boat broker question?

[oyster]

So, someone has made a reasonable offer on my boat. However, they want a 90 day closing. They will put up 10 percent earnest money. I asked my broker about this earnest money, if the buyer should bail from the contract, and he stated that the earnest money would be split evenly between him and myself. Now my wife has been a real estate broker for 15 years and certainly never made a penny off of her clients earnest money. Is a 50/50 split the norm when it comes to boats?

Bill O.

formerly of the CD 31 "Seamyth"

[Ron M.]

I think your broker is a knob. I've had this experience a couple of times with real estate sales and the broker took no percentage. Remind him he makes his fee by finding a BUYER for you. If he insists..........cancel your listing.
________
CELTA

[Sea Hunt]

I spent about 2 1/2 years looking for a Cape Dory and met with several brokers. Because I was buying my first sailboat (any boat for that matter) I researched the procedures and protocols for dealing with a broker, the seller, etc.

I believe the following is generally true.

Once you come to an agreement on price, the prospective buyer puts up a 10% deposit (usually a personal check) that is FULLY REFUNDABLE, which is technically held by the broker but can just as easily be held by the seller. The "payee" on the check should be the seller NOT the broker.

The buyer then has x number of days (it should be spelled out in the contract) to conduct a marine survey, sea trial, etc. It is the buyer's obligation to hire and pay for the survey, the haul out, etc. The seller's only obligations are to make the boat available at a reasonable place and time for the haul out for survey and have all necessary papers/title documents available for inspection.

Every contract I have seen says the prospective buyer has x number of days to conduct the survey (spell it out in the contract) and a certain number of days after the survey to review the survey and decide if he/she wants to go forward with the purchase. The buyer can cancel for any reason. Generally the surveyor finds some issue and the parties need to renegotiate the purchase price a little. If not able to come to a new agreement on price the buyer gets back his 10% fully refundable deposit.

Obviously, the buyer cannot reasonably withdraw if he says "well, now I decided I do not like the color of the hull" which he has been looking at for two weeks. Otherwise, a buyer has a lot of "outs".

I have never seen a contract where, if the buyer decides after the survey and/or sea trial that he does not want to buy the boat that the seller and broker split the 10% deposit. That seems particularly unfair to a buyer who does not really know if the boat is as represented until a surveyor examines it and does a sea trial.

The broker makes his money when the buyer actually buys the boat. At the closing, the buyer usually is required at that point to deliver a cashier's check or bank check or a confirmed wire transfer of funds, etc., unless the buyer and seller have established a bond and trust eachother (as happened with me ) The broker is paid solely by the seller out of the seller's proceeds from the sale. I have been told the broker's commission is usually about 15% but, given the current economics, I assume this fee, like everything else, is negotiable.

Having said all of the above please remember I am a true "tadpole" in the world of sailboats, buying them, etc. I would urge you to ask another broker in your area what are the customary procedures in your area. What is being suggested by your current broker seems pretty unorthodox and wrong.

[David Perry]

Some thoughts on the above comments that may be helpful. Sea Hunt has it about right except that the deposit check should be made to the brokerage company (not the broker) as it must be held in escrow until a closing or be returned to the buyer if the boat fails survey to the buyers satisfaction. If you don't trust the brokerage company, either use a buyers broker that you do trust, or pass on the boat. Once the boat is accepted by the buyer after survey, the deposit becomes non-refundable, and is expected to be part of closing funds. Most brokerage sales have a clause for "liquidated damages" if a buyer defaults on closing after acceptance of the yacht. This generally calls for broker and seller to split the 10% deposit 50/50. In the case of a default by the SELLER, the broker is due a full commission and the buyer is due all of the survey and haul out fees! (unless the boat is destroyed at no fault of the seller) This does happen, although it is not how we like to earn our commissions. So be sure, as a seller, that you have the ownership papers to pass title and know what you owe on the boat before agreeing on an amount to sell for!

This being said, with a 90 day delayed closing some other special provisions should be made for the seller for taking the boat off the market for so long a time. Maybe the broker gets his 50% of 10%, but the deposit is raised substantially higher and the seller gets this extra amount if the buyer defaults. Just a thought.
Dave Perry, CPYB
Robinhood Marine Center

[oyster]

Thanks for the great advice!