US Practice of Deposit with Boat Purchase

[ErikFinn]

Hi,

I'm a newbie here and would need some advice. I live in Europe but have my eyes on a sailing yacht for sale in the US. I made an offer on the yacht yesterday and today the broker replied with the following:

" Before we submit any offers to the seller we request a 10% deposit of the offer price and a signed purchase agreement. Let me know if you wish to proceed and I’ll attach an agreement."

My question is: Is this the normal procedure in the US? The broker wants the deposit BEFORE submitting the offer to the seller ? To me this sounds dodgy, to say the least. What if the offer is not accepted..?

I thought the normal procedure was to require the 10% deposit AFTER the offer has been accepted...

What say you?

[SaltyMonkey]

I've had it both ways. Some will want to make sure you are committed up front before submitting offer, so they walk away with something. Some are informal and will make a phone call while you are there and make sure your offer is at least acceptable to submit. But they will always want 10% as escrow to hold your boat in a purchase agreement pending survey in a timeframe. That holds the boat from the market. They need some security that the deal is honest in case they loose market potential in that survey / acceptance period, and you need assurance they cant sell the boat from under your and waste your time while you track down the surveyors needed and set up an appoitment (isually 3 wks). If it doesn't meet spec of survey, they have option to correct deficiencies or you can submit another low offer or get your money back.

But if it bails, the money is in escrow so you should get it back.

But I will not work through a broker unless they are licensed and bonded and apart of something like Yacht Brokers Association of America (YBAA). I also am careful on choosing boats sold by reputable dealers. I bought one boat from a yacht yard and that went smoothly probably because I also had business with them after purchase etc. I have never bought through an owner directly - not cruising boats.

EDIT

oh forgot to add - one reason they don't want to contact their client and confirm before your signing is that the owner may change their mind, and then get into all sort of broker relationship and credibility issues, not to mention legal weirdness about verbal agreements etc. But sometimes the broker is a good feel for what the owner might accept as a low offer before signing a PA. The other side of the coin is if you made an offer that was low, they may not want to bother their client on the spot and will request the PA. The brokers responsibility is also to isolate the client from bothering all the time with pesky offers. A PA MUST be signed by both parties, so basically its useless without those signatures...in fact the owner may use it as leverage before signing to get a better offer.

Just some thoughts

[SaltyMonkey]

Oh heres another scenario. Boat hasn't been selling. You offer a low number. Broker wants to sell boat and knows market is soft and thinks this is a good offer. However, he can't just call up his client and say that number. Why? client will have an emotional meltdown and reject it right away. Broker can't say to client..."listen i know this is low bt I think you should take it" not while you are there in the middle of this and right on the spot like that. Its probably doomed.

If he gets your side of the agreement, then goes off and preps his client carefully and shows him, it has a better chance of acceptance and not getting the client all emotionally messed up. He has a lot more control over the negotiation process without having to manage his client being distracted by you standing nearby and on a timeframe on the spot.

[pablothesailor]

Originally Posted by ErikFinn

Hi,

I'm a newbie here and would need some advice. I live in Europe but have my eyes on a sailing yacht for sale in the US. I made an offer on the yacht yesterday and today the broker replied with the following:

" Before we submit any offers to the seller we request a 10% deposit of the offer price and a signed purchase agreement. Let me know if you wish to proceed and I’ll attach an agreement."

My question is: Is this the normal procedure in the US? The broker wants the deposit BEFORE submitting the offer to the seller ? To me this sounds dodgy, to say the least. What if the offer is not accepted..?

I thought the normal procedure was to require the 10% deposit AFTER the offer has been accepted...

What say you?

I would tell him to get stuffed!! Its a buyers market in all departments, Property, cars, boats.......why on earth any broker would think the current world situation should not apply to his industry is beyond me!! There are plenty of brokers who visit this site by the way! Dont feel intimidated to not make an offer on a boat....and offer the price you can afford and are happy to pay, worst thing is they say no!

[roverhi]

Having an earnest money check with an offer is de riguer. A contract is not a contract without something of value held in the lurch. Without the deposit, the owner can walk on the offer if he gets a better one in the interim. Not very likely in this day and age but I've had it happen. Besides, an offer without you putting up earnest money could be you blowing smoke up his butt just for the fun of it. There are buyers or should I say people who pretend to be buyers who will do that.

