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Is a hurricane-damaged boat right for you?

Avoid making a big mistake by doing your homework before you buy

Avoid making a big mistake by doing your homework before you buy

Hurricane-damaged boats used to fuel fires on the beach; now they often fuel dreams.

Many people purchase badly damaged “hurricane boats” that have been salvaged, declared a total loss, and offloaded by an insurer. Hurricanes Charley and Frances alone tallied more than $430 million in losses to recreational boats, according to a BoatU.S. estimate. With Ivan’s $150 million in damages and Jeanne’s $100 million, the association reports a total of $680 million in pleasure boat losses.

Could any of these hurricane boats be for you? I’ll examine some of the issues you need to consider before buying a hurricane-damaged vessel.

How do you find one?

Finding damaged boats after a major storm isn’t difficult. The trick is to find them through a reliable source. Individuals or groups sometimes will buy large numbers of boats from a stricken marina for the purpose of speculation. They then sell them to individuals who are looking for a deal. You can find these sellers by driving around the affected areas or searching the Web. Also, there usually are individuals who, because of lack of insurance or other reasons, are selling their own boats. The risk of dealing with individuals or short-lived companies can be significantly higher than that of dealing with an established insurance company and/or its third party liquidator.

“If you’re going to buy a salvaged boat after a hurricane, do it through an insurance company, or its liquidator or licensed dealer,” says Carroll Robertson, BoatU.S. vice president of marine insurance claims. She notes that after catastrophic storms BoatU.S. often will sell through an agent.

“We want our staff out taking care of our insureds as quickly as possible,” she says. “They may not have time to also be selling boats.”

There are various established companies in the business of contracting with insurance companies to sell totaled boats, as well as other types of sales. These companies typically don’t own the boats; they act as agents for the insurer or owner and get a fee for the sale. You can find them on the Internet, of course, and also through advertising in boating publications. Boats damaged in catastrophic storms might be sold by the time you read a monthly publication, but the advertisements are very helpful in making a decision as to the companies with whom you wish to deal.

Getting into the game

After a major storm, these companies typically will post online information about the boats they’re selling. The information should include before and after pictures, a written description of the boat and its damage, and its location.

Companies often have central storage facilities that they move their boats to after a major storm. The buyer bids — typically by mail, phone or fax — for the boat that he or she wants. A good-faith deposit, if required, should be returned if the bid isn’t accepted. A much lower bid-processing fee charged by some may be non-refundable.

It’s in the best interests of the liquidator and the insurer to move boats quickly after a major storm, so the bidding on a particular boat may be open for only about a week.

Bob Toney, president of National Liquidators — (800) 633-7172 — says that although it usually it takes 35 to 40 days to sell a boat, things can move much faster after a hurricane. He says his

company’s Web site gets 6 million to 7 million

hits a month.

“Be sure you’re dealing with a licensed broker in states where they have such, or at least that the broker has been in the business for a long time,” warns Toney. “And beware of deals too good to be true.”

Bidding with National Liquidators, which has been in business since 1988, requires a conversation with a salesperson. “We want the customer to be informed,” he says. “We have 10 people ready to take calls.”

While no good-faith deposit is required to bid, buyers must make a deposit within 24 hours if they win the bid. The company charges bidders $20 to give them a bidding number and put them in the system.

Tim Blanchard is a managing broker for — (401) 732-6300 — which handled the BoatU.S. sales for Hurricane Charley. The company has been in business for 16 years, according to Blanchard, with Certified Sales as the parent company. It requires a small good-faith deposit with a bid, returnable if the bid isn’t accepted. Full payment is required within 24 hours of an acceptable bid.

For the Charley boats in Punta Gorda, Fla., buyers received five days of free storage after purchase. Storage fees after that were based on the length of the vessel.

Ronald Milardo of Cooper Capital Specialty Salvage — (860) 395-4745, www. — says he was impressed not only with the scope of the disaster from these four hurricanes, but also with the fact that he’s finding the damaged boats to be generally larger and more expensive than those from earlier storms. He says his company has been in business for more than 10 years and has represented some of the largest carriers.

