Deposit to Make an Offer 'Valid?'

[MatildaMouse]

SJPM

I JUST bought a sailboat from a broker in Redondo Beach, CA; it is NOT a quick procedure if things are done properly to protect both buyer and seller.

I gave them a 10% deposit which they held at the brokerage. When the seller and I agreed on a price, the broker deposited my deposit check and we proceeded to trial sail, survey, haul, etc. I could have backed out at any time and my deposit would have been returned in full. I am sure they followed industry procedure and my purchase could not have gone more smoothly.

IF you work with a reputable broker, you won't have any problems. Good luck and happy sailing!

[AnchorageGuy]

Steve, It amazes me that the same folks that claim no way is it the right move to put down a deposit when offering to buy a boat are the same folks that laid down large deposits prior to settling on a price for a home they wanted to or did purchase.

[bruce in oz]

my 2bobs worth, i shopped around a lot on ebay (et al) and brokerage web sites, finally decided on where i wanted to buy a yacht (i looked in several countries) and then eventually found my home. the one thing that i consistently saw in newsgroups and forums was "dont upset the broker" realistically the yacht brokers, like realtors and investment agents are hired to sell their clients product. whilst i was flitting around the place looking, the brokers were always helpful and... friendly...

anyway when i did find my yacht, it was a private sale. even that was a memorable experience, after the airline had lost my baggage and i finally got to near where the yacht was i spent a wonderful night in a pokey little backpackers ....hmm getting off thread now.. if the yacht is being offerred through a broker, listen to them, save yourself a lot of strife....

[Hyprdrv]

Chuck,
I have no problems placing 99.9% deposits down as long as I trust the agent and a contract is properly drawn up which returns the full deposit if (in this case) no agreed price is reached, terms are not excepted, the boat isn't as represented, the inspection reveals issues, or the sea trial reveals issues. In most cases the seller wants to sell so I felt the contract has leaned toward the buyer. Pretty much at any time I could back out for any reason with a full refund. However if I place a contract on something, I want it and I wouldn't spend the money to go, look, and have inspected, just for the heck of it. I'm more concerned about spending the money for an airline ticket and room and then find out that some seller is lying about the boat and I have no recourse for the money out of pocket. That's going to tick me off.

Steve

[smj]

Chuck, it has been my experience that the deposit for buying a house is usually $1,000.00, just an act of good faith. The usual deposit for a boat is 10%. If your looking at buying a large boat that's a large sum of money, a little beyond the act of good faith and to much to give to a complete stranger.

[AnchorageGuy]

Originally Posted by smj

Chuck, it has been my experience that the deposit for buying a house is usually $1,000.00, just an act of good faith. The usual deposit for a boat is 10%. If your looking at buying a large boat that's a large sum of money, a little beyond the act of good faith and to much to give to a complete stranger.

Then as I have said over and over and and over and over, if you have a problem with this and want to buy a boat go find one on your own but don't expect a broker to make offers on your behalf without a 10% deposit up front. This is not Quantum Physics.

[Cheechako]

You can do anything you want. To me $500 is enough to let them know you are serious. BE SURE TO PUT A TIME LIMIT ON YOUR OFFER. I had a broker once who didnt have a time limit in his contract. Also make sure you can walk away based on any reason you want resulting from your inspection or survey. (ie: no clause that says if the seller is willing to fix what is found in survey you must go forward) As I understand it, the seller can consider any offers that come in regardless if yours was first, but maybe it varies state to state. Frankly, a phone call by the broker to the seller to see if he will accept your offer is enough to start with. Then if he's willing to accept, you can do the deposit. This avoids multiple contract changes while you haggle. remember YOU are in charge!

[CarlF]

I've sold (and bought) many boats in the US. . I have always felt that taking a deposit before an offer (with terms and contingencies) is accepted to be NUTS. I have a boat for sale now and have told the broker not to take any checks until I accept the offer.

With all due respect to the broker community, as a seller I've never been the least bit impressed by a deposit check. It might not clear. It must be returned on request. And it's sitting in my broker's bank account not mine. When I sell, I always instruct my broker not to take any check until I accept an offer with price terms and contingencies. Why?

These checks are legal landmines. Nothing about the broker's license or business structure guarantees the money. Some states require brokers to be bonded. Some don't. In Florida I believe the broker bond is $10,000 - that's not "per buyer". And is the insurance company behind the bond solvent? Most so called "escrow accounts" are just a bank account completely controlled by the broker. And who guarantees a check in file folder? Staples?

Depending upon a lot of factors, if the broker steals the deposit or their business fails those with lost deposits might simply be unsecured creditors- not a good place to be in a bankruptcy.

In normal times the risk of a broker failing while holding your deposit is small to nil. But these are not normal times. Good people with longstanding businesses are in serious trouble (although I haven't yet heard of any brokers going out of business).

So what what would a buyer do if the broker went under and couldn't return the funds? They would sue me - the seller. They would be unlikely to prevail but a good attorney would argue that I had a fiduciary responsibility, that the broker was acting as my "agent", or even a conspiracy to defraud the buyer. Ridiculous. But this is court.

I realize there is great resistance among the broker community to changing the status quo. Taking a check is easy and most sellers are unsophisticated. But as a seller I care much more about the buyer's previous boats, their employment situation, and how they've expressed their interest. And as someone else noted, there's no cost or risk to going back and forth a few times about price. The boat's still on the market until there's a signed accepted offer - at which point I do want a 10% deposit with only a major survey problem as a contingency.

