Nautical Services, Inc.

Providing Marine surveys and Consulting immediately to the Gulf Coast States of Alabama, Mississippi, Louisiana, and Florida. Travel includes all other States, Regions and Countries as requested or needed. Previous travel experience includes; most U.S coastal and inland states, Australia, Turkey, Puerto Rico, Greece and the Dominican Republic.

SAMS® Accredited Marine Surveyor
ABYC® Standards Accredited
USPAP® Certificate on Appraisal Standards

Buyer Due Diligence

BUYER/SELLERS
BE ON THE LOOKOUT

"USE DUE DILIGENCE"
"Due diligence" is an investigation, audit or review performed to confirm the facts of a matter under consideration

First, let me say that the premise and motivation of this article is certainly not intended to be negative, demeaning or disrespectful toward anyone in the marine industry profession. In fact, I have developed the utmost respect for many individuals in the marine industry over the years, and it's in-part due to those individuals and past mentors that prompted this article.

From the beginning, to date, I have adhered to and maintained a strict code of conduct and ethics throughout my career as a marine surveyor, certainly out of respect and professionalism toward marine surveying as an industry, bound to as a licensed SAMS surveyor, and obligated to by survey purchasers.

This article is a culmination of many years' experience encountering and witnessing unfavorable, unethical practices of yacht brokerages, brokers and surveyors alike that is the premise of this article.

With a growing industry and expanse of expensive complex vessels, the enormous amount of money involved, and the perpetual degraded morality of brokers and brokerages, it stands to reason there will always be those involved for the wrong reasons. Growing up in a family that lived, ate and breathed boats, I've always had a special passion for the marine industry and looked-up to those professionals directly involved, only to be disillusioned, disappointed and in some cases just plain disgusted by the actions of these individuals and companies today.

Hopefully, this article will enlighten an unsuspecting buyer before he or she gets caught up in the good old boy broker network resulting in at least a lost interest of boating and probably a substantial loss of monies.

I'm sure there are many other honest veteran surveyors out there who have seen the same thing, but most I'd say would not be willing to air it out on their webpage because of the ramifications in general.

Over many years of surveying Yachts, small craft and commercial vessels, providing to the best of my ability a professional survey and survey report without prejudice or conflict of interest. I suggest it would be in one's (survey purchaser/buyers) best interest to understand in-part the logistical process between the (broker/brokerage/surveyor) when buying a used or even sometimes new used vessel.

As it is, buying a new or used vessel can be a time consuming, tedious, painstaking, and an expensive venture for anyone, then comes the survey process adding another but very important part of the vessel purchase process.

Sometimes as a buyer, finding a surveyor can be as easy as reviewing the SAMS webpage and making a few calls to find the surveyor YOU feel comfortable with, or as it is in many cases, asking your broker if you have one, to find a surveyor for you.

Well, what you're going to get for the most part depending on who is task with the job, especially if not handled personally by you or your honest broker, is a list of (usually three) surveyors as part of a pre-determined, preordained list, or the so called "recommended or preferred surveyors list" provided by the selling broker.

"Is that really in your best interest?"

Recognizing early on in my career that a professional survey and subsequent survey report is paramount and pretty much the sole purpose of this profession as well as a contractual, moral and ethical obligation to the buyer, and an obligation to the industry profession. You as a buyer should know and understand that those standards aren't always in someone else's business plan.

The normal business relationship between brokers, brokerages and surveyors is a love/hate relationship. Surveyors want to develop good long-lasting relationships with brokerages and brokers, it's just good business if for the right reasons, but that's not always the case if you're a surveyor worth your salt and you stand your ground. In some instances, with the honest veteran brokers, a friendship and good working relationship develops over the years.

Other instances as a surveyor, you're the best buddy of the listing or selling broker while you're on survey, but couldn't get a life- ring thrown to you on a sinking vessel outside of that. Most brokerages and brokers on the selling side don't want surveyors, or their listed vessel surveyed for the obvious reasons. They really don't want the surveyor discovering deficiencies or you to know the actual condition of the vessel for obvious reasons. The broker working for the buyer however has a different role, and a good trusted buyer's broker can keep the process running smooth, weed out the bad vessels before they even make it to survey, and make the buyers purchase process almost fun for him/her as it should be.

On the broker or brokerage selling side however, surveyors are a step in the pre-purchase process they would like to forego, and a thorn in their side for all practical purposes.

With that said! There are the broker exceptions to the rule with whom really want the buyer (survey purchaser) to know and understand the condition and subsequent value of the vessel, and these brokers do exist.

