Deposit to Make an Offer 'Valid?'

[David_Old_Jersey]

Originally Posted by marty9876

From what I've read this is the normal process in the US. Funny part is what I've read is people not from the US look and laugh at us for the process, the deposit part.

Maybe "laugh at" is a bit harsh, but for me genuine puzzlement. But of course when in Rome etc etc.

To my (sceptical? ) view point the accepted practices do seem to be designed to make the Broker's life easier, rather than for the benefit of either Vendor or Buyer.

If I was selling a boat I would want to know about all enquiries and offers - tentative, speculative or lowball. Doesn't mean that these folk will be getting free day trips, but I ain't gonna be discounting folk simply cos' they are not writing large cheques up front. I suspect that "accepted practices" may be subject to market forces........

Once contracts signed a different matter, but nonetheless if I was buying a boat I would not be depositing 10% (whether that be $50k or $5) with any broker, especially in this financial climate. At the moment I think very carefully about what bank my money goes in

[Stillraining]

Originally Posted by sjpm

I'd like to point out that (at least in my particular case) the broker wants money transferred to an escrow account. That may not be a big box full of cash, but it's still a non-trivial amount of money I no longer have until the deal completes or falls apart.

Having a check sit in a broker's folder would probably be less of a big deal to me, given certain contractual guarantees on when it would/could be cashed.

sjim...

This last post is a red flag...

Sorry to be blunt my friend but this is a sign of

1) someone who cant afford what they are looking at
or
2) Your not a serious buyer but a fender kicker.. ( this is exactly what the 10% requirement is there to avoid )

What are you going to use the money for while he holds your check? Is the check not going to be good a week after you write it because you used the funds for something else?.....I have two boats for sale..I ask this as Im not sure I would except your check and take my boat off the market with this attitude.....Bad check bad deal in my book...money its either there or it isn't...we are talking a 30 day max transaction period here even if you decline the boat...interest on that isn't worth the squabbling if that is your angle.

Again sorry to be blunt...but honest

PS: You can always lien the boat if there is a default with any bank over this deal...this is a very slim chance of happing and IMO totally irelivent...escow is different then bank holdings anyway.

[sjpm]

Oh dear. Well thanks for making a lot baseless assumptions. Nothing like being accused of insincerity AND financial insolvency in a single post.

The admiral and myself are in our early 30s and will be retiring for good as of 01/2009. We intend to spend at least the foreseeable future cruising. I'd say that puts us in the "motivated buyer" category rather than the "tire kicker" category. It should also give you some idea of our financial situation, not that it's relevant to this discussion or any of your business for that matter.

Also, if you care to read back, I never had any objection to having to make a deposit on a boat. My question was when in the buying process should I be expecting to do so. I found it odd that I would be asked to do so before even agreeing on a price. Apparently this is a fairly common thing and I was mistaken. But... like I said I in my very first post: "when in Rome...".

Originally Posted by Stillraining

sjim...

This last post is a red flag...

Sorry to be blunt my friend but this is a sign of

1) someone who cant afford what they are looking at
or
2) Your not a serious buyer but a fender kicker.. ( this is exactly what the 10% requirement is there to avoid )

What are you going to use the money for while he holds your check? Is the check not going to be good a week after you write it because you used the funds for something else?.....I have two boats for sale..I ask this as Im not sure I would except your check and take my boat off the market with this attitude.....Bad check bad deal in my book...money its either there or it isn't...we are talking a 30 day max transaction period here even if you decline the boat...interest on that isn't worth the squabbling if that is your angle.

Again sorry to be blunt...but honest

PS: You can always lien the boat if there is a default with any bank over this deal...this is a very slim chance of happing and IMO totally irelivent...escow is different then bank holdings anyway.

[AnchorageGuy]

Where exactly are you looking for boats. Perhaps if this deal does not work out some of us might be able to recommend a reputable broker, not to say the one you are discussing is not.

[smj]

4 years ago we made an offer with a 10% deposit with a reputable broker in the Annapolis area. After our offer was refused it took 3 months for them to start making installment payments to us. This was after we had to contact a lawyer, the Maryland district attorney, and the brokers association they were a member of. They didn't put our deposit in a folder or a escrow account, they put it in their bussiness account and used it to pay their bill's. If it wasn't for me threatening to camp out at their booth at the Annapolis boat show letting custumers know about their bussiness practices I doubt we would have been fully paid of. Next time I will pay a lawyer to hold the deposit in his escrow account. By the way this broker still practices in Annapolis, and the brokers association's only worry was that he hadn't paid his yearly dues! A.J.

[AnchorageGuy]

There are honest and dishonest brokers, lawyers, accountants, politicians, doctors, insurance salesman.....well you get the idea.

