Broker ethics question

[Dockhead]

Originally Posted by Suijin

There is really only one important question; are you paying a fair price for the boat?

The commission is essentially being split between both of you. If a selling broker finds a buyer they can take the full 10% but sometimes knock it down a few percent. 7% strikes me as fair. If brokers started adjusting percentages based on what the buyer does like finding the boat it would be chaos. When you buy a car the salesman makes the same whether you test drive one car or twenty.

Why would it be "chaos", if you agree in advance? We're talking about thousands of dollars. It's frequently done in commercial real estate to agree on varying the percentage depending on things exactly including whether the buyer found the building himself or not.

In fact, there is a trend in commercial real estate to make the "broker" a consultant instead of a broker, and pay him defined lump sum fees for specific services. It makes a lot of sense. No reason in the world the same principles couldn't be applied to boats.

But what is particularly awful with boats, is that the broker will have a duty to the seller, when he's being paid with the buyer's money. More important than money, in my opinion, is defining exactly who has what duties, to whom.

[SDChristian]

Originally Posted by Dockhead

Why would it be "chaos", if you agree in advance? We're talking about thousands of dollars. It's frequently done in commercial real estate to agree on varying the percentage depending on things exactly including whether the buyer found the building himself or not.

In fact, there is a trend in commercial real estate to make the "broker" a consultant instead of a broker, and pay him defined lump sum fees for specific services. It makes a lot of sense. No reason in the world the same principles couldn't be applied to boats.

But what is particularly awful with boats, is that the broker will have a duty to the seller, when he's being paid with the buyer's money. More important than money, in my opinion, is defining exactly who has what duties, to whom.

I too have a real estate background and I suspect my broker's responsibilities to me are indeed clearly defined by the state of CA since they regulate licensing. I intend to verify if he indeed has a fiduciary responsibility to me (as I suspect) by calling the regulating agency on Monday to confirm. If he does, then I think it's more than fair to simply request a refund of 2% at closing, especially since I never even had to include him in this transaction at all since I found the boat and opened communications with the seller.

[S/V Illusion]

Originally Posted by SDChristian

Correct. He had the seller sign a listing agreement before he submitted the offer. Which I have no problem with. He did not tell me what he was going to charge the seller. It's him pocketing the extra two points, which inflated my purchase price by 2 points that I think might breach his fiduciary duty to me.

Having bought and sold many boats over many years, I think your instinct is correct. What he did is at the least unethical and greedy.

As your buyer's broker, he is responsible to ensure representation to you, not the seller with whom he arranged this "deal" to make himself a few % extra.

If you have no contract with him as you implied and the selller only signed an agreement with him AFTER you found the boat, he could arguably be cut out of the transaction completely. If it was me, I'd talk directly with the seller to reach a mutual accommodation on purchase and only then negotiate with the broker for some agreed upon payment to him.

[Cheechako]

It smells bad to me, very bad. I dont think it's a coincidence that they ended up at your max price and he is getting money from the other side also. That tells me if done properly you could have gotten the boat at much less. Essentially you paid all the commission.
I have no idea whatsoever why people hire a broker to buy something, but that is another discussion entirely.

[SDChristian]

Originally Posted by Cheechako

It smells bad to me, very bad. I dont think it's a coincidence that they ended up at your max price and he is getting money from the other side also. That tells me if done properly you could have gotten the boat at much less. Essentially you paid all the commission.
I have no idea whatsoever why people hire a broker to buy something, but that is another discussion entirely.

Agreed. I used a broker because it's my first big boat purchase and "I don't know what I don't know" so I figured it would be prudent. Now I'm kicking myself.

[Awilson275]

Can you send me a PM with brokers name. I am in Md and looking for a boat and wish to avoid this person

[boatpoker]

Love to see the OP's original written contract before I'd make any comment on this situation.

[SDChristian]

Originally Posted by boatpoker

Love to see the OP's original written contract before I'd make any comment on this situation.

I didn't sign a contract.

