conflict of interest?

[swami maximus]

thanks taojones.
maybe it was good to use the broker, maybe not, maybe he acted with our best interests in mind, maybe not... in the end it's my responsibility to not get screwed and i don't plan on shoveling that off onto anyone else. i appreciate your words.
best,
SM

[Sailormann]

Sailorman-i fear that you have a few misguided ideas about this. we did not tell him to bugger off because we found our ideal boat by ourselves. we told the seller that we are working through a broker, and to expect his phone call...

Was not explained in your initial post

the broker was to be compensated by the usual fee's associated with co-brokerage or whatever he worked out with the seller. at no point did we tell the broker that his services were not needed.

Nor was this

I don't know where you got that idea, but have an inclination that you at some point were or are close to a broker

Nope - no way - brokers ??? Not me - it's an occupation in sore need of regulation...

that was screwed in said manner

I am sure it's happened, but yours was the first incident that I had first-hand knowledge of, and as the actual situation is not as may be surmised from the paucity of information first offered, I guess I still haven't encountered one...

and feel a need for some vindication.

I feel many needs at various times, but vindication is not often one of them..

either way we are still on good terms with all parties.

Excellent! - life is short and it is important to co-exist amicably

this was simply a question as to what the sagely thoughts of those much more salty than i might be about conflicts of interest

well - I think you certainly achieved that - lots of opionions covering a broad range of perspectives ...

- as this is our first boat, home, major purchase etc. we are a young couple and want to do things right the first time, knowing that very likely we will still make many mistakes, but still trying to minimize the damage of our ignorance.

If I may be so bold - here I will assert myself and suggest that there is no such thing as a perfect boat. People will spend hours and hours debating the various merits of full keels, multihulls, schooners, ferro-cement, whatever...in the end - a boat needs to be stoutly built and fairly watertight. There are hundreds of boats out there that are equally suitable for you and your family. None of them will answer all of your needs, and it is highly likely that you will find some of the things that seem so important right now, turn out to be quite superfluous when you have been sailing the boat for a year.

picky... your darn right i am. i have looked long and hard, studied the listings about many a boat, been aboard more than a fleet of 'em, traveled the west coast from seattle to mazatlan in search and found one i think fits us.

see above

patience is a virtue that we have been blessed with and have used it not to make costly mistakes.

this is a good quality, but remember, life is indeed short...

thank you for your thoughts though... all have been very helpful

You're most welcome - feel free to ask anytime

Happy sailing and may all your winds be fair...

[GordMay]

The YBAA (Yacht Brokers Association of America) is more or less silent on the issue of dual party representation.
See their code of ethics: YBAA : Yacht Brokers Association of America
(Look under About YBBA)

- The Broker shall encourage written contractual relationships in all matters involving agency in order to avoid misunderstanding between parties.
I think you should have had a clear written agreement with your purchasing agent broker.

- In accepting employment as an agent, the Broker pledges him/herself to protect and promote the interests of the clients. The obligation of absolute fidelity to the clients' interest is primary, but does not relieve the Broker from the obligation of dealing fairly with all parties in this transaction.
Who is the client, in your situation? You are the first come (first served) client, but the seller is the fee-paying client.

Other professions generally prohibit accepting compensation from more than one source, except with the full knowledge and agreement of both interested parties.

[hellosailor]

Gord, isn't a "broker's association code of ethics" somewhat like what Benjamin Franklin said about Democracy?

Two wolves and a sheep discussing who's to be lunch? <G>

[Benny]

Swami - I was not trying to be aggressive or chastising you, I was trying to understand and verbalize why if you asked for our opinions - which most if not all of our advice was not use the original broker as he committed to the seller by getting the listing and this put you into a secondary position. My reference to tire kicker was that both with your relationship with the broker and your question to us, there was lack of information which allowed you to get alot of responses from us but they were unfortunately based on an erroneous premise that you had been 'done wrong' by the broker. You had no formal or structured agreement with him so he was free to list the boat and list it on yachtworld. It was not considerate of him given your expectations of him to represent you but you did not bind him with an agreement originally but have since put an offer through him on this same boat. This is contrary to the advice I and many others gave you. This is essentially what I outlined in my first post on this thread and it is still good advice as confirmed by Gord and his excerpt from the brokers code of ethics.

