What You Need to Know About the Equine Purchase Process
You promised your daughter a pony for her tenth birthday – now what? Before embarking on the journey of horse or pony ownership there are several factors to consider.
First and foremost is to understand the responsibilities involved in horse ownership. These responsibilities include both a significant financial commitment, as well as a substantial time commitment. As a horse owner you are financially responsible not only for the purchase price of the animal, but also for its continuous upkeep including items such as feed, shelter, veterinary bills, and shoeing costs. Additionally, the amount of time involved will vary to some degree based upon the type of horse and the situation where you board the horse. Generally, horses need continuous care and a significant amount of time must be spent at the barn.
Next, yours or your child’s riding ability and level should be examined. You may need to weigh the choice between purchasing a pony for pleasure or maybe your child’s dreams include traveling to horseshows and competing on her new best friend. Whatever the decision these issues need to be discussed and considered carefully before advancing further in the horse buying process.
Finally, before beginning the horse buying process you should have an idea of the stables you will be using and preferably a stall reserved for the horse or pony. Often once you have found the right horse or pony the transaction happens very quickly. Therefore, having the boarding arrangements made before hand will eliminate a potential stress in the future.
Once you decide to buy a horse or pony, to avoid problems, I recommend you follow these six key steps to complete the transaction.
Step #1: How to Locate Horses/Ponies to Buy.
The horse buying process can take several months to complete, and it all begins with locating horses to try out. The internet is one of the fastest growing places were people advertise their horses. Please check the end of this section for internet sites that have classified ads.
In addition to the internet, several horse publications and magazines have listings of horses for sale. Some of the more popular magazines include, “The Chronicle of the Horse,” “Sidelines Magazine,” and “Hunter Jumper Magazine.” The disadvantage to searching on the internet and through horse publications is that you are generally viewing ads that list horses throughout the country. If you are a first time horse buyer, you may not be interested and may not need to travel across the country to purchase a horse or pony.
Therefore, another popular place to locate advertisements of horses and ponies for sale is in local feed and tack stores. Generally, both feed and tack stores have community bulletin boards with flyers of services available in the area as well as horses for sale in the area. Local newspapers also have a livestock classified section that usually lists horses for sale in the area.
Word of mouth is another great way to locate horses and ponies for sale. Even if you do not have connections already established within the horse community, visiting barns, and talking with trainers, vets, and farriers is a common way to locate horses that are for sale.A final way to locate horses and ponies for sale is to go through a horse broker. Horse brokers often either have horses in their control that are on consignment, or they have connections with trainers in the area who know of horses and ponies that are for sale.
A general warning must be given before you embark on this adventure, as the buyer you must beware that not everyone in the horse business is trustworthy, not every ad is trustworthy, and thus you must be very cautious when trying out horses and ponies.
Step #2: How to Correctly Try the Horse/Pony.
Once you have located several horses and ponies that might be appropriate the next step is to call and talk with the owner or trainer. Ask as many questions as you feel are necessary and request a video tape. While some owners may not have a video tape, many will. Viewing a video is a very good way to save money and time during this horse-buying journey. If after seeing the video you think the horse could possibly work, then you set up a time to go and have a trial ride on the horse. This trial ride is similar to a test drive of a car. It is an opportunity for the buyer to examine all the different nuances of the horse or pony.
Generally, when you arrive to try out the horse the owner will ride for a short while demonstrating the horse’s capability. Then the potential rider/owner has a chance to ride the horse and test it out. The following is a list of tips to keep in mind when you are trying a horse or pony.
- Be Safe – First you want to be safe. If it looks like the horse’s behavior is beyond that which you could control then do not get on. Owners would rather have you tell them this, than have someone get on and end up getting hurt.
- Take a video camera. Videotaping the whole trial ride is invaluable especially if you are trying out multiple horses. It allows you to remember what each horse was like as well as compare them when you get home.
- Take still pictures if you do not have a video camera. While not quite as helpful as a video camera, still pictures will still allow you to remember which horse was which, as well as examine any conformation issues that may arise.
- Take notes as you try out each horse, so that when you look back you can remember specific traits about each horse.
- When appropriate ask about the horse or pony’s show record. If the horse has ever shown in rated horse shows you can check their show record through the United States Equestrian Federation at www.usef.org. If the horse was used in specific breed shows you can investigate their show record through the appropriate breed websites.
Step #3: Make Sure You Request a Trial Period.
After you have tried the horse or pony at the owner’s stable, you can request a trial period. An owner has no obligation to give you a trial period, but with the right precautions in place, the trial period can be beneficial to both the buyer and the seller.