[David_Old_Jersey]

Originally Posted by ErikFinn

Hi,

I'm a newbie here and would need some advice. I live in Europe but have my eyes on a sailing yacht for sale in the US. I made an offer on the yacht yesterday and today the broker replied with the following:

" Before we submit any offers to the seller we request a 10% deposit of the offer price and a signed purchase agreement. Let me know if you wish to proceed and I’ll attach an agreement."

My question is: Is this the normal procedure in the US? The broker wants the deposit BEFORE submitting the offer to the seller ? To me this sounds dodgy, to say the least. What if the offer is not accepted..?

I thought the normal procedure was to require the 10% deposit AFTER the offer has been accepted...

What say you?

I've never bought a boat in the USA (and no plans to) - but from what I can gather (on this site and others) is that many US Brokers do insist on 10% upfront before even presenting an offer to a Vendor.....so not really a scam (although of course plenty of scope for that).

But no legal requirement to pay 10% upfront (if an offer is accepted can then pay the 10% (or lesser figure as negotiated) upon signing a contract - and why would you send money to a stranger without at least a contract???) - but 10% upfront just works very well commercially for the Broker, his commission is paid and buyer less likely to pull out due to a so so survey (for fear of losing deposit or chunks of it in "expenses" / legal bills)......so plenty of Brokers will claim it is "the norm" / "required" - IMO the answer to that is a simple F#~# Off It's business - everything is subject to negotiation (albeit not to agreement ).

[SaltyMonkey]

its not a F-O situation. I don't know how you all are reading it, but this is fairly norm.
You make an offer and the owner may come back with a counter, so negotiation is not closed. The owner might not be available at the moment to respond to your request. Might be out of town or living very far away. The broker is acting as an agent to the owner to filter requests so the owner doesnt make it another FT job. And so on.

one thing to watch for is that you put in a PA, and wait around 3 weeks for them to sign it. There should be some limit of time on getting back to you. See if you can get other receipts too, but not necessary if you have a check made out to their brokerage office as the check is a receipt.

I've also been in situations where the broker calls the owner and deals are cut back and forth, and the paper work is signed in the office that day. The owner lives near by and can come down to the office that day. So you get paperwork right away.

The purchase agreement is important,a nd outlines the rules of the closing process. The 10% is a holding escrow amount so no games are played and the boat wont loose market opportunity during that off market period. Similar to a rental deposit when you look for an apartment.

[pablothesailor]

We have been HIGHLY unimpressed with Brokers we have contacted for information recently! There is absolutely no chance I would pay 10% to anyone to just ask a question to a seller regarding price of a boat, my advice to ALL of you selling boats is to understand whether your broker is doing this, If he is, you 100% are loosing future buyers like us! We will buy in the next 12 months, with....or without a broker!! And we wont be bullied by the brokers either!

[Doodles]

The problem is there are good reputable brokers and there are ones that I would never deal with ... lazy ass bums! A good broker is not going to waste his time with buyers who aren't serious and are not willing to put up a good faith deposit. A good broker will also tell you and discourage you from putting up a ridiculous offer ... its waste everyone's time. A lot of brokers now are no more than listing agents, have never even seen the boat they are selling and are often located hundreds of miles away and rely on someone else to show you the boat. Those guys I would never trust with a deposit. I want a broker with an office I can walk into and deal with the people face to face, not over the internet or phone. Since you are overseas you need to find someone you can really trust if you want to make an offer if you aren't going there in person.

I tried to look at a boat for sale once that was in Virginia and the broker was in NY. He knew very little about the boat, couldn't get anyone to show me the boat, couldn't get the owner to respond, etc. etc. Basically, we just listed the boat on the internet and that was the end of it. I can imagine the horror if I had given him a deposit.

[Boracay]

For my way of thinking a deposit means that you've committed to buying the boat. Sure, if due diligence shows up problems that were not evident when looking at the boat (survey, title etc.) then the sale can be renegotiated or cancelled, otherwise the deposit could be forfeit or the owner could even sue for the sale price.

That 10% is the broker's commission and he's not going to give it back in a hurry unless he has to.

But a 10% deposit to find out the price? No way...

