What Advantage Is A Buyer's Broker?

[Tayana42]

I've searched the forum and not found the answer to my exact question so I'm asking it here. Sorry if this is redundant.

We are interested in a specific boat which is located in the San Francisco Bay area. We are located in Southern California. We have talked casually to a broker in Southern California who is also the authorized dealer for this brand of sailboat. He told us there were three of these boats on the market in the USA right now. We found the boat on YachtWorld.

So our question is this, should we go directly to the listing broker or use the local broker as a buyer's broker? What advantage is there in having a buyer's broker after you've identified the boat? Is there an advantage, one way or the other, in negotiating the price? Should should we look for a buyers broker where the boat is located?


S/V B'Shert

[Sailor647]

We most definitely recommend a buyer's broker. We were out-of-town buyers also and purchased our boat using only the listing broker. After the sale, items disappeared off the boat and we had no recourse. We were told "the boat is sold 'as is' and everything left on board goes with it." Once the sale was final, the broker (or someone with access to the lock combination) helped themselves to some of the personal items left on the boat including a brass hanging lantern, a set of fowlies, inflatable life jackets, etc. When we asked the broker about the missing items, he said "those items weren't actually specified in the listing agreement." Which was true, so we had to let it go.

The day of sale, we had the boat moved to a rigging company across Lake Union and let the broker know we would be there on Friday. Being excited new boat owners, we got to the boat on Thursday instead and started working below. Someone unknown to us (and the rigging company) was in process of boarding our boat when he realized we were on board. He quickly got off and walked away. Missing stuff wasn't that big of a deal, but still bugged us.

As far as price went, we were really firm negotiators and didn't give the broker any wiggle room. We knew what we were going to pay and stuck with it. We had been looking for our boat for three years, had the money ready to go, and bought the boat three days after it came on the market.

Another note - don't buy the bs that you need to use a title company to process the US Coast Guard Documentation or state registration paperwork. We processed all the paperwork ourselves. The documentation was $84. Pacific Maritime Title wanted $1,500 to fill out USCG and state forms - we did it ourselves for less than $200 and turn around time was a lot faster.

[jaybird1111]

Our experience:

--having our own broker meant that he could, for us, access the brokers' only listings of ACTUAL sale prices (hard to get).
--Sellers will be more likely to allow you to visit a boat accompanied by an 'official' broker if the seller or seller's broker isn't able to be there.
--a buyer's broker is working for you, not for the seller. Despite the claims to the contrary, if you have a good broker, he's interested in making the sale because any commission is better than none. Commission is split between the listing and selling brokers, so there is no 'extra' charge
--as a broker, he will likely know inside information about other brokers, etc
--buyer's broker holds any deposits until transaction is made
--helps you with the contract, making sure that it's right

I'd find the best possible broker, local or otherwise. Just like a good surveyor is worth hiring from wherever he may be.

always negotiate the price, nothing is ever firm. DON'T fall in love, be prepared to walk away

[CarlF]

As always "follow the money".

I'm assuming that you would not pay the "buyers broker". The usual arrangement is that he would get 5% from the seller. And the seller's broker would get 5% (although the brokers often secretly negotiate the split between themselves). So think this through:

The sellers broker will hate that you have a broker because he loses half his commission. But he can't turn his back. He could get into big trouble (including legal trouble) if the owner learns that he steered a sale to maximize his commission.

Brokers also work together (well, not officially because that would be illegal anti-trust. A felony. ). Your buyer's broker is going to see the selling broker again on another boat. They don't want to make enemies. They may be friends already.

Turning to your broker. He's really happy because he gets 5% for very little work - but only if he can put together the deal. So he is strongly incented to make the deal happen. He is not incented to get you a good price or tell you that it's not a good boat. Just get the deal to get his commission.

This isn't to say all, or even most, buyers brokers are bad. But their incentives are not aligned with your interests. It's a terrible system. Same with house sales.

I'd probably get the buyers broker but treat him like the seller's broker (which he is). Don't tell him anything that you don't want used against you.

Maybe you get both a buyer's broker AND a real expert that isn't being paid by the seller who will give you advice and tell you when are being taken advantage of. Someone like Bob Perry. Just $500. I once used him. He told me a lot about the boat I was considering. He was especially helpful before and after the survey (Surveyors are another "incentive" problem area). He also advised me (in the background) how to get to a fair price. It was well worth the money.

Robert H. Perry Yacht Designers, Inc. Consultation Service

Is the boat you're buying over $50,000? That would be $2500 to your buyer's broker. If you want to have some fun, ask your buyers broker if he would refund half the commission he receives as long as his half is at least $1000. It's perfectly legal. Does $1000 seem fair for the work you want him to do? (Maybe five hours at $200/hr).

Carl

[roverhi]

A buyers broker will be working for you, the buyer. Technically any broker involved in a sail with a commission sharing agreement is working for the seller who is paying the commission out of the proceeds. Doesn't really work that way but that's the way the law is interpreted. Since a buyer's broker (BB) is hired and paid by the buyer, they technically have no commitment to anyone else. They can try and find you all different types of boats at the best price for you. Since they probably have contacts around the country and experience in the issues with buying boats, they can save you a lot of hassles, dead end searches, and tthrough their negotiating abilities get the boat at the best price. They cannot get you stuff that isn't in the contract but may have been on board when you looked at the boat.