During the trial period, the buyer is able to see the horse for a longer period of time in different surroundings determining if the horse and rider are a compatible match. The trial period is beneficial to the seller because it allows him or her to be more confident about the placement of the horse, ensuring that the prospective buyer will give the horse a good home.
While the trial period can be beneficial to both the buyer and seller, it can also cause four types of potential problems that the buyer and seller should try to protect against. The problems that can be encountered during the trial period include 1) the horse being injured during trial, 2) an injury occurring to the potential buyer or 3rd party and the seller remaining liable, 3) payment for the horse, and 4) stableman’s liens. While each of these problems could cause potential headache, with the proper precautions they can generally be avoided.
Protecting Against Horse Injury During The Trial Period
The first potential problem during a trial period is that the horse becomes injured. For instance, the buyer could be riding the horse and because of his action, the horse goes lame. Alternatively, the injury could be no fault of the buyer’s at all; rather it is the result of the horse becoming sick much like a person can catch a cold.
A seller can prevent these injuries in three ways. First, the seller can require that the buyer pay for insurance of the horse during the trial period. Specifically the seller would want the buyer to pay for both mortality insurance as well as loss of use insurance.Another way the seller can protect against the horse becoming injured is to specify what activities can be done during the trial period. For instance, in the horse trial agreement contract the owner can specify that the horse only be ridden in the ring, by certain people or whatever other stipulations might be appropriate.
Finally, if the seller is very wary of the trial period, he or she can agree to a trial period that takes place at the seller’s barn. In this situation, the buyer would come over on several subsequent days and ride the horse. While this may not be quite as beneficial as having a trial in a different location, it still allows the potential buyer multiple opportunities to determine if they are a match with the horse.
Protecting the Owner’s Liability
The second concern that a seller must protect against is their potential liability. Specifically, while out on trial their horse does something to injure either the potential buyer, or a separate third party. There are three ways that the seller can protect his liability. The first is to require that the buyer sign a waiver, releasing the seller of all liability from the horse. Release forms in California must include specific language to be enforceable.
A second way the seller can protect his or her liability is to make sure there is an indemnification clause in the trial agreement. An indemnification clause is one that states that the owner/seller will not be responsible to any third parties that may be injured while the potential buyer is trying the horse. Rather, the potential buyer will be responsible for any injuries incurred by a third party.
Third, the seller can protect his or her liability during the trial period by acquiring Private Horse Owner’s Liability Insurance (PHOLI). PHOLI is a type of insurance coverage that covers the policyholder’s legal liability for both bodily injuries and property damage to others because of their horse ownership. Generally, this covers claims by third parties that were brought on by the seller’s horse even if the horse was no longer on the seller’s property. This type of insurance is an effective tool that helps protect the seller from liability during the trial period.
Protecting Against the Buyer’s Non-Payment for the Horse
The third concern for the seller is to protect against the buyer taking the horse on trial and not paying and disappearing with the horse. In other words, the buyer steals the horse.
There are three ways in California for the seller to protect himself from this happening. The first way is for the seller to require that the buyer give payment in full before taking the horse off the seller’s property. Coupled with this payment in full would be the seller’s guarantee that a complete refund will be given at the end of the trial period if the buyer decides not to take the horse. While some buyers may be hesitant to pay the full amount during the trial period, if the contract is properly worded both buyer and seller will be protected.
The second option for the seller to protect against the buyer “stealing” the horse or pony is to make the trial period a lease option to buy. In a lease the buyer would pay a certain percentage during the trial period and then if at the end of the period the buyer wants to keep the horse the remaining balance is paid.
The third option is to use an escrow service. At Hey & Hey our five-step process protects both the Buyer and Seller during the transaction. An escrow service for a horse functions the same way an escrow service for a house functions. The Buyer pays money into an escrow account, and Seller receives the money once all of the escrow instructions are met. It is an effective and affordable way to protect the Buyer and Seller’s interests during the trial period.
A fourth option in some states is for the seller to retain the registration papers as evidence of horse ownership. However, in California recent cases have demonstrated that registration papers are not considered legally binding for horse ownership and thus this would not be recommended as a way for a seller to protect himself. In California, the only advantage to retaining registration papers during a trial period is that the potential buyer may not be able to compete in some breed classes or horse races.
Therefore, a seller has the ability to protect himself against the potential buyer “stealing” the horse if the seller properly sets up the trial period.
The final potential problem is the stableman’s lien. A stableman’s lien occurs when a buyer takes a horse on trial to his barn and then fails to pay the board which results in the barn owner’s ability to place a stableman’s or agisters lien on the horse until the board is paid. In other words, the owner of the barn retains control of the horse until all the board payments are made.
