They say that all good things come to an end — and now it’s time to sell your collector car. While it may seem like an easy thing to do, there are a lot of potential legal land mines waiting for you when you become a collector-car seller. Auctions The first thing to come to the mind of an SCMer is to consign the car to an auction. For some cars, that is the best option. For some, it’s a very expensive and risky way to sell the car. If you have dreams of selling your 1983 Porsche 911 SC at […]
They say that all good things come to an end — and now it’s time to sell your collector car. While it may seem like an easy thing to do, there are a lot of potential legal land mines waiting for you when you become a collector-car seller.
Auctions
The first thing to come to the mind of an SCMer is to consign the car to an auction. For some cars, that is the best option. For some, it’s a very expensive and risky way to sell the car.
If you have dreams of selling your 1983 Porsche 911 SC at one of the major auctions in Monterey, think again. Your SC has to be extremely special to make it onto those auction lists — the big auctions are expensive operations, and they have a limited number of slots available.
Simple economics means they have to realize a minimum amount of revenue per lot, and your car may not meet their requirements. And even if your car squeaks by, you may not get a good time slot or any extended attention on the block.
But there is an auction for every car, so consider your options well. Be careful to factor in your entry cost, preparation expense, transport costs, commissions and the value of your own time. Also consider the cost of getting it back home if it doesn’t sell.
Your options of getting into an elite auction are better if you are selling a substantial car, say, a McLaren F1, a 12-cylinder Ferrari or a Mercedes-Benz 300SL. Most every auction is going to want these kinds of cars, so it’s more a question of logistics, cost and outcome.
Cost can sometimes be negotiated, but outcome is more a question of faith that the car will be presented well and that enough buyers will be present to make it a real auction.
“Legal Files” is not a big fan of no-reserve auctions, although many people swear that’s the best way to go. If you need the auction block lights flashing to sell the car, that’s one thing, but I’d be more worried about a major car selling too cheap.
Consignments
There are an almost unlimited number of brokers who will gladly take your car on consignment. Of course, the risk varies with the integrity and skill of the broker, and that isn’t always easy to discern.
Consignment fees vary dramatically, and they can be negotiable based upon the value and appeal of the car. One thing to watch, though, is the commission converting into a flip. Many brokers will take a consignment on a fixed percentage fee and then, somehow, it converts into a “how much do you really want for the car?” scenario. Once you commit, that often becomes your selling price, and the broker then flips the car at a higher and often undisclosed price.
If you care, insist on seeing the actual paperwork to verify the actual commission or profit. But the flip isn’t always a bad idea, and it can work to your advantage in some situations. If you are sure you know the value of the car, don’t be afraid to tell your broker how much you want, and let them sell the car for whatever they can.
The potential for a bigger upside may give them greater motivation to sell it.
One important thing to remember is that the broker is a dealer, and you have entrusted your car to them. If the buyer pays the broker, the buyer owns the car — even if the broker stole the money and you still hold the title. You can “sell” your car and be left with only a legal claim against the broker who skipped out with the sales proceeds.
You have to choose your dealer well.
Statements about the car
Whether you sell the car through an auction or a broker — or you sell it by yourself — you have to be extremely careful about how you represent the car to buyers. While it is always helpful to use a contract that specifies the sale is as-is, that is not a get-out-of-jail-free card.
The legal meaning of “as-is” is simply “with all faults.” It is, fundamentally, aimed at physical condition, and may not protect you fully with the collector cars we deal with. For example, if you sell your Pontiac GTO and it turns out to be a converted Le Mans, you still have a legal problem.
This situation is particularly exacerbated with Internet sales.
Sellers typically provide very extensive and specific descriptions of their cars and their qualities — you have to or it won’t sell. As crazy as it sounds, buyers often hang on every word said, and in some cases unsaid, and expect to be buying a near-perfect car.
They don’t realize the difference until it comes off the transporter and their friends point out all its flaws. Then, they hire a lawyer who insists that you buy the car back because you misrepresented its condition. Once the buyer’s lawyer gets involved, it’s a losing proposition for the seller. Even if you successfully defend the claim, your legal costs can eat you up.
The seller must be extremely careful about what is said about the car. Statements should be carefully considered for accuracy, and preferably made or confirmed in writing so that you can later prove what was said.
You should always disclose known defects — saying nothing is not a safe strategy. The buyer will discover them after the sale and present a claim. Again, the defense costs mean that you lose even if you win.
It’s also best to insist that the buyer have the car professionally inspected, especially when the buyer is a long distance from the car. If the buyer declines, consider whether to make the sale or not. It’s easy to think that the buyer had their chance, so now it’s all okay.
But what often happens is that the buyer claims it was your fault that there was no inspection — you told him everything about the car, you made him comfortable with it, and he was reasonably entitled to believe you. Or, as is often the case, the car was selling on an online auction site and it was “impossible” to actually inspect it before the auction ended.
Of course, much of that is always made up after the fact. But remember, once the buyer lawyers up, it’s going to cost you.
For that reason, it is best to take the ultra-conservative approach — if anything seems weird about the buyer or the deal, just walk away from it.
As easy as it is to say that, sellers can have a very hard time living up to it — the scary deals are often the ones that produce the highest sales price.
Think about that. You stand to get all the money and then some for your car, and the sage advice is to just let the deal go. But, realistically, the high sales price is often an indicator of something being amiss.
It can be that the buyer is a fool, but that won’t stop the lawsuit when someone later educates him. Or, more likely, it can be an indication that the buyer is expecting to receive more than is really there to give.
Those are the toughest situations, where the buyer’s expectations are unmet, he’s out a lot of money, and he isn’t very happy about it.
Contracts
It is always a great idea to have a written contract. And, whenever possible, have an experienced collector-car attorney write that contract. A well-written contract can specify exactly what is being promised — and what is not.
It can document that the buyer was afforded the opportunity to have the car professionally inspected — and it either was or wasn’t. It can identify exactly what was represented, and that the buyer is not relying upon anything said about the car that is not spelled out in the contract.
The possibilities are endless. How far one goes is certainly dependent upon the magnitude of the deal, but the essentials should be covered in every case.
Make sure you get the money
There are a lot of scams out there today.
By now, everyone should know that cashier’s checks are often fraudulent. Any capable crook can falsify one. It’s best not to accept them.
The most secure form of payment is wired funds, but that isn’t foolproof. When accepting wired funds, go the extra step of calling your bank to verify that the funds have been received and that the wire is not capable of being recalled for any reason. Only then should you release the title or the car.
Insistence on that level of verification can be disconcerting to the buyer — the seller will have the money, the title and the car all at the same time, which is a major no-no.
If need be, arrange for an escrow closing, either through a commercial escrow agent or even just an attorney.
The title and bill of sale go to the attorney, and the money is wired into the attorney’s client trust account. When the attorney has verified that collected funds have been received, the attorney wires the money to the seller and releases the title to the buyer, who then arranges to pick up the car.
If anything goes awry, the escrow company or the attorney is on the hook for the loss.
It can be a tough world. Be prepared for it — and protect yourself at all times. ♦
John Draneas is an attorney in Oregon. He can be reached through www.draneaslaw.com. His comments are general in nature and are not intended to substitute for consultation with an attorney.