Milardo says bidding circumstances may vary with the situation, but often there is a minimum bid amount to weed out bidders who aren’t serious. He says that normally with his company no deposit is required, and payment is expected within 10 days (special exceptions may be made), with allowance for 10 days free storage.

As is true of many, Cooper Capital doesn’t own the boats, but sells them for others for a fee, with guarantee of free and clear title. There is a 2-percent buyer’s premium fee added to the accepted bid price.

Milardo says his company not only sells on its Web site, but in special circumstances may have open-air auctions. In fact, they had one scheduled for Oct. 23 in Fort Myers, Fla.

Look before you leap

Paying for the boat is just a part — likely a small part — of the expenses. “Be realistic with regard to your experience in repairing boats,” says Blanchard. “If you can do a lot of repairs yourself, you may find this to be a real bargain.”

And you may have to fork over payment for the boat from your own bank account because you might be unable to get a purchase loan on a storm damage salvaged boat. As you’ll see below, there are too many potential problems to suit the risk comfort level of many institutional lenders.

It’s important to visit the boat before you place a bid. Most reputable companies strongly advise this. It means spending money just to look because you may have to take time off from work and travel, but your risks can be astronomically higher if you skip this step.

Milardo emphasizes that looking at the boat is even more important for higher dollar bids. He points out that if you rely solely on the opinion of a third party on scene, the opinion may overlook damage or may even exaggerate damage because the person may want the boat for him- or herself.

You will be buying the boat on an “as is, where is” basis. This means you’re stuck with what you get where you get it — like it or not — so due diligence is critical. Sometimes damage photos can be misleading, since many types of damage aren’t obvious. Insurance companies don’t total boats without good reason.

Unless you’re really knowledgeable in inspecting boats for potential damage, it’s best to hire an experienced, reputable marine surveyor, preferably one certified by a recognized organization such as the National Association of Marine Surveyors, the Society of Accredited Marine Surveyors or the Association of Certified Marine Surveyors. However, in the real world after a storm, they’re going to be in very high demand and might cost more than the boat.

If you want to move fast to get the best deal, you might have to take the risk and check the boat out yourself. At the very least bring along a knowledgeable friend if you don’t have experience in this area.

Details, details …

Here’s a look at some of the hidden damage a boat might suffer.

A blow to a fiberglass hull, as when it collides with a dock or other boat, can cause the hull to flex. It may then pop back out, with perhaps a few superficial scratches or some gelcoat crazing. However, the blow can cause fiberglass delamination, which can’t be seen or readily detected. When the boat is later put into use and the hull flexes in the waves, this can rapidly and dangerously worsen.

Sometimes a void can be detected by tapping along the hull and listening for changes in the sound made. However, delamination may exist with little physical separation, making it difficult for the inexperienced to hear a difference.

Most fiberglass hulls are stiffened by bonds with interior bulkheads, stringers and other components. Typically the bond is inflexible — for example, when it’s made with glass tape and resin. Frequently a blow to the hull will weaken this bond or tear it loose. If the bond is to a bulkhead, the blow may cause delamination in the plywood of the bulkhead. These areas of bonding are usually behind cabinets and joinerwork, and can be difficult to find. But the damage will become worse, perhaps even causing the wood to rot, as you use the boat.

Some hulls are stiffened with longitudinal fiberglass stringers, usually formed by layers of glass over wood or other material. They also may be hidden from view. If these are cracked, not only do they need to be repaired — sometimes by massive displacement of bulkheads and furniture — but the hull around them may be delaminated.

Bent shafts aren’t uncommon and are usually difficult to see unless severe. If the shaft is bent, chances are that the hull around the strut and through-hull cutless bearing (if there is one) also may be damaged. This could add significantly to your rebuild costs.