There are three main ways for the seller to protect himself from the stableman’s lien. First, the seller can have the buyer pre-pay the board to the seller and then the seller pays the board to the stables. Alternatively, the seller requires that the buyer pre-pay the board directly to the stables. Second, the seller should always require that the stables where the trial is occurring show the seller as the owner of the horse, not the buyer. Finally, the seller can make sure that the stable contacts the seller if there are any problems with the boarding of the horse during the trial period.
If a seller takes these given precautions, he will be protecting himself from a stableman’s lien being placed on the horse.If the above precautions are followed, the trial period is likely to run smoothly and be beneficial to both the seller and buyer. If as a buyer, the seller will not agree to a trial period, then the next best option is to ask to come back multiple times to try out the horse. Generally, most people selling their horse are also selling their friend and they want the animal to have a good home and willing to work with the buyer in some way or another to set up a trial period.
Step #4: Make Sure You Have A Pre-Purchase Veterinary Exam.
A veterinary examination of the horse or pony is critical in any horse-buying endeavor. Even if the horse or pony is relatively inexpensive, a buyer should always have it examined by a licensed veterinarian. Having a vet check done protects both the buyer and the seller. If down the road a health issue comes up regarding the horse, the buyer and the seller will have had an objective third party’s opinion that the horse was in good health.
Generally, the vet check is paid for and arranged by the buyer. As the buyer you never want to have the seller’s veterinarian do the vet check, rather you should hire your own vet or an independent vet so that if there is a problem down the road their will be no question of conflict of interest. If you are new to the horse world, you can locate a list of vets in your area at the California Veterinary Medical Associations website.
Occasionally a seller will have their own veterinarian perform a preliminary pre-purchase exam as well as take preliminary x-rays. Generally, seller’s do this so that they know what to expect and are able to properly represent their horse to potential buyers.
Veterinary exams vary in degree of how extensive they are. Obviously, the more extensive the exam, the more it costs. A basic vet check also known as the physical pre-purchase exam includes the veterinarian checking the physical attributes of the horse; it is similar to a physical for a person. During the physical exam the vet makes sure the horse is not lame, he checks the age of the horse by examining the horse’s teeth, he checks the horse’s vision, and generally looks for any obvious problems with the horse.
Generally, each veterinarian will have a set of exams that are standard and are performed each time a vet check is done. However, the following list, while not exhaustive in the least is a general guideline for the basic pre-purchase exam.
- Check for soundness. The following should be examined:
- Trotting horse in a straight line.
- Trotting horse in a circle on both hard and soft ground.
- Flexions of the hocks and pasterns.
- Use of hoof testers on all four feet.
- Check eyesight.
- Check lungs and breathing patterns.
- Check for any obvious neurological problems through use of the back up test.
- Check teeth and age.
In addition to the physical exam in many situations x-rays of the horse’s legs are suggested. Generally, it is recommended that five radiographs of each foot be taken. Of these five radiographs, at least two views should be of the navicular bone and one should be a skyline view, which is a view from the top down onto the foot. Additionally, at least four views of the hocks should be radiographed. During the physical exam, the vet will be able to determine if any other radiographs are necessary. While x-rays are not mandatory they are generally very useful to determine if the horse is likely to stay sound and are a good investment.
In addition to x-rays, ultrasounds of the horse’s ligaments are sometimes performed during the vet check. While not recommended in all cases, ultrasounds can be very useful if the horse or pony is going to be used in a high performance situation.Another component of the vet check is to often have blood drawn so that blood work may be done. Generally, blood tests are done to check for drugs in the horse’s system as well as any other blood diseases. Whether or not blood is drawn and tested is up to every individual buyer. In cases where the cost of the horse is high, it is often at least recommended to have the vet draw the blood and hold it for the future in case there is every any question of whether or not the horse was “drugged” during the exam.
The cost of the vet check varies greatly depending upon the veterinarian used as well the extent of the exam performed. A basic physical exam costs around $350.00 and an exam including basic x-rays of the hocks and navicular bones costs approximately $1,000.00. Obviously, the more x-rays that are taken the more the exam will cost. Additionally, the costs of ultrasounds and blood work will also increase the cost of the vet check.While the vet check can be an expensive procedure, since you are dealing with live animals it is highly recommended. The vet check provides the buyer with peace of mind. While unlike a car, there can never be a sure thing when it comes to horses, having a veterinarians opinion that a horse is healthy can be very valuable in determining whether to purchase the animal.
Step #5: How to Handle Payment.Once the horse has “passed” the vet check and you have made the decision to purchase the horse payment and terms must be arranged. Generally, once an owner finds out that the buyer will purchase the horse they want the transaction to be completed as quickly as possible.
