Why Not Use Escrow Accounts When Buying a New Custom Boat?
 

I've seen a bunch of horror stories about people prepaying for a new custom boat, and then the builder goes belly up, and the buyer loses all his money. Sometimes, the buyer may get the boat, but it is months or even years late. Sometimes the boat is incomplete when delivered.

Why don't people use escrow accounts? The buyer puts the money into an escrow account. The builder knows he will get the money when delivered, and the buyer knows he is going to get a boat for his money. If the company is not solvent enough to build a boat with its own funds, or can't manage a build schedule, or doesn't deliver the boat per specs, then the buyer gets his money back after a predetermined period of time. You wouldn't buy a house without an escrow account. Some of these boats are expensive as houses.

It seems like it would solve a lot of problems.

Michael

That's usually the case. It's more comparably to having a custom house built. Some builders build on spec but if you want a custom built you're going to pay a deposit, materials as delivered and progress payments. You can hold a 10% retention and sign off after final inspection.

Maybe bigger builders like Cigarette or Outerlimits can afford to build a custom boat on it's own funds but I don't think most smaller builders can. Plus, even if you could, it wouldn't make financial sense to do so. Why would you want to tie up your cash flow.

If I didn't feel comfortable paying for materials and progress payments (based on visual inspection of work) I wouldn't use that builder.

good question, except in custom hand built one of a kind or offshore racing boats on accepted contracts of 50 % deposits up front .If the buyer suddenly wants his money back and wants out of the contract .It s normal to keep his deposit to cover your damages,lost time, profit , dead custom parts left in stock. on production boats you can always try to re sell and return most of the deposit and that deposit should be in escrow, just like a production home purchase. also most of the spec s on a custom build are on going ,that s why it s custom.in any case it s better for the buyer to go to the builder see his factory , work force , check credit , and speak with his bank using a lawyer.you can not collect from a one man show without any credit or assets and check to see what their last customers are saying. also they usually under bid just to get the job.
sonny miller my opinion .