Plenty of boats are sold with a loan still on them. It is routine, as long as the payoff is handled at closing so the buyer receives the boat free of the lien.
The payoff
Early in the sale, ask your lender for a payoff letter showing the exact amount needed to clear the loan on a given date. At closing, the payoff is paid to the lender out of the sale proceeds held in escrow, and you receive the balance.
If the loan is larger than the sale price, you will need to bring the difference to closing. Knowing your payoff before you set the price avoids a surprise.
Releasing the lien
Once the lender is paid, they release their lien. For a federally documented boat that means a release of the preferred ship mortgage recorded with the Coast Guard; for a state-titled boat the lien is released on the title. The buyer's lender, if there is one, will want to see the release before the new owner's documents are filed.
The Coast Guard bill of sale
Federally documented boats are transferred with the Coast Guard's bill of sale form, and the new owner then applies to the National Vessel Documentation Center to have the documentation issued in their name. State-titled boats transfer through the state's titling process instead.
Your broker's closing paperwork covers the documents that apply to your boat. The important thing is that the names, the vessel details and the lien status all match across every document.
What escrow does for both sides
The buyer's deposit and the balance are held in escrow until closing. That protects the buyer, who knows the money is only released when the boat and clean paperwork are delivered, and the seller, who knows the funds are there.
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How we sell boats