[Doodles]

Originally Posted by Boracay

For my way of thinking a deposit means that you've committed to buying the boat. Sure, if due diligence shows up problems that were not evident when looking at the boat (survey, title etc.) then the sale can be renegotiated or cancelled, otherwise the deposit could be forfeit or the owner could even sue for the sale price.

That 10% is the broker's commission and he's not going to give it back in a hurry unless he has to.

But a 10% deposit to find out the price? No way...

That's all fine and well, but how do you separate the serious from the not serious. Would you as a broker run to the seller every time someone emails or phones in a potential offer? Should a broker in the US go to his seller and say hey this guy in Europe emailed me and wants to know if your will take xx for you boat and sorry but that's all I know about him/her? If I'm a broker, I'd say "show me the money"; otherwise, you're just on a fishing expedition and wasting everyone's time. It's a buyers market but they still need some skin in the game.

[pablothesailor]

It is utter nonsence for any broker to expect me or anyone else to pay 10% to ask what the seller may be prepared to accept!! Lets imagine my budget is $100,000 and I see several boats I quite like that fit my search being offered in the $125,000 price range, I would want to ask the broker if any of these boats would be prepared to drop their price? It does not mean he has a sale, it is the 1st stage, I would then expect him to come back with an answer! If there was a boat that was happy to reduce their price and it did come within my budget, I would want to look closely at the boat to see if I liked it...........it would only be at the next stage if my offer subject to survey was accepted would I even consider paying a deposit!! Brokers need to wake up a bit and smell the coffee.....or they will loose business, as they are doing everyday for both them and the seller!!

[Bash]

I was once in a situation where a broker wanted 10% earnest money, and I responded that I wasn't willing to make that much money liquid at that point, but that I'd be happy to write a check for $1,000. That was fine with the broker.

They just want to know that you're a serious enough buyer to make a commitment to the deal.

[Doodles]

Originally Posted by pablothesailor

It is utter nonsence for any broker to expect me or anyone else to pay 10% to ask what the seller may be prepared to accept!! Lets imagine my budget is $100,000 and I see several boats I quite like that fit my search being offered in the $125,000 price range, I would want to ask the broker if any of these boats would be prepared to drop their price? It does not mean he has a sale, it is the 1st stage, I would then expect him to come back with an answer! If there was a boat that was happy to reduce their price and it did come within my budget, I would want to look closely at the boat to see if I liked it...........it would only be at the next stage if my offer subject to survey was accepted would I even consider paying a deposit!! Brokers need to wake up a bit and smell the coffee.....or they will loose business, as they are doing everyday for both them and the seller!!

I've done exactly what you are describing pablo, and what my broker did was make an inquiry but they (seller & his broker) never give you a firm answer like ... yea, its listed for $125K but we will take your $110K offer. It's going to be a vague ... yea, we can probably do something in that range. Nobody is going to show their hand until they have a valid offer to buy.

[pablothesailor]

Originally Posted by Doodles

That's all fine and well, but how do you separate the serious from the not serious. Would you as a broker run to the seller every time someone emails or phones in a potential offer? Should a broker in the US go to his seller and say hey this guy in Europe emailed me and wants to know if your will take xx for you boat and sorry but that's all I know about him/her? If I'm a broker, I'd say "show me the money"; otherwise, you're just on a fishing expedition and wasting everyone's time. It's a buyers market but they still need some skin in the game.

Hmmm...and how do you know that this guy in Europe is on this so called ¨fishing expedition¨? How do you know he is ¨wasting everyones time¨?? Says who?? You?? One thing that sort of mentality does is close the door 100% on any deal, you 100% will not sel to that guy!! I myself may be that guy from Europe, why would I waste my time emailing if I did not have some interest? Ive seen boats that are out of my price range by a liitle, there is absolutely nothing wrong in calling to ask the broker where he thinks the seller mat be prepared to drop to, but i would tell him to get stuffed if he asked me for 10% payment to do this....whats the big secret, its not there in the property or used car market....I am selling a property at the moment, every caller asks me the same question, ¨what would I be prepared to accept¨, I dont ask them for 10% to answer the question, sure, ive had the odd time waster, but that surely is part of the whole thing!! I treat EVERY enquiry with respect!