Payment for a horse is generally made in six ways. The most common is the money transfer where the seller gives the buyer their banks wire transfer number and requests the money for the purchase price of the horse be directly transferred into the seller’s account. Cashier’s checks and personal checks are other ways that horse transactions are often completed.
As discussed earlier in this section, an escrow service is the best way to complete a transaction when both parties want protection.
A newcomer to the horse-purchasing world is the credit card. Through advent of agencies such as pay pal sellers can set up an account through which a buyer may use a credit card to purchase the horse. However, accounts such as pay pal generally charge a transaction fee ranging from 2.2%-2.9% and this must be considered when determining whether buying your horse or pony with a credit card is advisable. For more information on setting up this type of account please visit www.paypal.com.
Finally, the last way to make payment for a horse is with cold hard cash. Buying a horse or pony with cash is NEVER recommended, and in fact should never be done. Purchasing a horse with cash could result in multiple problems such as the seller denying that he or she ever received the money and their being no receipt of the transaction. Therefore, once you have decided to purchase your horse you should complete the transaction using a money transfer, cashier’s check, personal check, or credit card account where available.
Step #6: How to Handle the Bill of Sale and Other Legal DocumentsOnce the decision to purchase the horse or pony has been made, the final step to complete the transaction is to have a purchase agreement and a bill of sale signed by both parties.
A purchase agreement is not always necessary however, it is recommended in most circumstances. A purchase agreement is used when the buyer agrees with the seller to purchase the horse or pony and the buyer gives the seller a deposit. In return for the deposit, the seller states that he will not sell the horse to anyone else, and that the seller remains responsible for the horse’s well being until the sale is completed. Generally, the purchase agreement should contain a specific time that the deal will be closed and a clause stating that the buyer’s deposit will be refunded if the horse is injured before the close of the transaction.Regardless of whether there was a purchase agreement signed by both parties, it is necessary that upon the completion of the transaction both the seller and the buyer have a copy of the bill of sale. Even if the amount paid for the horse is minimal, a bill of sale should always be signed in order to show ownership and protect both parties from liability.
There are two main types of sale transactions and each requires a slightly different bill of sale. The first is the cash sale transaction. In a cash sale, the buyer does not take possession of the horse until payment has been made in full. In a basic bill of sale for a cash transaction, the following items should be included:
- Name and Address of the buyer and seller
- Name and Description of the horse or pony
- Amount of Consideration to be paid and payment terms
- Care prior to Delivery and Delivery terms
- General Warranties
- Risk of Loss
- Choice of Law
- What happens if one party defaults
- Signatures of both parties and the date
The second type of sale transaction is the installment sale. An installment sale occurs when the buyer purchases the horse over a period and has a scheduled amount of payments before the sale is completed. There are three different ways that an installment sale can be structured.
The first option is to set up an installment sale and to file a UCC 1 financing statement. While this might sound a bit intimidating to the first time horse buyer, in reality it is quite easy to do. A financing statement is filed to perfect a security interest in the horse and to establish priority for payment in case of the buyer’s default or bankruptcy. Under this scenario, the seller has constructive possession of the horse and buyer has actual possession of the horse. In other words, the seller retains an interest in the horse and can get the horse back if the buyer defaults on the payments. Once payment has been made in full, the title passes to the buyer.
The second option is for the buyer to take both actual possession and constructive possession. In this scenario the buyer would sign a promissory note for the balance due on the horse and the seller gives the buyer both actual and constructive possession, and there is no need to file a UCC 1 financing statement. This option is a good choice for a seller who does not want the horse back if the buyer defaults on the payments because here if the buyer defaults the seller can sue on the note for a monetary judgment only. However, unlike the first option from above, this is an unsecured debt meaning that if the buyer files for bankruptcy the seller has no security and the buyer will not have to pay off the debt.
The final option under an installment sale transaction is a combination of options one and two. In this scenario the seller would maintain a secured interest in the horse and the buyer would sign a promissory not for the balance due on the horse and a UCC 1 financing statement would be filed. This is the most recommended option because it makes the seller a secured creditor so that if the buyer defaults the seller can still sue to get the horse back.
The bill of sale in an installment contract will include all of the same essential information mentioned above. Additionally, it will include a section on the security interests based upon one of the options mentioned above
The decision to embark on the journey of horse ownership is an exciting time. With proper precautions it can result in many years with your new best friend.
Several popular websites list classified ads of horses and ponies for sale. The following list is not exhaustive and is merely a jumping off point for your horse search.
The California Veterinary Medical Association website at www.cvma.org allows for a search of vets licensed in your area.
“Many attorneys include equine law as a sidenote to their practice, but Hey & Hey Attorneys at Law specializes in the full range of equine law services. We also have nearly 30 years of experience in the horse industry.”