In reality, if you know what you want and are comfortable with your negotiating ability, dealing with the listing broker can work out just fine. They know the owners and the boat and may have more bargaining ability with the commission to effect a sale at a price beneficial to you. Yes they do have an obligation to get the most money for the seller but they also have to get the boat sold.

[Kenomac]

Yes, I highly recommend a buyers broker. You need someone on your side.

Ken

[CarlF]

And if you do get a buyer's broker, don't let them come to the survey or recommend a surveyor. Don't let the seller's broker be there either. A failed survey means a lost commission.

[Kenomac]

Originally Posted by CarlF

And if you do get a buyer's broker, don't let them come to the survey or recommend a surveyor. Don't let the seller's broker be there either. A failed survey means a lost commission.

Nope. The buyers broker's job is to be at the survey, then work on your side to negotiate the price downward or get the shortcomings repaired or replaced. My buyers broker saved me over $40k off the negotiated price following the survey.

[Tayana42]

Thanks to Sailor645, jaybird1111, CalrF, roverhi, and Kenomac for your replies and insights. It has been very helpful, once again, to get perspective from the members of this forum. We are still not sure we will consider moving up since we already are lucky enough to have a wonderful cruising home, but your information will help us if we move ahead. Thanks all.


S/V B'Shert

[bsurvey]

you don't need a buyer broker


you Do need a buyers surveyor

[sailorbobdeb]

We used a buyer's broker for an out of state purchase because we assumed he'd look out for us. There were several things that disappeared off the boat. Including things listed on the sales agreement and we were never assisted in recouping the items or compensation. With that being said, he did procure a captain to move the boat from one marina to the other (at our expense ). My question is ... Does that justify his commission? We were very disappointed, but I'm sure there are many different types of brokers out there.

[Blaine]

The biggest advantage to using a broker as a buyer is it's free. Commissions are paid by the seller and instead of the selling broker getting the full commission, it will be split between the two brokers. As a buyer, having a broker costs you nothing. The other advantages including some previously mentioned, are that your broker can protect you legally so that you're deposit is safe, etc. Brokers have basic agreements over which party should be responsible for fixing various survey items and having a broker help negotiate this for you will keep you from being bullied. Brokers also have large Rolodex's (or the electronic equivalent) and much experience to draw from including knowledge about the specific boat, good surveyors, yards, delivery options, etc. It's not a bad deal for the price.

[2Hulls]

Perhaps some definitions would be helpful here. There's "buyer's broker" and a "Buyer's Broker."

Used to be - maybe not so much anymore - that a buyer could hire a "Buyer's Broker" for a fee. This person worked solely for the buyer and got nothing from the sale - no percentage of the commission paid by the seller. This person would be completely independent from the sale, if a sale occurs. No sale, the wanna be buyer still pays the fee.

On the other hand, a "buyer's broker" is just another broker who is "free" to the buyer, but gets paid by the seller, usually by sharing the commission with the listing broker. No sale, they don't get paid. There is obviously an incentive for these brokers to see a sale happen. Only foolish buyers think these people are working for them. Just like Real Estate agents (in the US).

I'm in the camp that advocates that buyers do not need any broker unless you're a complete novice. Be your own broker. Do your homework and hire a good surveyor and make the sale contingent on accepting the survey results.

One benefit of being your own broker is that when the listing broker is getting the entire commission vs splitting it with a "buyer's broker", he/she may negotiate their commission down a little with the seller to make a deal happen. This occurred for me, working as my own broker. We were down to a few thousand $$ difference on the selling price and the listing broker cut his commission by the difference in order to get a sale.

Dave

[CarlF]

Kenomac,

I only want the buyer's broker at the survey if he is not getting a commission from the sale (the normal system in the US).

Buyer's brokers want to get some discount from the survey to get a good reference from the client ("he saved me $40k! - and always at least enough to cover the cost of the survey) but they are incented to never let a survey kill the deal - since they lose their commission.

I've seen more than one instance where the buyers brokers told the client not to worry about an issue found in survey because he knew the seller wouldn't drop price that much. "Don't worry. All boats this age have a little.."

I've even witnessed a case where a survey was going badly and the buyers broker took the surveyor aside out of earshot of the client. I have a pretty good idea what was said as the guy had a $25,000 commission check at risk.

And since most surveyors are referred by buyers brokers, they too are incented to get the discount but not kill the deal and the brokers commission - it's hard to have a good surveying business if you have a reputation in the broker community for killing deals.

Again, not all buyers brokers do this but the incentives are there. And there's no way for someone buying a boat to know.

[duefocena]

So much conflicting advice on this topic but for what's worth and in my own experience:
The buyers broker is definitely paid by the seller not the buyer.
A list of surveyors must be provided to the buyer by his broker and the buyer then selects the surveyor.
A buyers broker wants his client to buy and the best way to do that is to get hime the best deal. A good broker negotiates at least 50 boats prices a year. Do you have the same experience?
The seller broker is trying for the highest price as many times his client is buying another boat and his position is assured if he negotiates for the most paid.
I could go on about the protection of monies in escrow and clearing clouds in title, making sure listings are correct etc. but only the well initiated should think of a large purchase without a professional to navigate the water. Do you use an insurance broker for your insurance? A real estate broker for real estate? Nuff' said.