If you are in need of a good broker, ask an honest surveyor... We know who they are!

We (surveyors) are here for a reason, a reason that began back in the 60's when there were no real standards for yacht construction, especially with the boom of plastic boats. Somewhere in the 1960's to 1980's, SAMS and NAMS were born and evolved to a regulated professional organization to protect the unsuspecting buyer from poor quality constructed vessels, hidden damages, unknown damage, manufacture defects and/or just plain junk that is and was being built and sold.

Today it has evolved into an organized, regulated, educational professional organization which continues to evolve as a result of the plethora of yacht types, complex systems, components and construction approaches, all of which require some level of knowledge by the surveyor.

Yacht brokers will provide a buyer or another broker with a list of surveyors, usually three surveyors with their preferred surveyor first on the list, and of course would generally meet most state licensing Yacht Broker "code of conduct" requirements. As such, be careful of this because it's likely going to be surveyors that a selling or listing broker or brokerage wants, and not necessarily what's in the best interest for you, the buyer. I suggest that the list of surveyors provided by (yacht brokers) is a list of surveyors who the broker or brokerage feels comfortable with. There are many very good surveyors out there, just make sure the surveyor working for you, is actually working for you.

As a buyer, is your yacht broker if you have one, providing you with the list of surveyors that has your best interest in mind? Or, are you even given the option of making the decision as to what surveyor is being hired or considered for hire. In addition to the hull surveyor, and in most cases these days an engine tech or engine mechanical survey is part of the overall survey process, and a very important process at that.

With that said, to many times I've witnessed brokerages with their own technicians or at least part of the same entity (especially outboard boats) providing mechanical survey's and reports to buyers. Buyers? where's the logic in that? Would you have a hull surveyor conduct a survey that's paid for by the selling brokerage, selling broker or dealership?

On another note, NEVER! be led to believe the vessel your considering for purchase, doesn't need a pre-purchase survey.

Too many times I've received calls from buyers who just purchased a used vessel without a pre-purchase survey because they were told it didn't need one. Now, after they purchased the vessel, it's brought to their attention they now require an insurance survey to meet insurance underwriting requirements, as well as other requirements by marinas and so forth, and then..... Lo and behold... these were vessels previously surveyed and subsequently rejected by other buyer(s) due to a failed pre-purchase survey.

These vessels are ultimately rejected because of poor survey findings and/or findings that were bad enough the vessel would be rejected by insurance underwriting based on their current condition. Now, you just purchased and currently own a vessel that was previously rejected as a result of a poor pre-purchase survey, and it's more than probable there's too many deficiencies to get a binder for insurance, or its current condition is uninsurable without considerable repairs.

Remember! It does not cost much more, if any, in some cases to get a Pre-purchase survey over a Condition & Valuation survey depending on the vessel. Again, do not let anyone tell you the vessel does not need a survey, find and hire a surveyor of your choice.

The pre-purchase survey can be used for insurance if the vessel passes survey and you elect to move forward with the purchase. So, the logical approach is to get the vessel surveyed before you buy it, then use that survey for insurance underwriting requirements.

One way or the other you're going to need a survey at some point, you might as well get it up front before you actually own the vessel.

If the vessel doesn't pass the pre-purchase survey you can always reject it, re-negotiate price, negotiate deficiency corrections or repairs, and then reengage the surveyor to inspect the deficiency corrections or repairs. Then, amend the report to reflect the changes if you end up purchasing the vessel, and get insurance.

Yes... it is another expense to reengage the surveyor to inspect deficiency corrections or repairs but, it is well worth a few hundred dollars versus thousands on potential substandard repairs, incompetent repairs, repairs that were on a list and subsequently missed, and/or repairs that were made and exhibit less than yacht quality standards.

The broker/brokerage:

I would submit that quite a few (definitely not all) brokers are being directed or influenced by higher powers in brokerages to provide or utilize surveyors that can and will be directed to a particular value, or preferred (lack thereof) survey content. I know personally of brokerages and brokers who do this. Conversely, I also know of brokers within those brokerages who highly contest that style or method of business, and honestly want the vessel surveyed properly and professionally with the buyer's best interest at heart, but their hands are tied for fear of dismissal or retaliation against them by the brokerage.

With that said, there are new surveyors, and also veteran licensed surveyors that are not in it for the buyer's best interest either, or at least some who have fallen into the pitfall of pressure from the yacht brokerages and brokers, who somewhat control the surveyor workload by their preferred surveyor list or by surveyor recommendations. Surveyors that are being led to a pre-determined market value, omit or overlook particular deficiencies, or just barely make the minimum survey content requirement on purpose, should be reported to SAMS or their respective accreditation entity for review of their practices.