Wiring that has been partially or completely submerged — especially in salt water — should be replaced. The moisture eventually will corrode wires, causing problems with conductivity that could lead to failure, overheating and even fire. Moisture can travel up the wire strands far above the high-water level, unseen beneath the insulation. Still, by looking for a water level inside a boat you can make a better determination as to the extent of wire replacement, as well as other water damage.

Moving the boat to a storage or repair yard can be very expensive, especially after a hurricane. Some sellers or agents will allow a few days free storage, but they won’t want your boat around too long. They need to make room for others, so they will start charging you for storage or evict you.

Depending on the size and type of boat, you may have to hire a specialized trucking outfit to move it, as well as pay for a crane or lift and possibly a crate. You’ll also have to find a location where you can store and work on it. Check into the logistics and feasibility of all this before you bid.

Engine may be the key

An engine that is in good shape or is readily reparable may make a boat worth buying, even if all else looks worthless. Water in an engine isn’t necessarily fatal if the power plant is promptly and properly treated. Restoring an engine is beyond the scope of this article, but there are some steps you can take to make an informed decision.

Try to ascertain the engine’s history since the storm. The longer the engine sits in water, the more likely there is to be permanent damage. Also, damage normally is accelerated substantially when the engine is removed from the water and left sitting without taking steps to preserve it. Remember, the agent might not know the recent history because of the pace of salvage after a storm.

When checking in engine spaces, be sure they are well-ventilated and free of dangerous gas before you proceed. Check for high-water marks in the engine space, and look for signs of water in the engine. Pull the oil fill cap, and check for moisture in the starter, alternator and around the exhaust. You probably won’t see the telltale chocolate milk mixture of oil and water when you pull the dipstick because the engine likely will not have been run since the disaster. However, a high oil level can indicate that the oil is floating on water. Removing fluid from the bottom of the engine sump should give you a clearer picture. One way of checking this is to take along a hand pump with a small dipstick tube.

See if you can manually turn the engine over by using a wrench on the end of the shaft. If not, it is probably seized and not worth buying. Also, you may not be able to manually overcome the compression in a very large engine unless you remove the injectors or plugs.

With a diesel, there is another reason to remove the injectors. There may be some danger of the engine starting when you turn it over because fuel combustion is attained by compression only, not electric spark. If it were to start while you were turning a wrench on the shaft you could be severely injured. Also, disconnect the high-pressure fuel lines from the injectors to avoid the possibility of a high-pressure spray from the nozzle.

If the engine is a gas model, be sure the space is well ventilated and there are no sources of spark. For example, if you remove the spark plugs before turning it over, remove the plug leads also and be sure that the contacts can’t spark to ground. Take no chances of creating a spark in any environment. Immediately leave if you smell gas or other fumes. Obviously, expert help is a good idea for reasons of safety as well as analysis.

Because a large outboard may be worth as much as or more than the boat it’s on, even without storm damage, many find particularly good deals in this area. It isn’t unusual to see a ruined hull with an outboard that’s in relatively good shape, having been protected in part by its location on the hull.

Many modern outboards have most of their electrical functions in plug-and-play black boxes, which makes them easier to repair. But you still must know whether the engine is seized.

Outboards usually can be turned over manually by pulling the starting cord. Take a length of 1/4-inch rope with you for larger outboards that don’t have recoil starters installed. Don’t try the electric start; you don’t want the engine to run, just turn over.

First, disconnect the fuel supply and sniff for fumes. Stop and leave if you smell gas, advising the boatyard. Remove the plugs and their leads, taking care to avoid any chance of spark. If you think you’re going to bid on the engine — this applies to any type of engine — you might want to spray some CRC 656 or a similar lubricant on the top of each piston while turning.

After the mud settles

If you’re not careful, you could find that you’ve paid the purchase price, you’re shelling out money for a mess sitting in a boatyard, and someone else is claiming a lien on the title. This isn’t the stuff that dreams are made of.

Typically you will be expected to close within a week or so of your bid being accepted. Before the storm, the title likely will have been held by the previous owner, encumbered by a purchase lien from a lending institution. And there may be other liens, such as those for unpaid boatyard bills.