[Calif.Ted]

The contract stipulating a 7% commission was between broker and seller, you were not an "involved party" so have no standing to contest it.
You may have thought it was "just a courtesy" but essentially you changed this from FSBO to a brokerage boat by engaging a broker. You didn't have to do this, the seller didn't have to sign a listing agreement, but he did to facilitate a sale.
Apparently you think the purchase price was inflated by commission, but the price is negotiated and you named the price.
If it makes a difference the broker is probably getting 5% unless he OWNS the brokerage he works for, they need office expenses. There are a lot of brokers but not so many brokerages, I know of very few one person brokerages.

[SDChristian]

Originally Posted by Calif.Ted

The contract stipulating a 7% commission was between broker and seller, you were not an "involved party" so have no standing to contest it.
You may have thought it was "just a courtesy" but essentially you changed this from FSBO to a brokerage boat by engaging a broker. You didn't have to do this, the seller didn't have to sign a listing agreement, but he did to facilitate a sale.
Apparently you think the purchase price was inflated by commission, but the price is negotiated and you named the price.
If it makes a difference the broker is probably getting 5% unless he OWNS the brokerage he works for, they need office expenses. There are a lot of brokers but not so many brokerages, I know of very few one person brokerages.

Is this ethical in your opinion?

[SecondBase]

Originally Posted by SDChristian

Agreed. I used a broker because it's my first big boat purchase and "I don't know what I don't know" so I figured it would be prudent. Now I'm kicking myself.

I've had excellent professional services with a couple brokers and okay services from a third (much lower price point- felt like a car dealer).

But, at a vulnerable point in each deal, I learned to completely trust the two ethical brokers. They can do a lot for you.

As a buyer pointing a broker I now trust at a deal means he will bulldoze any bad behavior by the other broker out of the way while taking a split of the commission. Having had the experience, even knowing his wallet isn't aligned exactly on my side, I wouldn't buy from a seller's broker without bringing on my own.

I was frankly astounded at how strongly my buyer's broker moved the seller's broker back onto solid ground. These guys make a good living and they aren't fools. Getting their advice and value really falls more back on us as buyers. It is freely available and shouldn't cost you anything.

They know the market, they know the marine service providers, they know more than we do because it is their livelihood.

I like knowing I can trust a guy with escrow without a second thought. That probably sounds dumb obviously he's in regulatory trouble if he doesn't act right but I still like having that personal trust. If I buy not build my next boat I'll be right back to one of the two brokers I've used with good experience before.

[SDChristian]

Originally Posted by Calif.Ted

The contract stipulating a 7% commission was between broker and seller, you were not an "involved party" so have no standing to contest it.
You may have thought it was "just a courtesy" but essentially you changed this from FSBO to a brokerage boat by engaging a broker. You didn't have to do this, the seller didn't have to sign a listing agreement, but he did to facilitate a sale.
Apparently you think the purchase price was inflated by commission, but the price is negotiated and you named the price.
If it makes a difference the broker is probably getting 5% unless he OWNS the brokerage he works for, they need office expenses. There are a lot of brokers but not so many brokerages, I know of very few one person brokerages.

So you don't think the commission percentage influenced the minimum offer the seller would accept? I certainly do.

[boatpoker]

Originally Posted by SDChristian

I didn't sign a contract.

Aaaah! There's the rub.

[SDChristian]

Originally Posted by boatpoker

Aaaah! There's the rub.

Am I being screwed on this deal? This is all I want to know.

[thinwater]

The important point, which I believe is being overlooked, that the broker basically lied to the seller, telling him he needed to sign a listing agreement. The seller should call him back, tell him he is a liar, and cancel the listing agreement.

It isn't about whether the price was fair. It is about what he said to convince the seller to pay him 2%. He almost certainly told a fib, and that is not OK.

As for the pricing being inflated 2% to cover this, probably, but not as cut and dry nor provable.

I would never let any broker take the lead on negotiation. The conflict of interest is too severe. They can deliver the quote and try to talk it up, but I would not give them latitude.