Additionally, surveyors who are conducting repairs on vessel's after a survey they wrote deficiencies on, delivering vessels as pre-arranged terms for survey, providing gifts to brokers or brokerages or any other recognizable conflict of interest should be reported to SAMS or their respective accreditation entity and brokerage code of conduct licensing entities for further review, and be reprimanded of their actions and subsequent license revocation per further review.

"And YES, this does occur on a regular basis"

Any vessel a surveyor is engaged or under contract with, cannot participate, or be paid to make repairs on that vessel as a result of their survey findings.... That is a direct conflict of interest of that particular vessel and surveyor. If this does occur and is substantiated, that surveyor should be reported to SAMS or their respective accreditation or licensing entity and hopefully their license suspended or revoked per further review.

Remember! If the surveyor is not licensed or accredited, you will likely have no recourse for action other than legal action. Accredited licensed surveyors are policed within and therefore will not act illicitly for fear of license revocation.

Be sure to hire a licensed Accredited surveyor!

This one actually astounds me, and for the life of me can't believe it went unchecked by the powers to be. There have been instances, quite a few instances actually of surveyor(s) actually operating, sea-trialing vessels without anyone else on-board, just the surveyor, and/or surveyor and broker with the surveyor operating the vessel, or the surveyor and buyer and the surveyor is operating the vessel. First of all, it is against all recommended practices for a surveyor to operate a vessel during survey unless it's an emergency situation, or momentary test during the sea-trial portion of the survey, but preferably with an operating licensed captain aboard. Secondly, unless you can be in three places at once, how can you conduct tests or make observations as you should be if you're operating the vessel... You can't!

Report that surveyor and file a complaint to their respective accreditation entity SAMS if this is observed.

Update:

during the course of writing this article, at least one of those surveyors cease to exist on the SAMS roster. Can't imagine why...

There are and will be equal an opposite reactions to an action!

Market Value:

Remember, most brokerages have their own particular product lines of vessel's they sell new from manufactures. They ultimately want the values of those particular product lines and subsequent used vessel values to be inflated or remain high for resale. They want to control the used market price with their product lines and keep the prices as inflated as possible. If the surveyor is truly working for you, the value in the survey report will be researched utilizing various tools and methods.

"Not a value provided by the selling brokerage which sometimes miraculously ends up in a survey report somehow".
I have run into this more than once with particular brokerages who think their vessels are worth more than everyone else's because one, they are dealers, and two, they think they can get away with it. (Not so Much)
You purchase the vessel understanding it's worth X, then at some point after the smoke clears, you find it's worth Z.
Don't let that happen to you..... Rely on research from a multitude of sources, not what the brokerage tells you.

HIRE YOUR OWN SURVEYOR AND AN HONEST BROKER TO REPRESENT YOU:

The best and only true approach for a buyer: Research and hire your own surveyor.
View the SAMS surveyor webpage, call and qualify surveyors on your own or by your agent or broker. Don't get cheap at this stage of the game! If surveyor A has twenty year's experience, and surveyor B has a year experience and you elect to use surveyor B because you save fifty dollars, well, it's likely going to come back to haunt you ten-fold. You will save fifty dollars up front, but could end up costing you thousands in missed deficiencies or problems in the end. It does not mean surveyor B just didn't do his or her job, it just means surveyor B didn't have the experience which is possible in any profession. "Qualify your surveyor"

Contact surveyors directly and not necessarily a surveyor in the selling brokerages back yard. A lot of surveyors will travel in a certain radius without additional charges, and if not, it may be worth spending a little more to get a surveyor that's not in a selling brokerage's back yard or, in their back-pocket. Talk with your own surveyor (hull and/or engine) and get a feel for their experience, ask the surveyor about the vessel you're interested in and/or the brokerage or broker you're working with.

Remember! The honest surveyor provides an impartial, unbiased opinion.
"Engage or hire your own qualified, licensed and accredited surveyor"

A broker and/or brokerage cannot tell you what surveyors to use, if they do, it's a conflict of interest and against most Yacht broker associations licensing code of conduct rules, and that should certainly be a red flag to you.

