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Sales of Repossessed Vessels |
The information below answers most of the basic questions regarding the sale and purchase of repossessed vessels. Please consult an attorney for answers to your specific legal questions. Feel free to contact us with other questions.
The following explanations refer to the usual terms, conditions, and realities of a sale. Some sales do have variations. Some sellers have different requirements or needs and sometimes the situations vary within an individual selling organization. For the purpose of this explanation the terms seller, bank, credit union, and private moneylender are all used interchangeably. |
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U. S. Marshall Sale of Vessel Pursuant to a Federal District Court Order |
The information below answers most basic questions regarding a U. S. Marshal Sale. Please read the Notice of Sale which usually is published in the Daily Journal of Commerce for the official information. Please consult an attorney for answers to your specific legal questions. These are Admiralty cases and are very different from most other litigation. We would suggest you find an attorney versed in Admiralty Law. This is not a government publication.
These are the usual terms, conditions, and realities of a sale. Some sales do have variations. Read the Notice or listen carefully when the deputy reads the order at the beginning of the sale.
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By the very nature of visiting this web site you have probably found one of the ways to learn what is for sale at any point in time. The Internet is a major tool for moving information in today's world and this includes repossessed items for sale. Often times the boat is also advertised in a local newspaper or boating magazine. Most sales facilities have walk-in and established customers, which results in prospect databases used in telephoning and direct mail. When you are in the market call us and see what is available that fits your needs. Marine Lenders Services LLC has one of the largest selections of repo boats in Seattle.
The bank has certain legal obligations to both their borrower and banking regulators. They are bound by these obligations and do not operate in the same way as a private party might when selling his or her own boat. Do not expect things to go the way they would in a normal buy / sell situation. Items that have been repossessed by a bank, credit union, or private moneylender are usually sold to the optimum bidder in what is called a "reasonably commercial manner".
Normally the balance owed is not relevant. The seller must sell the item in a reasonably commercial manner and if there is a balance due to the seller after closing the seller may attempt to collect that from the borrower. Similarly , if there is money left over the seller has a legal obligation to return any excess proceeds to the borrower.
The owner of the vessel had 10 days to redeem the vessel. Usually a bank will not even allow the boat to be marketed during this time let alone be sold during this 10 day period. It is very unusual for an owner to get his or her boat back during the redemption period and extremely rare that it happens after the redemption period expires.
The sale may not necessarily be to the highest offer if the offer requires that the seller provides financing, makes necessary repairs, extends a closing date, or other items. In most cases the seller wants to stop the expenditure of money for insurance, moorage, repairs, loss of interest income etc. In some cases banking regulations come into play regarding whether a loan is an asset or not and this may affect price and the closing date beyond what someone outside the industry might expect.
In the situation where we are selling the boat for the bank it is not our place to give an opinion of value. The value of a vessel is frequently determined by using the various "blue books" available, a marine survey, an evaluation etc. The banks refer to these so that they know what the experts say the item is worth. You can use these tools also. Ultimately, the value is what a willing buyer will pay and what a willing seller will accept. They want you to make an offer!
Frequently there is no asking price. The seller is requesting offers or bids on the item. Sometimes the blue book, survey, or evaluation price will be stated but usually not. If a bank gives a borrower notice that the boat is going to be repossessed it will usually be stripped of any and all equipment prior to being picked up. Equipment shown on an old survey, equipment list, or which may have been on the vessel previously may be gone and unavailable. The buyer should thoroughly inspect the vessel for equipment and ask. Usually the vessel is sold as is where is and with only the equipment shown on the vessel. In some cases equipment which will be included with the boat is in storage but might not be listed in the ad. Ask the broker if there is anything else that goes with the boat.
Our policy is to not reveal the amount of other bids, which may be pending. Our Offer to Purchase contract states that the bids may be divulged. We find it necessary to include this language because some sellers have been known to work people up using this method. We do not agree with this practice and if the seller does not interfere offers are handled in a closed bid manner. We usually divulge rejected offers in order to give a bidder an idea of what bids have been considered too low. It is important to remember that a high bid might be rejected when encumbered with terms and conditions where a simple quick clean offer at a lower amount might be accepted.
A seller may receive a bid and make no response. Usually this is because they do not have an adequate number of bids yet. They may reject an offer or make a counter offer. The rules are very common in all sales situations. If a seller rejects an offer the buyer is free to walk away or make a new offer. Similarly, at this point the seller is free to accept an offer from another party. If a bank makes a counter offer they have agreed to sell on the terms and conditions stated. They cannot accept a higher offer until the buyer rejects the sellers offer. Similarly the buyer is free to walk away and not accept the counter. Once a counter offer is made the original offer is deemed rejected. Therefore, a counter offer is a rejection of an offer combined with the placement of a new offer. Once either party makes a counter the other is free to say no and move on. Be careful, sometimes when a buyer is close to the amount a seller is willing to accept, a bank will reply with an offer that $"X" amount is close but would you be willing to pay $"Y"? In these cases the bank has held that they did not make a counter offer but asked a question to see if the buyer would come up the small additional amount. If the buyer says no then the bank feels they still have the right to accept or reject the original $"X" offered amount. You should be clear when or if this occurs on what yours and the banks intentions are. Frequently they are trying to keep the buyer interested and obligated and do not want to lose him by a making a true counter offer which would in effect be a rejection of the $"X" offer.
