In the spirit of the 20th anniversary of SCM, “Legal Files” has compiled a list of the top 20 traps that sellers and buyers of collector cars can fall into. I’ll split the list in half, with ten each for sellers and buyers. The Sellers’ Top 10 When you’re the seller, your two primary legal concerns are to get all your money and to not to get sued later. Most of the Sellers’ Top 10 fits into one of those categories. Here they are, in reverse order: 10. Watch what your broker says Your broker is acting as your agent when […]
In the spirit of the 20th anniversary of SCM, “Legal Files” has compiled a list of the top 20 traps that sellers and buyers of collector cars can fall into. I’ll split the list in half, with ten each for sellers and buyers.
The Sellers’ Top 10
When you’re the seller, your two primary legal concerns are to get all your money and to not to get sued later. Most of the Sellers’ Top 10 fits into one of those categories. Here they are, in reverse order:
10. Watch what your broker says
Your broker is acting as your agent when talking to buyers about your car. As such, you can be legally liable to the buyer if your broker makes inaccurate statements about the car. Make sure you give your broker complete and accurate information, and make it clear that he is not authorized to say more. That way, the broker will be liable to you for any ensuing legal problems he might create.
9. Check out your consignee
When you consign your car to a dealer, be aware that the dealer can pass legal title to a buyer who pays him for the car, even if you don’t get paid. Since you chose to entrust the car to a dealer, the law believes that the customer is entitled to own what he has paid for, and you take the risk that the dealer might be unscrupulous. It isn’t enough to hold back the legal title, as you can be forced to sign it over. Your best protection is to check out the dealer ahead of time.
8. Beware the stupid buyer
Be cautious when the buyer doesn’t seem to know what he is doing. It’s easy to not worry about what a fool is going to do with his money, but this type of buyer will sometimes find out later that he overpaid or didn’t get a good car. Sometimes he will then decide he got cheated and sue to get his money back. Similarly, recent Internet scams involve quick responses to your ad, wanting to buy your car sight-unseen, and seeking information about how to get the money into your account. Don’t fall for that ruse.
7. Watch the buyer who just wants a driver
Be careful when the buyer tells you he doesn’t want a perfect car, but just a driver. This type of buyer will get the car home and start showing it to his friends, who will point out every little defect. Pretty soon, the “nice driver” will become a rust-bucket fraudulently passed off as a great car, with a lawsuit to follow. Your best protection here is a good contract that is specific about the condition, and the as-is nature of the sale.
6. Don’t promise too much
It’s pretty easy for your mouth to move faster than your brain. You can easily wind up telling the buyer all sorts of things about the car’s condition that you really don’t know anything about. For example, don’t say the car is rust-free just because you don’t remember ever seeing any-did you really look as closely as the buyer will later? This kind of fast talking can get you sued for misrepresentation.
5. Cashier’s checks aren’t foolproof
Ever notice that when you buy a cashier’s check from a bank, they just print one off on their laser printer? How hard do you think it would be for a crook to print one that looks just like it? Also, it really is possible to stop payment on a cashier’s check. Don’t release the car until the cashier’s check clears. Note that this is the other part of the recent scam described in #8.
4. Real pitfalls at no-reserve auctions
Don’t think you can put your car into a no-reserve auction and protect yourself by bidding on it or having a friend do so. That is an illegal practice. The law requires that the car be sold to the highest real bidder. If the auctioneer knows you’re bidding on your own car, the auctioneer is required to ignore your bids and sell to the real bidder. You can easily end up very disappointed. If you want to protect your financial position, insist on a reserve price-that’s why reserves exist.
3. Don’t use vague descriptions
When describing your car, avoid using terms that are vague, imprecise, or able to be interpreted with multiple meanings. We are dealing with one situation now where the seller stated the car did not have any “significant rust.” You guessed it-they disagree about what is “significant.” We’ve also handled situations where cars “need nothing,” have been “totally restored,” “run and drive excellent,” and have “paint that shines like new.”
2. Don’t misrepresent the car
Selling a clone as a real car, faking matching numbers on the basis that they’re all the same now, saying the engine has been rebuilt when it just had a top-end rebuild, and similar situations are fraud, and will get you absolutely no slack from a judge or jury. Play it straight.
1. Wait for the cash
Don’t release the car until you have collected funds and they are in your bank account. Checks can bounce, even cashier’s checks (see #5 above), so make sure they’ve cleared. If the buyer will owe you money, hire a lawyer to make sure the debt is properly documented and collateralized.
THE BUYERS’ TOP 10
When you’re the buyer, your main legal concerns are to be sure you know exactly what you’re buying, to get good title to the car, and to not overpay unknowingly. Here are the Buyers’ Top 10, again in reverse order:
10. Don’t buy the salesman’s pitch
Salesmen are usually good folks, but don’t believe everything they say without getting independent confirmation. Remember, they are selling someone else’s car, and their knowledge about the car really is limited.
9. Why sellers can’t be trusted
No matter how honest the owner seems to be, verify everything for yourself. Even if the seller doesn’t actually lie to you, less despicable errors come from wanting to make the sale too badly. It’s easy for a seller to get carried away and tell you more than he really knows. Also people see the same things differently. It’s very hard for many sellers to see the problems with their cars.
8. Really check that title
“Legal Files” has already pointed out how easy it can be to wash a car title. Dig deeper, run a Carfax, and do all you can to confirm the title history for yourself.
7. Make sure it’s not a fake
If authenticity is important, confirm it yourself. Cars are pretty easy to fake. Spend the money to hire an expert to verify that the car is exactly what it is supposed to be. Get your own documentation from reputable sources, as crooks know how to fake that, too.
6. Always get an inspection
Never buy a collector car without a professional
inspection, as mechanical issues are hard to spot. I once bought a Porsche 930 that ran so strong I almost wrote a check without an inspection. Luckily, my
mechanic noticed several broken head studs and rings. That rebuild ended up on the seller’s bill, not mine.
5. Be sure to get the title
Don’t give up your money until you have a properly signed-off title certificate, including from any lien holders. There are many examples of buyers who paid for and took possession of the car and then couldn’t find the seller or get him to produce a title certificate. That makes it pretty hard to sell the car later.
4. Don’t bid against a chandelier
Before bidding at an auction, learn how auctions work. Sometimes, the auctioneer will manufacture bids, trying to get you up to the reserve. Or the seller will be bidding against you in a no-reserve auction. Learn how to recognize when this is happening. If the car doesn’t sell, you can always negotiate with the seller afterward.
3. Know what’s included in the sale
Don’t assume anything. The books don’t automatically come with the Ferrari. The spares don’t necessarily come with the race car. The Rudge wheels don’t always come with the Gullwing. Get a clear understanding of what’s included, especially with Internet sales.
2. Call and ask questions
It’s amazing how many people buy a car on eBay without even calling the seller to ask about it. This is just crazy! Everything looks great in those low-resolution photos. Everything sounds perfect in those glowing descriptions. It’s so easy to fall into the trap of thinking you’re going to get a great car. Call the seller and ask lots of questions.
1. NEVER buy sight-unseen
There is no substitute for seeing the car yourself before you buy it. Having an expert or a friend check it out is good, but you’re the one who is going to have to like the car, and you’re the one with the most critical eye. If it’s too much trouble or expense to travel to inspect the car, pass on it and wait for one to pop up closer to home.
That’s one suggestion for each year that SCM has been publishing. They all seem pretty straightforward, but as we all know, once the red mist of buying or selling a car you really want to own or really want to sell gets mixed into the equation, rational thought sometimes just seems to go out the window. Which is part of what keeps our hobby so interesting