After the storm, a responsible insurance company usually will have paid off any purchase money or other known liens against the title, paid any balance owed to its insured, and received the ownership. It or its liquidator should have conducted a search for title liens with the Coast Guard or the local jurisdiction where the boat was located. These normally turn up, for example, recorded as liens for unpaid yard bills.

There also may be “hidden” claims that exist but haven’t been recorded, such as claims against the boat for damage it may have done to others during the storm if the owner was negligent, or claims for very recent repairs. Another significant example could be a claim made by a governmental agency for environmental damage, such as an oil spill when the boat sank. If the boat was insured with an adequate policy, environmental damages should be covered. The typical BoatU.S. policy includes $500,000 coverage of such claims. (Note that environmental coverage normally is for the cost of containment, cleanup and damage resulting from the spill. No policy covers fines or penalties that may be assessed because of the insured’s actions.)

Obviously, your odds of getting a lien-free title are much better if you’re buying from a reputable insurance company or reputable third-party liquidator representing insurance companies. Ask for a clear statement from the seller or its agent as to whether the boat is free of liens, and whether they’ll stand by that statement.

You also should consider obtaining title insurance. Victor Koock, general counsel and vice president of First American Transportation Title Company — (800) 247-4035 — says his company offers vessel title insurance that protects against liens, whether recorded or not, including offshore liens. He also says it insures titles for foreign-flag vessels. He points out that First American doesn’t cover liens based on tort liability, salvage, environmental or other such claims normally covered by the vessel’s general liability policy. Koock says the company usually turns around an application in one or two days, and therefore could respond within the context of hurricane damage purchases. He says the company has been in the title insurance business for many years, although vessel title insurance is a relatively new field. The cost usually is around $1 to $1.25 per thousand dollars of value.

Is it worth it?

The most important financial issue probably will be the one you are least able to answer: Is the total cost of bringing the boat up to par going to be so much that you’d be better off buying a used, undamaged boat? The answer to this question is based upon another: Are you going to have the skill, strength, perseverance and time to properly restore the boat? If the answer is yes, this may be the key to your dreams. However, if you must hire a yard to restore the boat you may find that you’ve made a serious mistake.

I’ve discussed some of the tricky issues in evaluating a boat before you buy. In addition to this, there are many other factors that should be considered when you ask yourself those two questions. Here are a few examples.

Fiberglass is relatively easy to repair if you know how and can access the damage. But the grinding necessary for a major repair may be far more toxic and difficult than you want to undertake. And once you’ve made it “tougher than new” you’ll face the issue of cosmetics. Making a damaged section of a hull look like the rest of the hull can require great skill and time, and be very expensive. Wooden boats generally require much more skill and experience to repair than fiberglass, especially with structural damage.

Purchasing a hurricane boat for spare parts may be a good idea if you can move and store the hulk cheaply. Sometimes the cost of a new sailboat mast or rebuilt engines will be considerably more than a badly storm-damaged boat with those items intact.

Yet another snake awaits in the grass for the unwary: These boats can be difficult to insure unless you pay a higher premium. “Often an insurance application will ask whether the boat has been seriously damaged before,” says Robertson, the vice president of marine insurance claims with BoatU.S. “They will have to be candid and open in their application to the insurance company, or the policy will be voided back to its inception.”

Many people, astounded at the high price of new boats, dream of buying a damaged boat, fixing her up and cruising away. Years later the boat still lies broken in a yard, eating up expenses. The boat may yet be reparable, but the dream is broken forever. Just remember, don’t underestimate the job or overestimate yourself. n

Tom Neale is an experienced writer, lecturer and boater who has lived aboard and cruised full time since 1979. His current fleet of eight boats ranges from a kayak to the Gulfstar 53-foot motorsailer on which he and his wife live and work.

(Editor’s note: Because of the circumstances following the hurricanes, Soundings was unable to talk to every company involved in liquidation sales. Readers should draw no positive or negative inference from a company’s mention, or lack of mention, in this article.)