If you have been watching the value of the US dollar against the British pound, and against the other major European currencies, you have probably observed the relevant strength of the dollar. A number of my legal clients have made that observation, and this situation, coupled with their own particular racing/investment agenda, has motivated them to purchase racecars overseas.
These transactions can be interesting and rewarding when they are successful. Constructing these deals requires understanding of the process and the differences between strictly US deals and deals in a particular foreign country. It requires close attention to each step of the process. Since each deal is different, this article is not intended as a do-it-yourself guide or a model to apply to a particular deal. In all deals, it is recommended that the buyer engage professional assistance.
Essentially, we find out about cars for sale overseas in many ways, including magazine advertisements, auctions, brokers, attending races and car events, word-of-mouth, etc. The goal is to avoid coming to tears on a deal in a foreign acquisition by minimizing the factors of distance, language, custom and practice, and plain unfamiliarity with dealing collectible, race, vintage or exotic cars in a foreign country. All these factors can work against the novice buying abroad.
For example, a few years ago, a buyer dealt directly with a seller in Europe on a vintage Alfa Romeo racecar. As the buyer tells it, the language problems were difficult. He went to meetings where people helping him to make the deal, but not representing him, continually conversed in Italian with the seller and the seller’s representative, and there was no ongoing translation. After a time, he became physically and mentally worn down by the course of the dealing, the length of the meetings and the feeling that he was imposing and demonstrating ignorance by continually asking for translations. He lost control of the deal. Consequently, he was talked out of a comprehensive and independent mechanical inspection, which he would have done in the US. The seller apparently bullied, manipulated, and generally worked this buyer into giving up that aspect of the contract. The deal concluded, money was wired and the car arrived in the US. In its new home, the “after the fact” inspection revealed problems. The buyer’s recourse was a lawsuit in a foreign country, and without a legally enforceable contract, the matter quickly degenerated into a “he said/I said” set of facts prejudiced by the general explanation that “something must have been lost in the translation.” Added in was the “hometown” bias in favor of the seller, and sure enough, the buyer did not prevail in trying to obtain relief.
Many foreign sellers, as in America, are not licensed dealers and therefore do not operate under a set of defined standards. There is, consequently, sometimes, very limited recourse. The verbal representations may not be committed to writing when buyers deal directly; and even when there is some writing, through ignorance of the local laws, or not structuring the transaction properly, the necessary representations are frequently not made in a way that offers protection to the buyer.
Honesty by the seller may, in any event, offer no protection from claims and business practices with which the buyer has no familiarity. For example, in some countries there is a presumption of good title under the law based on the facts of the transaction and history of ownership where the transaction occurs. But if there is a competing claim that is not yet discovered by the buyer in another jurisdiction, this good title may not hold up.
On the other end of the scale, a greedy and dishonest seller may have no cares about his reputation and treat each “foreign” deal as a predatory opportunity, since he will part the buyer with his money and buyer and car will be long gone shortly. A buyer can be pressurized by people who appear to be very nice, knowledgeable and correct when the reality is that the buyer is dealing with a bigtime bad guy who views the buyer as just a sheep to be sheared.
In my opinion, the best chance for a successful acquisition requires careful independent research about values, provenance, originality, title, ownership, history, and condition. It relies on having trustworthy, independent and knowledgeable experts lined up before the deal is to be made. The buyer should always keep the initiative and have the deal organized to his specifications. The keys to sucess are: confirming what the seller says, asking the right questions, finding out what has not been said, structuring the deal, and then refining all of this to conform to dealing in a particular foreign country.
There are some common models frequently used as starting points for doing deals abroad:
Go direct. – Go to the shows; go to the races; read the magazines; do the research; talk to the experts; contact the owners; contact the brokers; attend the auctions; and make your decision on what kind of car to buy. This is probably the best route if you have the background and time.
Hire a broker to find you a car. —Many are excellent and really have the respect of the owners and other professionals in the business in their home country. Some are not too straight. How do you know, and how do you know how much time and attention is being paid to your deal? Among the risks is the lack of 100% loyalty and care taken with a foreign-buyer transaction. The fine art of the undisclosed “backhander” from the seller to your agent is for some of these folks a way of life, and the potential for conflict of interest is present.
Buy at an auction. — This is often a good way to go if you are disciplined, knowledgeable, and astute. Each particular country has its own customs and practices associated with auctions, and it is important beforehand to understand the differences. However, it is understood that a buyer should always be familiar going into the auction with the conditions and rules of the house. Do your research on what you intend to purchase. The typical “auction speak” about “…believed to be…,” and the general conditions under which items are sold at auction, may offer no guarantees about authenticity, condition, provenance, value or history. While each set of facts is different, a buyer should not rely on recourse against the auction house in the event there is some dissatisfaction with the lot sold once the hammer goes down. Moreover, if you are inclined to bid beyond any “sensible” value, you will discover that “winning” at an auction carries the sometimes dubious, sometimes irrelevant, next-morning distinction of having made the all time top market price for the particular lot you now own.
Car clubs. — This is frequently a good way to go in that the organizers of race groups often know who might have cars for sale that run with the group. The organizer may help you with contacts to the potential sellers directly if you intend to acquire the car and have it continue to run with the group.