[smj]

Next time I'll take my chances with my lawyer!

[BlueWaterSail]

Originally Posted by sjpm

I'd like to point out that (at least in my particular case) the broker wants money transferred to an escrow account. That may not be a big box full of cash, but it's still a non-trivial amount of money I no longer have until the deal completes or falls apart.

Having a check sit in a broker's folder would probably be less of a big deal to me, given certain contractual guarantees on when it would/could be cashed.

The sales contract should stipulate how much time you have to sign off on the survey and sea trial after your deposit check has been cashed. Beyond this, the contract becomes null and void, and your deposit is returned.

In my case, it was 2 weeks - very reasonable.

Regarding inflated asking prices, the buyer's offer would of course compensate accordingly, and the deposit paid is of course a percentage of the buyer's offer. The seller must decide whether to take it or keep angling for more money.

BWS

[sabray]

quote"I found it odd that I would be asked to do so before even agreeing on a price. Apparently this is a fairly common thing and I was mistaken. But... "
I think I originally did not understand the process you were presented with this seems more normal.
I think that a deposit before an agreed price is not really common.
I think and this is not my strong point you make an offer that you feel meets the value and is within reason. The owner agrees and then there is a contract that protects you, the broker and owner. Once there is a contract with protective clauses you put the money in escrow not the brokers account a seperate escrow .
I think also if it doesn't feel right your gut is telling you something isn't right good chance something isn't right. Thats your call. Also of importance is finding a surveyor with a strong reputation and that you are comfortable working with. If I were doing this again I think that is where I would start. Find a surveyor and with the surveyor build a list of potential boats work with the surveyor from the start rather than trying to find a good surveyor at the end of the process.

[Pelagic]

Originally Posted by Chuck Baier

I No one is asking you to go to your bank and get a box full of cash and bring it in and plop down a deposit. You write a check, which is a piece of paper worth about 2 or 3 cents until it is cashed. That check sits in a file until the deal is agreed on.

Hi Chuck,

I find it really interesting how the 3 parties have such different perspectives and try to circumvent or modify good business practices.

Seller: If you are talking about a +$300K purchase of my boat, I would be pretty pis*ed off at any Broker, representing me who took a 2 cent check as collateral and exposed my boat to invasive surveys and risk based on that. (Think flake/empty account or stop payment!)

Once the 10% is put in a 3 party named Escrow Account with a reputable bank, I know that potential buyer is financially capable and serious....he will lose a small percentage service fee if the deal does not go thru, so he can have complete access to my property to do inventory and survey

I would also expect the Broker to present all offers and let me decide how ridiculous it is, given my private priorities at that moment.

Buyer: If you can emotionally disengage yourself from any particular boat or model…It is always a Buyer’s market! …. There are always Owners out there who over extend themselves in so many ways that the boat is the first to go and it happens on all levels.

(Recently involved in a large yacht marketed at USD +8mil, buyer was prepared to start at 5.5 Suggested that if we were going to insult Seller… we should start at 3.5mil…. The deal went thru at less!). I am not a broker, received no commissions, but know that identifying a seriously motivated seller is the best advice I can give my client.

Broker: Simply put, they are commission salesmen of various levels of professionalism who view their time as “money” The more money exchanges hands in the least amount of time the happier they are. Never think of them as objective! They have families to feed and that is rightly so their priority.

The bottom line for the Buyer is to do your own homework on the Boat and Seller, identify a price you can live with and only negotiate down. Read the fine print on the Escrow Account and in principal let the Broker facilitate the deal, but ignore his advice.

“You never get what you deserve you only get what you negotiate!”

[Ex-Calif]

Originally Posted by sjpm

I'd like to point out that (at least in my particular case) the broker wants money transferred to an escrow account. That may not be a big box full of cash, but it's still a non-trivial amount of money I no longer have until the deal completes or falls apart.

Having a check sit in a broker's folder would probably be less of a big deal to me, given certain contractual guarantees on when it would/could be cashed.

You need to look at a purchase agreement. I have one and the caveat is that I am not a lawyer.

A purchase agreement spells out what happens and when it happens. It specifies the downpayment, the initial asking price, when the boat should be available for sea trial, what is and is not included and what is considered a default by either party and what happens if either party defaults.

Then there is a bill of sale when the contract is completed that stipulates the money was received and the title is clear etc.

Originally Posted by smj

Next time I'll take my chances with my lawyer!

If the money is not insignificant I would let my lawyer review the documents.

The guy we bought our boat from here for a relatively insignificant amount of money laughed at my process but it did go smoothly.

You should be sceptical and you should be careful.

PM me with your email address if you want copies of the documents we used. You broker should have similar processes or I'd find a different broker.

