Deposit to Make an Offer 'Valid?'

[Pblais]

But since this is an owner selling without broker, do any of the rules and guidelines change? Has anyone purchased from an owner 'sans broker' and had the deal go sour? Any lessons learned you can share would be appreciated.

You start with a purchase agreement and you work with an escrow service to hold the money. Both parties are protected and so are comfortable working through the process. Brokers follow this process because it works better to close more would be deals. You can do the same thing without a broker,

[Jolly Roger]

Wow! I’ve just finished reading this complete thread, which contains some very salient advice, but now I have a dry throat! I will stick my own two pennyworth in on a slightly different tack.
Last year I flew to Seattle from Orlando to look at a boat, (which alone you might think would indicate a certain seriousness), but the broker still insisted he needed 10% of any offering price, along with a formal contract, before he could submit to the owner. He also told me in Washington State it is law that brokers must actually deposit checks straight away. I didn’t care for this arrangement, and since the boat was obviously over priced I suggested something else.
I suggested the seller give me his lowest acceptable price, and that would be that – yea or nay. I would not try to beat him down any further; I would accept things I knew about, and only haggle if a lift-out or sea trial exposed further faults. I also promised not to broadcast this information. The broker nearly swallowed his teeth, but I must look like an honest man, and within a few days the seller gave me his figure, which was acceptable to me. This saved an awful lot of haggling and grief by all parties, and I was then prepared to make my deposit and contract.
Unfortunately, events completely out of my control intervened, and I regrettably had to back out. But it is still a good method to bring a quick meeting of the minds, and also indicated to me the willingness of a seller to actually sell – because some of them don’t really want to part with their baby, and can jerk you around just like buyers.
Funny thing: the boat is still for sale, now at a price less than I agreed, but I’m still unable to afford it, damn luck!
One common word in this thread, and others, is the propensity of American writers to use ‘your’ when they really mean ‘you’re’ (you are). As an Englishman this drives me round the bend, but I do happily accept if this is all I have to worry about, I ain’t doin’ bad in this weak piping economic time.

[RigelKent]

Here in Australia the terminology may be different. Escrow services here provide safekeeping for intellectual property - such as software source code or copyrighted material. Possibly Aussies use a different word to refer to a secure account?

Hey, I'm just an expatriated yank learnig to spell with more "s"s and less "zeds," whilst caring for lost apostrophes off of Cape Catastrophe. So what do I know?

The tip to have an independent local attorney protect the deposit makes good sense. Also a good point that *the seller* is saving money by not engaging a broker, but my deposit should nevertheless be protected and, accordingly, the price should be discounted if I am the one to engage an attorney to protect it.

[hellosailor]

"As an Englishman this drives me round the bend,"
Round the bend, not "around" the bend? How curious, as a semi-literate Colonial I find that's quite on the par with the writers who mistake "yours".

And equally immaterial in the larger scheme of things.

[Pblais]

The tip to have an independent local attorney protect the deposit makes good sense. Also a good point that *the seller* is saving money by not engaging a broker, but my deposit should nevertheless be protected and, accordingly, the price should be discounted if I am the one to engage an attorney to protect it.

Brokerages have a separate bank account for escrowed money. It is normal that all funds be placed there for the purpose of securing the deal. It means neither buyer or seller can access it. The deposit check is deposited so that everyone knows the check is good and the offer real. Escrow services are provided by many sources as well as companies that do only that. In a private deal you could use one for a small fee. It means the seller will not get any money until they complete the paperwork and it means the seller can't run off with your deposit and the buyer can't skip out and get the deposit back unless the agreement is canceled.

There isn't normally a reason you can't get the deposit back. You can say at any time you are out of the deal. What it does it it makes sure the buyer won't just run off for a year to think about it. The seller once they accept the offer is obligated to stick to the deal but not the buyer. Should a buyer leave and never come back it would allowed to keep the deposit since it's going to take a lot of expense to void the contract. Neither the seller or the broker can just terminate your contract offer because they want to. The contract usually sets deadlines but forces the buyer to give cause why it should be extended. My wife was in the hospital at the time of a closing and we could not close on time. The parties agreed it would be OK to wait since her signature was required. So long as a deal is moving along most contracts just get amended as required.

Any time there is a condition of the contract that can not be met it is either mutually amended or canceled. There are people in big business that make contracts to purchase or sell and then string out the other party so far they can to force the party to receive less money or go broke. It is possible in this case for a buyer to tie up a boat so it can't be sold with the idea you could force the seller to give it to you for far less. Imagine you knew the seller had a loan due and their house was securing the loan. Forcing the seller to be in default by intentionally delaying the deal so you could get the boat cheaper without a deposit. Simlarly making multiple boat contracts and delaying them all until one can be resold is avoided by making you tie up your own money. This one part of why deposits are a good thing.

It's not about how people look or if you trust them or they don't trust you. Dishonest people look like honest people too. Your gut feeling is not financial assurance of compliance. Ignoring the risks by not using an escrowed account has only serious downsides.

[DPMatty]

Originally Posted by Chuck Baier

Sorry but that is not going to work with a reputable broker.

I'm looking at other boats, the brokers have all played ball with me and if they haven't I've simply done title searches and bypassed them. If the economy does what i think it's going to, after the summer it will be even better for buyers.

I'm offering pennies on the dollar right now, which I expect to be rejected, but I'm there is still interest and I'm getting counter offers WAY WAY lower than asking. In some cases it is the broker teaming up with me to do it. We'll see where i settle out, but the next several months appears to be the right time.