Note! Brokerages and/or Brokers will supply you with a list of surveyors for you to contact as a smoke and mirror attempt to meet their respective licensing requirements, if that state has licensing. At the end of the day, if you choose a surveyor not on their list, they (the broker or brokerage) will try to talk you into using their preferred surveyor which is more than likely going to be a surveyor working for them.... Not you!
If this does occur, report that brokerage and/or broker to their respective Yacht Broker licensing agency i.e. Florida "Florida Yacht Brokers Association" or whoever, don't let them get away with that deception.
Remember... these particular brokers take advantage of the fact you're buying a vessel from them, and they want you to think they know what's best for you....MALARKY! Remember, the surveyor you hire works for you and no one else, and, provides you with an impartial, unbiased opinion and report of that vessel.
That surveyor only answers to you and no one else, the survey report is for you and no one else, unless you request it be sent to someone else and it's authorized by you in writing to release.
ABSOLUTELY do not let a brokerage or broker pick a surveyor for you.... BIG RED FLAG !!!!!!

You're doing yourself a huge injustice if you don't research and qualify your own surveyor, and it's likely and probable it will cost you in the long run. Whether it be an improper or inflated value, lack of survey content, or a surveyor not conducting a professional survey in your best interest, any of which could cost you greatly.

On another but similar note: some brokerages have their own technicians to a certain extent...general labor, electrical, mechanical...etc. etc. and utilize them where applicable. Some brokerages advertise they have licensed repair personnel, when in-fact they outsource to licensed repair vendors, and bill you as if they did the work. They will outsource to local repair vendors as needed for specialty work like gelcoat, paint repair, electronics and engine mechanical repairs. But remember, in-house technicians are loyal to the brokerage so beware, take the extra time to explore alternative repair options and the costs associated with them, especially if it's a deficiency and subsequent repair that came up in survey and is being negotiated as part of the sale.

To many times I've witnessed brokerages with their own repair facilities engage in repairs on survey deficiencies as part of the sale agreement which were completed improperly, not completed at all, or completed by an outsourced repair vendor in a quick simply get the boat out the door mentality. The catch or problem with repairs from survey deficiencies and the subsequent sale agreement is rarely does a follow-up survey inspection occur, because it's an additional expense for the buyer, or at least that's what the brokerage or entity may convey to you. Complete the mission properly, confirm the work was completed and/or completed properly. Don't let the brokerage convince you the repair(s) were completed and completed properly without an unbiased repair inspection.

I suggest and recommend you should always have the repairs inspected by someone (unbiased) especially if it was negotiated as part of the sale agreement.

Moral of the story:
Research and qualify your yacht broker, brokerage and/or surveyor, make sure he or she has your best interest at heart. Call surveyors on your own whether they're on a list you received or not. Don't be influenced or be made to feel like you're not going to get a fair deal if you don't use a surveyor.... they (the brokerage, broker) recommends. If they persuade you otherwise.... It should raise a Big Red Flag!
Remember, even if you have a broker working for you, you're most likely looking to purchase a vessel outside your own geographic area, and they (brokers), the majority of times will contact and ask the selling broker in that area for their list of surveyors. That means the selling broker will be providing his or her own preferred surveyor for a vessel your purchasing. Is that really in your best interest?

Once you have engaged a surveyor and a survey report on that vessel is generated, ask for the comparable comps if you don't understand the derived market value. Ask about the particular deficiencies in the report if you don't understand, don't be led or influenced by a brokerage or broker alone on a vessel's value, and surely don't be led or influenced by either on a repair procedure and/or cost for a particular deficiency generated in a survey report. Use a collective consensus utilizing your own research and other un-biased expert opinions.


On another note, and probably off the beaten path a bit is your listing agent or selling broker, if you're a buyer that is also selling a vessel.
Beware Sellers! ... you might be losing good offers to selfish brokers.
Brokers obviously want the full commission for selling your vessel, just human nature. Therefore, in some instances, selling brokers won't even bring an offer to the table from another broker because they will have to split the commission. Many sellers do not even realize this occurs, and that a buyers (broker) made a reasonable offer which was not even brought to the table. This happens all too frequently and sellers have no idea because they leave the details to their trusted listing broker. Another reason to research who you have working for you on the selling and buying side.

One more thing worth mentioning, actually a couple more things worth noting or looking for as a buyer and/or a seller or both:
Brokerages with brokers with whom claim to be licensed surveyors... Definitely beware of that... That's not a conflict of interest or anything...Unbelievable!

Next, there are brokers who also have yacht "management companies" caretakers if you will. The corruption and deceit here is unfathomable, harder to spot if your not paying attention as a boat owner, and deception would likely go unchecked until possibly caught by a survey or just being a prudent, involved owner.
This very thing happened on a vessel I was engaged to survey some time ago. I conducted a pre-purchase survey on a vessel which was ultimately rejected by the buyer (survey purchaser) due to findings. At some point later (month's) I was contacted by the listing broker (also yacht management company owner) and asked if I would change the name on that survey report for a new buyer so they could forego the survey and survey costs. I politely denied that request for many reasons.

