine, but what the results couldn't tell me was that the previous owner had changed the transmission oil prior to putting the boat up for sale.

I called the brokerage and told them about the holding tank and the transmission, and said I wanted to walk away from the boat. (They had not yet supplied me with the signed final paperwork transferring ownership.) I was informed that since I had already transferred the funds into the brokerage's account and signed my copies, the boat was mine. The operation sent down a broker with the full escrow amount covering about 40 percent of the cost of replacing the transmission and holding tank. The broker said they could not account for the dishonesty of the prior owner, wished me luck and took off.

Over the next week, the family worked like dogs to help remove the transmission and holding tank and do other work on the boat. The diesel mechanic, a commendably good and honest man, rented me a space at his dock and agreed to repair the transmission. After a week of 16-hour days working on the boat and my kids spending their vacation at the yard, I left the boat with the mechanic, resigned to an $8,000 bill before even starting my planned refit.

The Whitby 42's failed transmission

I was furious and deeply disheartened, and from what the broker had said, I felt I had been cheated by a dishonorable seller who had put my family at risk. Rifling through the reams of paperwork, I stumbled upon the seller's e-mail address on an ownership transfer document. I e-mailed him telling him in no uncertain terms that he had put my family at risk by allowing us to get on a boat with a known major defect and that I would greatly appreciate it if he would let me know if there were any other safety issues we should know about.

He responded the next day, assuring me that everything else, to his knowledge, was OK. However, he was puzzled why we didn't know about the transmission, since the listing broker was well aware of it. After exchanging several e-mails, I    realized we had met the prior owner and his wife at a Chesapeake Bay anchorage on our way back from the Bahamas the year before.

At this point, I started to do some research into a course of action against the broker. I found out that in Maryland there is no law specifically giving a boat buyer recourse against a dishonest dealer or broker. I would either have to go to small claims court or seek informal mediation through the BoatU.S. consumer affairs division.

In 2006, the Yacht Brokers Association of America enacted a code of ethics that prohibits brokers from misrepresenting a vessel. But the YBAA president said the only sanctions his organization can impose are to revoke the broker's membership and professional certification - after a third violation, which neither prevents the broker from staying in business nor satisfies any financial claims.

I asked the prior owner to send me any documentation that would prove that the broker knew about the transmission. He sent me an e-mail string that went like this:

When I sent the escrow addendum to the broker and the broker forwarded it to the owner for signature, the owner told the broker he could not sign it because he knew it would not cover the cost of the transmission. The broker asked the owner what he wanted to do, and the owner said he saw three options: 1) fix the transmission, 2) reduce the asking price by the amount of a quoted repair, or 3) take the boat off the market.

He advised the broker to immediately tell me about the transmission. The broker responded that in this market no one would buy the boat without a working transmission. However, the boatyard lift was out of commission, and this would work to their advantage. I could not perform the sea trial until after the sale, so the owner would only be out the escrow money once I found out the transmission would need to be replaced. The broker strongly advised to not tell me about the transmission and let the chips fall where they may.

From this documentation, it was clear the broker intentionally misled me about the vessel's condition. However, I also realized this document was not enough when dealing with such dishonest brokers. I contacted the surveyor who did my land survey and told him what I had learned. He then told me of another instance where this specific broker put a prospective buyer in jeopardy by not divulging a major safety issue with a boat in order to make a sale. The surveyor wrote off the broker with some harsh expletives.

I contacted the owner of the Maryland brokerage and told him about the information I had regarding the broker's prior knowledge. He said he had no time to speak with me, that I should send him the documents and when he had time he would review them and maybe call me back. At this point, the gloves came off. I told him he had 24 hours to respond. If I didn't hear back, I would begin action with YBAA, BoatU.S., the Maryland attorney general's office and the lawyers I had contacted. He was unimpressed and said he'd get back to me.

At 8 o'clock the next morning, the owner of the brokerage called and said I did have reasonable proof of prior knowledge and asked what I wanted. I told him I wanted reimbursement for a new transmission, reinstatement and extension of the escrow addendum, and the funds - which I used to pay for the repair - immediately wired into my account. He tried to play with me, but I was in no mood to play.

He did finally meet my demands, and after all was done, he said he had learned from this never to sell a boat for someone outside the country. What I believe this meant was that the only reason there was an e-mail trail of this dishonesty was because none of the discussions with the owner could be done over the phone. Had the seller been local, nothing would have been in writing, and they would have been off the hook.

So, my cruising and boating friends, remember: You can be the wisest boat mechanic, surveyor, researcher and sailor, but at the end of the day this is not our game. There certainly are honorable brokers out there, and you should do everything in your power to find them. But make sure to cover yourself and your family, because there are dishonorable folks out there selling boats, and there is very little, if any, recourse if you fall prey to one.

Don't buy a boat without sea-trialing it first, if possible. If you must buy first and sea-trial later, require the seller to put no less than 20 percent of the boat's purchase price into escrow to cover any problems the sea trial uncovers. In the end, I was very lucky.

See related articles:

- Choosing a broker

- Be on the lookout for these red flags

This article originally appeared in the March 2010 issue.