[sailorboy1]

I'm closing on my boat in the next few days. At first I ordered $66k on a $79k listed boat and left a deposit of 5% ($3300). This deal was "kind" of accepted but the owner started playing timing games of wanting to be there for the survey (and he was in FL while boat was in MA) etc that didn't work for my timing. So I cancelled the offer and make an offer of $72k for another boat I had looked at that was listed at $80k (I think I liked this boat better anyway). The deposit was the same $3300 from the first boat as the broker had that check already. So the deposit was than 5% and this got accepted. So I don't think the 10% deposit to make an offer is any real rule. Hell I pull less of an dollar amount offer deposit down with my last 3 house purchases than I did on the boat and the houses were much higher priced.

[RigelKent]

Does anybody from Australia know what they call an escrow account in Australia? I'm getting nowhere googling this for results in Australia. There is probably a local term for this I don't know.

[RigelKent]

Originally Posted by DPMatty

If the economy does what i think it's going to, after the summer it will be even better for buyers.

It's very strange in Australia at the moment. The government has lowered the 'prime' interest rate, but the banks in return have just raised (rather than lowered) their mortgage rates. The riskier banks have kept their saving rates higher and I think the AAA banks offering lower savings and term interest are losing their deposits. Riskier Queensland banks (who are sometimes also insurance companies) were hit hard by storm disasters in the last few years and appear to be experiencing more defaults, but all the banks are government backed now, but riskier banks are required to purchase insurance. A bit of power politics going on now, I think, with the Prime Minister hitting back at the AAA banks by predicting a recession with certainty (just my guess).

[fareweather]

If you don't like the sellers broker can you get your own and have them co-op the fees? I have an excellent real estate broker that I use for buying and selling regardless of other brokers involved and most have agreed to co-op the fees. Is it the same in the boat world?


The broker I got my boat through was just not very bright and complicated the process, he wasn't a bad person but I had to point out numerous errors in his math and legalese that actually would've been in my favor. I feel sorry for the sellers who had to pay his commission, they did not get what they were paying for.


If your broker treats you like a fender kicker right off I would hire your own. As in many other aspects of life, most brokers don't earn the pay they get, if the one you're using isn't making you feel comfortable with the deposit or any other part of the process, get rid of them. When you find a good one, pay them well.

[Bash]

Originally Posted by fareweather

The broker I got my boat through was just not very bright and complicated the process, he wasn't a bad person but

Yeah. The not-very-bright broker is an all too common hazard to navigation. These guys never seem to know when to get out of the way and let the deal happen. It's as if the broker's worst nightmare is to have a seller and buyer actually communicate with each other.

[Cheechako]

Private sales are fine, just specify everything in your offer. (I have sold as many privately over the years as through brokers. Also had to close a deal that went sour through the broker myself.) Make sure it says you can walk away with a full refund for any reason, "sea trial , owner's further inspection and survey". How about asking the seller if you can give him a post dated check as deposit? (let's face it, the deposit is really just to let the seller know you are serious... which is obvious if you're spending the money on survey haul out etc!)
If things go sour for some reason you can cancel the check before anything happens.

[nautical62]

I've purchased cruising boats directly from the previous owner twice, through a broker twice and new once. In my opinion, each has their place, but if you disagree, you are of course free to purchase your boat by what ever means you are comfortable with. All a broker can have any control over is the boats they list which even for the larger brokerages is an incredibly small percent of the market.

When I'm boat buying, I see many good reasons to consider boats listed with a broker: I think there is a better chance it is legitimately for sale. The broker may help talk some sense into the owner as to what the boat is really worth, the broker provides escrow services and the broker is there to handle any issues that may come up during the process. This was very helpful to me one time when a through-hull broke during the survey, which also required an immediate haul. The best part is that as a buyer, these benefits cost me nothing. They are paid for by the seller.

I may have to part with 10% of the boat price a little earlier when purchasing through a broker, but it's money I'll be spending anyways, so I don't see any real disadvantage here. I certainly feel better about getting 10% back from a broker than 5% I may have given as a deposit to an owner seller if the deal goes bad. Of course, some brokers are more competent than others and some owner-sellers are less reasonable than others.

The best reason to consider a boat for sale through a broker is that I feel I have the best odds of getting a boat I'm happy with at the best price I can by considering all boats. For the same reason, I consider boats for sale by owner. In the end, that's what is important to me: getting the best boat at the best price.

[Pblais]

The best reason to consider a boat for sale through a broker is that I feel I have the best odds of getting a boat I'm happy with at the best price I can by considering all boats.

I think it's more a matter of it's the best chance that you have to close a purchase. The last thing you want is a boat you like and a seller that is killing the deal for no real reason. Sometimes buyers or sellers need a broker to show them the light to a good deal. The sellers broker can be your friend. It worked for me and I know it worked when I sold our boat too. It's not about manipulation and being sneeky.

[nautical62]

Originally Posted by Pblais

I think it's more a matter of it's the best chance that you have to close a purchase. The last thing you want is a boat you like and a seller that is killing the deal for no real reason. Sometimes buyers or sellers need a broker to show them the light to a good deal. The sellers broker can be your friend. It worked for me and I know it worked when I sold our boat too. It's not about manipulation and being sneeky.

I certainly agree and have experienced exactly that and seen how helpful the seller's broker can be. However, I've also experienced the opposite. Sometimes an unreasonable seller won't listen to a broker either.

I experienced just that when I purchased my trimaran. Two boats on the market - the same model almost exact same age and condition. I purchased the one for sale by owner for barely more than half the lowest rate the one for sale by broker would consider.

I appreciate some people prefer to go one way or the other. I appreciate what the seller's broker can offer both parties, but I've also learned for me at least, it can pay to look at all options.