Later I received multiple phone calls by the same listing broker, who proceeded to call me every name in the book and threatened the existence of my business amongst other things, because I wouldn't change the contents in the survey report. At first, I didn't really understand his insistence, but it made sense at some point later.

(His contention was I just wanted to charge for another survey, the mentality of a crook)

(The first, original buyer of the vessel rejected it due to negative survey findings), later, I find out that repairs and maintenance he (the listing broker/yacht management company) was billing the owner (the seller) for... i.e repairs and maintenance were never completed (although paid for by the owner/seller).
Later, after the first rejected survey of the vessel, and for reasons unknown to me, the vessel was subsequently transported back to the seller's home town after the sale fell thru from the first buyer.

Now it started to make sense... The reason the listing broker didn't want the vessel surveyed again, deficiencies written again and subsequently rejected again, was at least in-part because the seller would now likely be involved with the sale and survey since the vessel is back at his home or in his home town. He would therefore find out he's been paying for maintenance and repairs that were never completed and are showing up as survey deficiencies.
Further, (the corruption continues), since I wouldn't comply with his requests and the vessel had to be re-surveyed to meet the new buyers financial underwriting requirements, he was going to make sure I didn't survey the vessel again, which I didn't.
Further, this corrupt broker actually contacted another brokerage in the city where the vessel was now located, a city I frequently survey in and attempted to get that brokerages well known drive-by surveyor to do the job (that surveyor is no longer accredited, not because of this vessel, but because of the other similar conducts of business). The new buyers broker smelled a rat, subsequently hired another reputable surveyor who happened to be a friend of mine, and the vessel was surveyed with subsequently the same deficiencies found as in the first survey.
The vessel was subsequently rejected once again by the new buyer.

Not sure how the selling broker/ yacht maintenance manager explained that one to the seller, or why he's not in jail for fraud, but this is just one example of some of the corruption that happens routinely at different levels of this industry.
Don't let any of this happen to you.....

One more sad fact worth mentioning, but this one is actually even more disturbing. There is a local brokerage that for the last couple of years, has been advising unsuspecting buyers they don't need a survey on their new used vessel, because they state they have looked over their vessels carefully. The potential buyer is advised by the brokerage that if they want a list of possible deficiencies on the vessel, they can just use one of their employees to provide a deficiency list. TRUE STORY! and it gets better. So, a few diligent buyers over time who didn't just fall off the banana boat seen the writing on the wall (red flag) and called me to conduct a pre-purchase survey on the vessel prior to purchase. The buyer(s) that have contacted me on multiple occasions subsequently advised the selling brokerage, that he or she has a surveyor and would like to set a date for survey.

Astoundingly, the brokerage advised the buyer that we (NSI) were not allowed on their vessels for some unknown reason, and didn't offer to provide that information to the buyer, but of course we know why.

I would suggest they made that statement because we actually write deficiencies, conduct an unbiased survey, and provide a detailed report of the vessel.
Non-the-less with that said, as I stated, the brokerage would subsequently advise the buyer they are more than welcome to use one of their own (brokerage) employees to provide a deficiency list on the vessel, and they really don't need to spend the money for a surveyor. Later, when the buyer (survey purchaser) denies their offer (usually via email or text these days) and elects to utilize a surveyor, the brokerage say's Sorry, we have taken a deposit on that vessel from someone else while you were planning to set-up a survey.
That is absolutely the most ludicrous, criminal brokerage I have ever seen in my career and they, the corrupt brokerage is still selling boats when they should be jailed, and/or at least forbidden to sell boats or anything else for that matter. If you run into this FRAUD! contact the better business bureau, state attorney's office or anyone having jurisdiction and advise them of the situation. Maybe with everyone's help and input, we can get rid of people like this and make the industry what it once was.
By the way, the reason they lie or failed to explain why we're not allowed on their vessel's is because they defraud their potential buyers and we know it. Every vessel we have surveyed that belonged to that brokerage was junk. Meaning... it's likely the repairs were going to cost more than the boat was worth. It makes me very angry because these are starter type, to medium size outboard boats typically purchased by first or second time buyers with little or no knowledge of boats in general. It is ultimately going to be a bad experience and leave a bad taste in someone's mouth as a result, and likely deter them from ever buying another boat which hurts everyone.

Remember... This is your purchase, your vessel, your money and your enjoyment. Don't let someone else's business plan, greed and/or corruption throw a rope in your prop.

Happy and safe Boating!
Dennis Heine SAMS AMS

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