BTW - If I was a seller, an uncashed personal check would not secure my boat. A cashier's check might. It wouldn't sit in the brokers manila folder, it would be in a bank with a proper escrow officer who is bond by state law to follow the escrow contract.

No disrespect Chuck because I am sure you are completely reputable. The thing is that this is not how business is really done. One just has to understand that the broker gets paid by the seller. It is in his interest to have a high selling proce and to get you to buy the boat. There are a million reasons a boat deal will fall lthrough.

A purchase agreement covers that.

[Stillraining]

Wasn't ment to be taken personaly...your asking questions on a public fourm and I just told you how I saw what you posted with a sellers or a brokers hat on...

Good luck what every you decide.


PS : We are a lot more cautious driving after our first T bone, but we still get back in and play the game by the rules.

[AnchorageGuy]

Originally Posted by Ex-Calif

No disrespect Chuck because I am sure you are completely reputable. The thing is that this is not how business is really done. One just has to understand that the broker gets paid by the seller. It is in his interest to have a high selling proce and to get you to buy the boat. There are a million reasons a boat deal will fall lthrough.

A purchase agreement covers that.

I am afraid you have misunderstood but this is exactly how business is done here by probably 90% of the brokerages and not just how we did things. The other 10% will want a Cashiers check up front. Being in the business for ten years I think I know what I am talking about. We sold thousands of boats. Our sailboat was sold just a few months ago by a very reputable broker in Charleston, SC and when we negotiated he had a check attached to the buyers offer until the day it was accepted. Then it was deposited into escrow. As a broker I had no desire to constantly deposit money and withdraw it as each deal progressed or fell through. Whether you agree with it or not, whether it is how you bought or sold a boat, it is how the majority of the brokers in the United States operate be it in Annapolis, Ft. Lauderdale or Seattle. Whether anyones agrees or thinks it is good, bad or indifferent practice it is how it has been done for as long as I have been buying or selling boats for my personal use or as a profession and I can tell you that has been a long time. If SJPM wants to buy a boat through a broker in this country he will need to lay out a deposit up front or go find a boat on his own, period. BTW most brokerage forms for offers are standard forms occasionally modified by the broker. Yes you can pay a lawyer $100.00 to $500.00 per hour to review the sales contract or you can read it. Which won't go in escrow and you won't get back not matter what happens with the deal. They are actually pretty simple.

[AnchorageGuy]

It is very easy to voice opinions on a discussion board about what is or is not "good Business practices" when there is little or no understanding of the workings of that particular business. If a buyer writes a check for a deposit in the morning and by the afternoon it is determined that a deal is NOT going to be made it makes little sense that one would deposit the check in the morning and refund the money in the afternoon. Furthermore you can not do that because the check you deposited will take 3,4, or 5 days to clear the bank. So now the buyer is upset because I can't give him his money back because his bank has not released the funds and I can't refund it for almost a week. These negotiations don't take days or weeks. In a large percentage of the deals we worked the buyer and seller came to terms on the same day. In some cases where the negotiations were more difficult we would have the parties think about it overnight. So maybe 24 hours passed before we had a deal or knew it was not going to happen. So when the deal went south in a few hours or a day should I have to deal with waiting for the buyers check to clear then send him a refund that will get to him a week later then take 3,4, or five days to have my check clear the bank so he has access to them. So it is more than just whether I should "use good business practices" and deposit the money immediately. It is a bit more complex than that and the standard practice by most all brokers is standard for some very good reasons.

[Hyprdrv]

SJPM,
In reference to the deposit you said "I found it odd that I would be asked to do so before even agreeing on a price." in reference to a deposit check.
The truth is you haven't decided on a price at this point.
Your contract that is presented by your agent, has your price, the check is in the hands of your Representative. The money hasn't changed hands. It hasn't even been put into an escrow account. Your agent just has it and flashes it in the eyes of the seller to show your a serious buyer.
The seller sees your offer is under his asking price by $20k and counters with an offer of of lets say $10k lower than his asking price. Your agent walks away from the table (with your check) with a revised contract (called a counter offer) and talks to you at which point it's a new ball game. You counter again, this whole time the check hasn't done anything other than ride around in your broker's folder. The seller and you agree on a price, the conditions (Inspection, Sea trial, ect.), and completion dates (when each of these conditions will be met) and the statement that if for any reason the boat doesn't conform or meet the requirements of the contract (good, as-is, what you see is what you get) or standard sea worthiness, you get to renegotiate the contract or walk away. Again all this is done with the check in the hands of your agent or your escrow with him. Only after all conditions have been met and at closing does any money actually change hands.

You want to get fancy?? Offer a promissory note.

Disclaimer:
I've never bought a boat in my life, However I've bought more homes than I can remember as investment properties and there is no difference between the two when it comes to contracts.

Steve