US Practice of Deposit with Boat Purchase

[Doodles]

Originally Posted by 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.

Yes, its definitely negotiable but they want something.

[SaltyMonkey]

exactly. show some seriousness if you want the boat by putting down an escrow. they can come back and reject the offer and give you a counter.

The bottom line is if you really want the boat make an offer on what you think the boat is worth or how much you are willing to spend (make that clear), give them something for escrow, and see what happens. But I agree with everything doodles say especially that you should:

1) see the boat in person
2) the broker should have an office and be local to the boat.
3) if possible check on the reputation of teh broker in the community

Not sure we are allowed to plug, but I've had good success in Annapolis with:
Bernie Jakits out of RogueWave RogueWave Yacht Sales - Annapolis, Maryland Blue Water Sailing Boats and Yachts for Sale - Valiant and Outbound Yachts Dealer
Martin Bird and Assoc Martin Bird and Associates - Annapolis, Maryland Yacht Brokers and Dealers

Others might agree or disagree or provide some testimonials of their own.

[pablothesailor]

Originally Posted by SaltyMonkey

exactly. show some seriousness if you want the boat by putting down an escrow. they can come back and reject the offer and give you a counter.

The bottom line is if you really want the boat make an offer on what you think the boat is worth or how much you are willing to spend (make that clear), give them something for escrow, and see what happens. But I agree with everything doodles say especially that you should:

1) see the boat in person
2) the broker should have an office and be local to the boat.
3) if possible check on the reputation of teh broker in the community

Not sure we are allowed to plug, but I've had good success in Annapolis with:
Bernie Jakits out of RogueWave RogueWave Yacht Sales - Annapolis, Maryland Blue Water Sailing Boats and Yachts for Sale - Valiant and Outbound Yachts Dealer
Martin Bird and Assoc Martin Bird and Associates - Annapolis, Maryland Yacht Brokers and Dealers

Others might agree or disagree or provide some testimonials of their own.

We are getting a bit off track here......the original question was regarding a broker asking for 10% just to ask what the seller might be prepared to accept , otherwise how do you know the boat is in your price range? Once you have an idea that the seller is prepared to reduce his asking price you can go to the next stage!! I dont get asked to pay 10% when I walk into a used car show room, there is no guarantee I will buy, why should I?? But I still want to know what the best price may be, what extras, etc, etc!!
The used boat market is in its worst condition in many a year, Many adverts now show ¨motivated seller¨ or even ¨highly motivated seller¨ then there is the ¨further reduction¨, Many houses, boats, cars are going for 30 and 40% less than asking prices, it is certainly not the time for brokers to have airs and graces, they need to chase every bloody lead they can find!

[SaltyMonkey]

how do you know?? How do you know?? You have the money - its either in your range or not. Its up to you to decide what you think you are willing to spend for the boat you see, and follow up with a survey. Its not the brokers or the owners responsibility. Again if you want the boat you make an offer - even a lowball offer - and put your money where your mouth is, and see what happens. He either accepts its, or rejects it and then you bargain. Thats it. Thats how you find out. If they acccept you can negotiate also in the survey process given what the surveyor finds.

Like I said I've had brokers give me a thought on what their client might agree to, and I thought the price was also reasonable given my own analysis. But its always a 10% escrow with a PA, and either a sign in the office, or in a few days if the owner is away or non local. Its always through the broker, never directly talking to the owner.

Also I never give an offer the day I see the boat. Never. I don't take my check book. I look at a lot of boats and then come back again to spend more time for a serious self survey/review.

I like working with brokers. I don't have to deal with pesky emotional owners who overrate their boats and inflate prices. A good broker WANTS to help negotiate, but there is a careful balance between getting inventory out the door quickly and compromise vs acting for his clients best interest and getting a commission.

[MarkJ]

Originally Posted by ErikFinn

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.

It is dodgy.

Its a ridiculous rip off because to whole money in escrow cost foreigners money. I think it was about $250 per $10,000 when I was doing it. Every offer that is not accepted you lose $250. So I didn't do it.

You can get around it but its a little difficult.

Another dodgy bit is when the broker won't refer your offer to the owner they will try to pass you onto another cheaper boat at the same high cost.

That sort of activity (holding back offers) is illegal in Australia where we have consumer laws.

Beware and play hard-ball. It will work out in the long term.


Mark

[Boracay]

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.

A broker must have some way of qualifying buyers. Asking a 10% deposit is one way, but there are many others.
Assuming the boat has been accurately described, photos have been posted, emails have been exchanged and phone calls made then the next step is to view the boat.
The broker should have spoken to the seller already and should know if a particular offer is acceptable. If they don't then they should find out.
Even when living next door looking at a boat is a time consuming business. Keys need to be arranged and marinas checked. Its going to be a few hours, maybe 4 or more.
So what's wrong with the broker making a quick call to the owner? Takes only a few seconds. Could save half a days work if the offered price is way out of line with what's expected.
If my reading of the original post is correct they're being asked to put a deposit down on a boat they've never seen, just to find out if their offer is acceptable.
If I were coming to the states to look at boats I'd want to have at least a dozen potentially good boats to look at. Would I need to put 10% down on each of them?