I do hope sincerely that you have a smooth purchase transaction and that no problems arise to your detriment. Having gone through a similar situation last year while purchasing my boat, I had issues after the fact mainly with the surveyor but I also because of many years of sailing and boatbuilding experience was able to have the asking price cut to almost half due to deficiencies with the boat. The broker was more inclined to represent me as he had tried to get this boat sold for a year and after a couple of offers that died after the survey, he wanted to get the seller to realize his price was too high and he was really working for me and not him in the end to persuade the seller to accept my much lower second offer. After your survey, you may be in a similar situation and don't hesitate to adjust your offer much lower accordingly.

Good luck with the rest of the purchase, please let us know how it went and about the boat.

Regards, Randy

[swami maximus]

Just to keep you all informed, I called the broker today and he told me that the sleer wants "x" (which is exactly what we had in mind) but for him to get "x" we need to offer "xy" to cover the commision on the sale. oh well... guess we all learned something here eh? maybe we'll just wait it out and see how long he holds onto the broker then we'll approach him and say heres "x" you want it?

[capt lar]

Offer him X now. The broker is his problem and an offer is what it is. Take it or leave it. We don't care what he or the broker want and you can now see where the broker is clearly in a conflict of interest. He now represents the seller. You want to play the game - make the offer. Tell the broker that is it and if they don't want to play, you are off looking at other boats (...without the broker - remember he benefits if he sells this one for seller and acts as buyer broker for you on another deal. He needs to believe this is it.)

[TaoJones]

. . . then you must act in your own best interest, and that does not mean since you had intended to pay "x" that your initial offer should be "x."

Originally Posted by swami maximus

Just to keep you all informed, I called the broker today and he told me that the sleer wants "x" (which is exactly what we had in mind) but for him to get "x" we need to offer "xy" to cover the commision on the sale. oh well... guess we all learned something here eh? maybe we'll just wait it out and see how long he holds onto the broker then we'll approach him and say heres "x" you want it?

I suggest that you find another broker, and have him prepare and present your offer. Don't ever let yourself think that you owe anything to the person who is now, by virtue of a signed listing agreement, the seller's broker.

Once you have your own, independent, broker, have him prepare your written offer, subject to an acceptable (to you) survey. I would make an initial offer at least 25% below whatever the seller is asking. What he wants to net and what his broker wants to earn in commission is irrelevant to you.

It is unlikely that they will accept your opening offer, but you have made a bid to get the ball rolling. Your intention at this point is only to make them aware of your interest in the vessel - why else would you submit a signed contract and make an earnest money deposit?

Of course, they already knew you were interested in the vessel - you're the one who found it in the first place, and brought it to the attention of your former broker. And don't forget that the seller now has the benefit of having as his advocate someone with whom you were sharing your hopes and dreams and, very likely, even how much you were willing to spend.

That's information that is invaluable to them, and puts you at a decided disadvantage. But nothing can be done about it now, so your strategy has to be to "lowball" your offer. If nothing else, this will make the seller question the information his broker is sharing with him about you.

If they take it, great! If they counter, the ball is back in your court, and (if you feel like it) you can raise your bid some small amount - just don't be in any hurry to come up to "x." As the potential buyer, you are in the power position. And make sure your new broker understands exactly where you're coming from, because he will be doing the actual negotiating on your behalf.

If no deal can be made at a price, and on terms, that are satisfactory to you, what have you lost? You were already willing to wait them out if they wouldn't accept "x." And never underestimate the value of sitting back and keeping quiet. It will make them wonder what you're up to!

It's just a hunch, but my experience tells me that your former broker will try to persuade the seller to accept a reasonable offer, even if it is less than "x." He's already shown his true colors, and time is money to him. He just wants to get a quick sale, take his commission, and move on to the next deal.

And the beauty of getting your own broker to represent your interests is that your old broker will now have to split the commission! I doubt that he really cares, though, since this vessel is one he never even knew about until you told him about it. For him, it was a gift.

Best of luck, swami! Keep us informed.

TaoJones

[hellosailor]

Tao, if his first mistake was engaging a "buyers broker"...what on earth is there to be gained from incurring financial obligations to ANOTHER BUYER'S BROKER?!

Guy'll have to pay two commissions instead of one.

But of course, if he didn't contract anything with that first broker, he's free to ignore him and make offers directly to the seller. Whether the seller and broker have any agreement and obligations, is their problem to deal with.

If there's an ethics committee in his area, odds are that broker woudl be in trouble and entitled to NOTHING from EITHER party because of his ethics violation in trying to represent both sides.