Most sales are for cash with closing in 10 business days. The seller is not interested in a delayed or prolonged closing. Back-up bids are usually taken and are kept in the order received. Once an offer has been accepted, a higher offer will not "bump" the accepted offer. If however the purchaser cannot close in the allowed time period then the seller may accept a higher or lower offer. If a back up bid is made and accepted, that buyer will have the opportunity to close if and when the original buyer defaults either by not accepting the vessel at sea trial, survey or by not being able to close on the financial obligation.
Yes, you must write the request for any special inspection in the "Other Conditions" section of the BID/OFFER TO PURCHASE FORM. We will assist you or your mechanic in starting the engines if you request. Frequently we will have the sea trials / demonstration prior to the haul out for survey. The purpose of the sea trials is to determine if the boat performs, handles, and equipment operates as you expect. This is not a family joy ride but a serious inspection of the operation of the vessel.
A marine survey is primarily done for insurance purposes. It is done to determine if the vessel or vessel cargo and loading is safe and adequate for its intended use. Most surveyors will place the value at the highest justifiable amount. Most banks rely on the survey to determine whether there is suitable value to properly collateralize the loan.
We very strongly recommend that you have a marine survey done on the vessel. The surveyor used is totally your choice. There are 4 haul out facilities within 1/2 mile of our location and it is the buyer's choice as to which one of these is used. If requested by an out of area buyer we will read off names and numbers out of the local Yellow Pages directory to help facilitate his decision. We will deliver the vessel and return it to its slip at no charge to the buyer. Special arrangements must be made if the haul out is at a facility farther away and there will be a charge for vessel transporting in these cases. Any charges for haul out, pressure washing, repairs, etc. are the responsibility of the buyer.
If you have never had a boat surveyed before there are a number of ways of handling a survey. Usually the buyer contacts the surveyor of his choice and the haul out yard of his choice and sets a time for haul out and survey. The buyer and someone representing the seller, usually the broker, deliver the boat to the yard at the appointed time. The surveyor does the interior and above water portion immediately before or after the haul out where the in water portion of the survey is done. This method results in one trip for the surveyor to the vessel. Another option is to have the survey broken into two parts where the surveyor does the in water portion first and then if no major problems arise the vessel is moved to do the out of water portion. Each method has its advantages.
If the buyer chooses to have any work done including but not limited to the bottom painted, props or shafts checked, or hull cleaned, buffed and waxed this must be cleared with the sellers agent or broker prior to beginning work. The buyer must realize that these are his expenses even if he fails to close for any reason including if the sea trials, survey, or financing are not satisfactory. If the buyer fails to pay these directly his deposit check will be used to pay for such repairs.
Yes, you must write the request for any special inspection in the "Other Conditions" section of the BID/OFFER TO PURCHASE FORM. A Marine survey does not include a survey of the engine, transmissions, and major machinery, which can be a significant part of the vessel's value. We strongly recommend these additional items be surveyed. It is recommended that a specialist in each of these areas survey the equipment. Naturally, both the expense of the survey and the costs of transportation etc. are paid by the buyer.
Most sales are for cash with closing in 10 business days. The seller is not interested in a delayed or prolonged closing. Back-up bids are usually taken and are kept in the order received. Once an offer has been accepted, a higher offer will not "bump" the accepted offer. If however the purchaser cannot close during the allowable time period, the seller may accept a higher or lower offer. If a back up bid is made and accepted that buyer will have the opportunity to close if and when the original buyer defaults either by not accepting the vessel at sea trial, survey or by not being able to close on the financial obligation.
Upon payment in cash, cashiers check, or certified funds and confirmation of funds the vessel is available to the buyer. A temporary state registration may be obtained while waiting for titling and registration. In most cases a documented vessel may not be used until documentation is completed. Contact your attorney or documentation service for details on this. Remember to get insurance!
The seller will provide a Bill Of Sale, Affidavit of Repossession and proper forms for re-documentation of the vessel or state titling. The Broker is responsible for State Titling if the buyer is a resident in the state where the broker is. The buyer is responsible for titling or re-documenting the vessel if he is from out of state. It is the buyer's responsibility to pay any and all applicable taxes. The vessel will be sold free and clear of liens and encumbrances unless otherwise noted.
Arrangements for moorage after closing of the sale is the buyer's responsibility. Make inquiries about moorage when making the offer so that you know what the details are.
Usually these vessels are being sold under a court order issued by the presiding Judge in a civil court case in the local district. This is Federal Court not state or county. These cases are frequently related to bank loans but can be for repair liens or personal injury situations.
Usually not, it is the foreclosure on a bank loan or to pay other liens against the vessel. The bank will have the vessel sold at the U. S. Marshal sale in order to clear other liens. Suppliers or personal injury parties want to get paid if possible. Some vessels are seized for drug related reasons but the numbers are very small.