[SaltyMonkey]

Again the owner may not be available for a quick call, or even set the rule that they want an offer in writing before being disturbed. They might just say i dunno yet...submit your pa and i willt hink about it so what have you gained? If you want a gut feel about your offer chances of success, ask the broker.

As for 10 boats, look at em first and then submit to your best bet. Maybe some will play the game in your viewing but most might not. And do you honestly think those 10 boats are gonna wait around till your plane lands anyway?

Wining about "do you think its acceptable" makes you sound weak in negotiations.

I offer you 10k do you think it's in range?

What do you think my reply is going to be 100% of the time?

[Doodles]

The OP's question was ...

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..?

The answer is YES it is normal in the US. Some don't like it but its normal. And if the offer isn't accepted you get your money back. You can whine all day about how it SHOULD be in this buyers market, but the fact remains this is still normal today.

You either play by their rules or negotiate something better which is always a possibility. It up to you. To say the brokers need to "wake up", they need to do this and that is not going to help you one bit. It is what it is.

[MarkSF]

I keep hearing about how it's a buyers market and you should expect 30% to 40% off. I do not believe it is true. Around here nice examples are selling fast and at close to asking price (provided they are priced realistically of course). Now that realistic asking price may be 30% lower than 5 years ago. But to say you should then expect another 30% on top of that is not reasonable.

[chucks]

Everything is negotiable here. When we bought our boat I looked at it in person several times, then we made offer/counteroffers over the phone. We were 200 miles away from the broker. Pacific coast. The broker wanted it this way. When we agreed over the phone to the price, they sent a purchase agreement by fax for us to sign. They suggested the deposit amount-- 2% of the 80K purchase price and we mailed a check to hold it.

The broker had the check go to a marine escrow/documentation firm that handled collecting our money and paying off the seller. It was a documented vessel with loans outstanding but the process was completely professional.

If you want a survey you will need to pay for the haulout and surveyor and you will need to pay that on the day of the survey.

Any legitimate broker will work with you and discuss price and present offers and counteroffers if you present yourself as a serious buyer with a reasonable deposit.

[djambalawa]

I don't care if this is the norm in the states - it sounds ridiculous to me. After all its a simple question you want an answer to. I'm not asking you to take it off the market whilst you find out if the seller will consider a certain amount - even if it takes weeks. Just let me know if he would sell it for X amount - and if he does we might have a deal.

If I miss out because I haven't paid a deposit and someone else got it in the meantime too bad for me.

So you might get some people "fishing" with false offers etc - maybe that should just be considered part of the business and its associated annoyances that you have to deal with? And with experience a broker would be able to better judge when a query is just this.

Buyers market or not - nothing to do with it - a unreasonable practice in my opinion.

[Doodles]

Originally Posted by djambalawa

I don't care if this is the norm in the states - it sounds ridiculous to me. After all its a simple question you want an answer to. I'm not asking you to take it off the market whilst you find out if the seller will consider a certain amount - even if it takes weeks. Just let me know if he would sell it for X amount - and if he does we might have a deal.

If I miss out because I haven't paid a deposit and someone else got it in the meantime too bad for me.

So you might get some people "fishing" with false offers etc - maybe that should just be considered part of the business and its associated annoyances that you have to deal with? And with experience a broker would be able to better judge when a query is just this.

Buyers market or not - nothing to do with it - a unreasonable practice in my opinion.

Guess what ....life ain't fair sometimes.

[bangkaboat]

Wow, why all the controversy? Tell the broker, "yes, please send me the purchase agreement." When you receive it, read it through & decide if the terms are agreeable, make your offer subject to survey, rig inspection, whatever else, and fax the offer back along with a facsimile of a check that represents 10% of the offer. Speak to the broker to find out when he/she wants the actual check. Continue with negotiations, etc. .

The deposit simply shows your commitment to buy the boat IF you are satisfied with survey, price, etc. . On my recent purchase, I did all of this, then revised my offer after the survey. Why would one expect the broker & owner to negotiate with anyone who calls up but shows no commitment to buy? We use the same process in Canada & it saves much, otherwise wasted, time & effort. Nothing "dodgy" about it. It's the same when you buy a car & similar to buying real estate. There are laws in every state to protect you from being ripped-off.

[David_Old_Jersey]

If anyone is wondering why there Broker has not sold there boat (or not had any offers) - the answer may be in this thread

The 10% "rule" is simply pissing a Vendors money away - fair play to those who can afford that IMO not a serious Vendor.

[djambalawa]

Originally Posted by bangkaboat

Wow, why all the controversy? .

Hmm maybe its a cultural thing I dunno...

Here's a few reasons;

1. I don't think I should have to bereft of a significant amount of money (for probably weeks at least) for the "privilege" of negotiating. This time taken to get money back if it doesn't go ahead would mean for most mortals you couldn't "ask" about any other boats prices in the meantime.

2. If I only want to buy the boat at a certain price - why would I want to go through all the complexities of getting 10% to the broker (this could involve bank loans, international transfers, changing exchange rates and all sorts of things) only to be told that its not available at that price and have to undo all that work?

3. I might be looking at a couple of boats which knowing what can be negoiated will decide it for me - lets put 10% on each shall we...


It seems that folks in or near the US thing that this is quite reasonable - and others think "you're kidding!?". So yeah must be a cultural reason...

When I actually decide to buy the boat then I'll hand over some money...