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Boat Closing Settlement - Guidelines



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Boat Purchase Funds Clearance

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How to secure boat purchase funds with step by step instructions.


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Introduction


JUL 6, 2025 - One of the most crucial aspects of any boat sales transaction is that of making sure the purchase funds have been properly secured. This will help to prevent any fraudulent or inappropriate actions on behalf of a buyer. It is particularly important when dealing directly with an unknown buyer without the services of a third party closing agent.

Step 1 - Qualify the buyer.   


The lengths necessary in securing funds may depend on your familiarity with the buyer and risk tolerance level. It's not unreasonable to question an unknown buyer about their background and motives for purchasing the boat. Any signs of vagueness or contradictory information may be a signal to proceed with trepidation. There are lots nefarious folks that will take advantage of an unwary seller.

Step 2 - Become familiar with various types of payment.


Purchase transactions typically involve cash, personal checks, cashier's checks, foreign checks, wire transfers, direct deposits or a combination thereof. Of concern is the ability of a payer to arbitrarily stop or reverse payment on a particular instrument or transfer. You should accordingly become familiar with the ramifications of accepting any such transmittals.

Cash is arguably the most secure method of funding, assuming of course, the bills tendered are not counterfeit. However, counting or tallying can be cumbersome when it comes to smaller denominations. There are also reporting requirements involved when depositing large sums of cash. Have your bank inspect the bills should any concerns arise about their validity.

Personal checks are probably the least secure type of payment as these can be easily stopped or reversed by the payer. All it takes is a timely phone call to their banking institution and any such deposits into your account will be immediately reversed. The same can be said when there are insufficient funds in the payers account or the instrument has been counterfeited. At best, you can contact the bank upon which drawn to confirm its validity and whether there are sufficient funds to cover the amount. Another option would be to have it converted into a cashier's check directly with the bank upon which drawn.

Cashiers checks are the most common means of secure payment, especially among seller to buyer direct transactions. This is because they are a direct and unconditional obligation of the issuing bank and can not be easily declined. However, there  are occasions, where a bank may stop payment where the purchaser certifies to having been defrauded or having lost the instrument. This can result in the need for costly and time consuming litigation. When accepting a cashier's check from an unknown or questionable party, it would be prudent to contact the issuing bank to make sure it is not counterfeit.

Checks drawn on foreign banks, whether personal or cashier's, are the least desirable type of payment because they may not be subject to U.S. banking regulations and protections. There is also a matter of whether they are payable in U.S. dollars. Exchange rates fluctuate consonantly and you may benefit or lose depending on the circumstances.

Wire transfers into your account are considered as very secure and such method is most often preferable when timing is of the essence. As with cashier's checks, these funds may not be reversed or withdrawn unless there is evidence of fraud or there were irregularities in the transfer process. This method of funding is often required by escrow companies and third party closing agents.

Direct deposits from a buyer into your account can be tricky because it may not be immediately evident as to exactly what type of funding was involved. At best you may contact your bank to see if they can provide copies or evidence of how such transfer was implemented.

Step 3 - Demand the appropriate type of funding.


Highly motivated sellers are sometimes willing to take chances when it comes to accepting unsecured purchase funds. However, a legitimate buyer will understand the seller's position of exercising due diligence. You should make it unequivocally clear right from the beginning as to the type of funding that will be required at closing.

Conclusion


Seller to buyer direct transactions are sometimes difficult when it comes to funding, closing, and the final settlement. Especially where the parties are dealing remotely. It often comes down to a matter of who blinks first with regard to handing over secured purchase funds versus releasing possession of the boat and title transfer documents. In consideration of the values involved, it may be worthwhile to seek out a reputable boat broker or independent third party closing agent.

Use of these guidelines may have legal, financial, and tax implications.
You should consult with an attorney or professional about any such concerns.


Credits and References

July 6, 2023 - Page initiated.




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