The vessel will be opened up between 30 minutes and 60 minutes before the auction for inspection at no charge. You will be required to sign a release form prior to boarding the vessel. Sometimes there will be an order allowing on board inspection of the vessel during the days, weeks, or even months prior to the sale. If there is such an order allowing inspection you will be required to pay the Substitute Custodian of the vessel for their time and travel expenses while you inspect the vessel. You will be still be required to sign a release form prior to boarding the vessel. You can inspect the vessel completely but without doing any disassembly or damage to the vessel.
You can have the vessel surveyed at your expense by the surveyor of your choice in the water prior to the sale if there is a court order allowing for onboard inspection. You will not be allowed to haul out the vessel to survey the hull. You will not be allowed to start nor operate the engines and any of the vessel's machinery.
Normally not. This is not included in the usual care or safekeeping of the vessel. Operation of this equipment would be done for marketing and sales purposes which is outside the scope of the typical court order. Therefore, no one is allowed to start nor operate the engines, generators, or machinery such as pumps, cranes, etc. Occasionally a generator may be operated to provide electrical power on a temporary basis for safety reasons.
Little if any information will be made available by the court other than the Official Number and the name of the vessel. Sometimes additional information may be provided by an attorney, the substitute custodian, or a broker. This information is not guaranteed to be accurate and should not be used to establish value or as a basis for bidding on the vessel. It may help determine whether this is the general type or size of vessel that you might be interested in.
The U. S. Marshal's Office and the custodian will not give an opinion on the condition or the value of the vessel beyond very vague answers. You should consider consulting your own marine surveyor or other expert.
The U. S. Marshal and the Substitute Custodian will not discuss the balance owed on the loan.
There may be additional information in the court file, which you can get from the clerk of the court, if it is available. You must go in person to inspect the file when it is available. The amount owed and other information may be in this file.
The payment terms will usually be in the Official Notice of the Sale and will be read by the Deputy U.S. Marshal at the time of the sale. The payment terms are usually a 10% deposit of the highest bid in cash, cashiers check, or certified funds at the time of the sale. This means you must have the money on hand at the time of the sale. The Deputy U. S. Marshal cannot let you "run to the bank" to get the funds. Naturally, payment is in U. S. dollars. The balance of the bid is due in 3 business days, excluding Saturdays, Sundays and holidays. It needs to be in the form of cash, cashiers check, or certified funds. If you cannot pay within that time your deposit is forfeited. There are no exceptions.
The vessel will be sold free and clear of liens and encumbrances unless otherwise noted.
No, if the case is related to a bank loan the bank frequently can credit bid and purchase the vessel without paying the cash required of other bidders.
PLEASE READ AND LISTEN TO THE OFFICIAL NOTICE OF SALE!
The deputy will start the sale at the appointed time. It is your responsibility to find the vessel and be ready. They do not start late. The deputy will ask all prospective bidders to register their name address and telephone numbers. There is no obligation to actually bid but you must be registered in order to bid.
The deputy will read the court order and usually ask if there are any questions. He will then ask for an opening bid. Frequently the minimum bid is stated in the order at $500.00. The bidding is verbal. The deputy or the court order may establish minimum amounts that the bid must increase by such as $100.00 or $1,000.00 depending on the value of the vessel. The deputy may say the bidding is "going once, twice, sold" or "going once twice, three times, sold". You should establish this before it is too late.
The vessel will be re-secured and not available for inspection after the sale.
Yes, the bank will often buy the vessel at the sale. It is difficult to get top dollar at an auction if a buyer cannot survey and sea trial a vessel. Also the buyer must have the cash on hand to buy it at the auction. If the bank buys the boat, they will usually then brokerage the vessel on conventional terms where you can make an offer and negotiate a selling price, have the vessel surveyed, operate machinery, and negotiate the amount of time to pay for the vessel and close the sale. Remember the lender does not want the vessel, they are in the money lending business. They do, however, have a responsibility to recover as much of their money as possible.
The balance of the bid is due in 3 business days, excluding Saturdays, Sundays and holidays. It needs to be in the form of cash, cashiers check, or certified funds. If you cannot pay within that time your deposit is forfeited. There are no exceptions.
The sale can be objected to by certain parties. It very unusual for this to happen. The sale is confirmed three business days after the auction unless there is an objection filed with the court or the bidder fails to pay the balance of the bid amount.
The balance owed on the loan is not actually relevant. The vessel will be sold to the highest bidder per the Court Order.
The U. S Marshal's Office will provide a Bill Of Sale and proper forms for state titling or re-documentation of the vessel or. The buyer is responsible for titling or re-documenting the vessel. It is the buyer's responsibility to pay any and all applicable taxes. The vessel will be sold free and clear of liens and encumbrances unless otherwise noted. U. S. Marshal Sale of Vessel Pursuant to a Federal District Court Order.
The sale is not confirmed for three business days after the auction, unless there is an objection filed with the court or the bidder fails to pay the balance of the bid amount. Arrangements for moorage after confirmation of the sale is the bidders responsibility.