If this seems alarmist, Google "Madoff". These peope were putting their money with a company audited by the SEC with SIPC insurance.

Carl

[irwinsailor]

I will not ever have any broker dictate terms to me. There have been several brokers in my area that want my boats listing and they tell me what I am to do. None of them got the listing. If I were a buyer again they are not going to tell me how they want me to buy a boat. I can not see any reason that moving to a broker that I can work with would be a problem for me to do.

I guess that I am just hard to deal with. I also do my best not to waste peoples time.

[Stillraining]

I will not argue that it can be done differently...the OP's origional question and concern was is this normal..

Answer yes

If your not comfortable try to do it any way you want..just dont expect every one to accommodate your rules...which is totally cool also..

I am to trusting sometimes..its my nature and hard to change, others are the opposite and that is cool as well..

Good luck.

[Pblais]

If this seems alarmist, Google "Madoff". These Pepe were putting their money with a company audited by the SEC with SIPC insurance.

Putting your money in a boat isn't going to earn any interest either. Yes, it does seem alarmist.

People are cheated buying everything sold every day and have been for millenia. I don't see times as being any better or worse. I find people are about as honest as they ever were or were not. I won't say it's reassuring but at least it is consistent. The hard part is there are at least 50 alarmists for every thief. I understand what thieves are after.

[Pelagic]

Originally Posted by Pblais

The hard part is there are at least 50 alarmists for every thief. I understand what thieves are after.

Paul, I don't consider myself an alarmist, but just prudent when we are talking about large transactions.

My last 2 cents on this (written on a check)

If I understand the procedure in Chuck’s patient explanation:

1/…A person takes a quick look at a boat Chuck is representing… likes it and wants to make a formal offer.

2/…Chuck writes up a standard agreement (protecting Buyer/Seller/Broker) and holds a 10% deposit check in his file that is ready to be deposited in an Escrow account which is attached to the agreement and will only be executed after Seller has signed his agreement on “price with subjects” and potential Buyer gets a signed copy.

In principle, I have no problem with that except:... “if” the check is made out to the Brokerage Company, there is a (small) chance that a financially strapped Broker could prematurely cash the check in the hopes that a deal will go thru and he will get a commission. (Or) that the boat is heavily mortgaged and the Seller can not offer it free and clear (Broker doesn’t know that)

We all know this has happened in various financial transactions so to protect myself I would never write a check to a Broker but instead would wire transfer the 10% directly to an Escrow account which is attached to the signed agreement by all parties.

I can understand that the many good Broker’s out there see Chuck’s standard method as a way of controlling the process and making sure the two principals don’t circumvent the Broker. That is a legitimate issue, but to be honest Chuck, a good salesman knows when he has a serious Buyer and making a low ball offer on their behalf without a check is a much faster process to see if a deal can be made and if your instincts are right about the Buyer, will waste no ones time.

By insisting on a check, you are not protecting the Seller, but are focused on establishing yourself as “Broker on Record” so as to avoid any counter claims on commissions.

My experience with Florida-California Brokers is that they collude to make up “standard” rules that protect their own interest, punish non compliance like some kind of mafiosa, regardless of the risk to the Buyer (as I explained above)

Luckily other parts of the world operate differently as do International Brokers based in the USA, while still protecting the Broker's rights.

[Pblais]

I have no problem with that except:... “*if*” the check is made out to the Brokerage Company, there is a (small) chance that a financially strapped Broker could prematurely cash the check in the hopes that a deal will go thru and he will get a commission. (Or) that the boat is heavily mortgaged and the Seller can not offer it free and clear (Broker doesn’t know that)

Both checks are always made out to the brokerage. If it is an escrow account no one gets paid until all the paper work is done. Seller never gets anything until after everything is done. Buyer gets the papers first, the broker gets paid, and then the seller gets a check.This is what brokers do. Most are state licensed so that the state can make sure they don't scam on the use / sales taxes.

If the broker has a eye toward the criminal he waits for the final check and skips town with both checks including the brokerage owner that helped close the escrow account. Since the first check never goes any place except to the broker for the commission. Even an idiot broker won't steal his own commission and then leave town. The concept of an escrow account is in both parties interest. Making it seem like an escrow account is a potential scam really is alarmist.

Brokers are a business and can be checked out before you buy any boat. The issue is if you did the checking first or waited until after they stole your money. I suppose they may have been waiting all these years to get your money and run but they probably have bigger deals than yours. You can go into any deal with eyes wide open. Checking the broker first is the prudent thing. If they can't pass that test then it does not matter about anything else.

[sjpm]

A very kind offer Chuck and in fact probably not a bad idea at all.

Can I ask you a question though? If I engage a broker to look for a boat for me, am I at that point contractually obligated? In other words if I walk past my dream boat at a marina and it is for sale by owner, am I free to negotiate directy with that owner?

To answer your question, I am currently living in Denver. When all our loose ends are tied up, we intend to head to the boat selling mecca of the US: South Florida.

Thanks and have a great new year.

Originally Posted by Chuck Baier

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.

[Ex-Calif]

I have no problem with depositing 10% on a boat I want.