[S/V Elusive]

Hellosailor - The commission is agreed to when the contract to represent the seller is signed. Typically a percentage of the selling price. That is the TOTAL commission - if there is one broker for listing and selling - he/she gets it all. If there is more than one broker, they split; this includes a 'buyer's broker' being involved. I don't know what the exact split would be, but I'm sure it is detailed somewhere in the Broker's Association Rules or whatnot.

It IS a rather neat way of 'poking' the previous 'buyer's broker' by having him have to split the pot.

[TaoJones]

Originally Posted by hellosailor

Tao, if his first mistake was engaging a "buyers broker"...what on earth is there to be gained from incurring financial obligations to ANOTHER BUYER'S BROKER?!

Guy'll have to pay two commissions instead of one.

But of course, if he didn't contract anything with that first broker, he's free to ignore him and make offers directly to the seller. Whether the seller and broker have any agreement and obligations, is their problem to deal with.

If there's an ethics committee in his area, odds are that broker woudl be in trouble and entitled to NOTHING from EITHER party because of his ethics violation in trying to represent both sides.

The commission comes out of the seller's proceeds. In a yacht sale, it is typically 10%. If swami's old broker is the only one in the sale, the entire 10% of whatever price swami agrees to pay is all his. If there is another broker at the table representing swami, the 10% commission is split between the two brokers.

And, in this instance, for swami to think that his old broker is in any way looking out for anyone but himself and the seller, would be unforgivable. That is why he must have his own representative at the table.

So, either way, it can only cost swami what he offers the seller, and the seller accepts. What comes out of that, and who gets it, is someone else's fight.

TaoJones

[Hiracer]

A broker is, by law, an agent. Agents have fiduciary duties imposed on them by common law, unless modified by contract or a specific statute. These fiduciary duties are owed to the principal (viz., the buyer or seller depending on the case, typically only the seller).

The fiduciary duties include (without limitation):

1. The duty to maintain the confidentiality of information sensitive to the principal.
2. The duty to disclosed information to the principal that is provided by third parties.
3. The duty not to make a private profit or unjustly enrich himself from the agency relationship.
4. The duty not to accept new obligations that are inconsistent with the fiduciary duties owed to the principal.

Without written disclosure and written consent by both principals (or protection from a specific statute), it is obviously impossible for an agent in a buy/sell transaction to represent both sides. The opposing duties of disclosure and confidentiality ensure a violation of a fiduciary duty to both principals. It doesn't matter what conduct is undertaken by the agent, there will be either a wrongful disclosure of information or a wrongful failure to disclose.

When representing the Seller, the Agent is legally obligated to tell the Seller of the Buyer's highest purchase price. When representing the Buyer, the Agent is legally obligated to keep the highest purchase price confidential.

When representing the Buyer, the Agent is legally obligated to tell the Buyer of the lowest selling price of the Seller. When representing the Seller, the Agent is legally obligated to keep the lowest sale price confidential.

And so on. The agent will most assuredly come into the possession of information where no matter what the agent does, the agent will violate a fiduciary duty.

Part of the typical remedy for an Agent violating the Agent's fiduciary dutiies to a Principal is forfeiting the Agent's fee.

I have watched real estate brokers and now boat brokers dance around these fiduciary duties for decades. Fiduciary duties are most inconvienent to brokerage industries, and they would very much like for you to not understand agency law. Fortunately for brokers, most sellers and buyers know nothing of agency law, so for the most part agency law is unenforced and, therefore, ignored by many brokerage industries--if not in theory then certainly in practice.

Any broker who claims to be able to 'protect' or 'represent' both sides to a buy/sell transaction is less than one step away from being a crook.

The exception is the broker who has an appropriate waiver for both principals to sign, in which case the document would be so offending (if correctly drafted) that each Principal would immediately fire the broker--which is why brokers never try to protect themselves and instead rely on the ignorance buyers and sellers.

Any broker claiming to represent a buyer, and then goes onto obtain a listing of property in which the buyer has expresed an interest in purchasing, is likewise one step from being a full blown crook, and at the very least (1) has mislead the buyer into thinking there was an agency relationship between buyer and agent when in fact there was none (intentional misrepresentation--borderline fraud) or (2) has actually created an agency relationship with the buyer and then at the most basic level violated several fiduciary duties.

[TaoJones]

Thank you for posting that, Hiracer. It is the best summation of the built-in conflict-of-interest when an agent attempts to "represent" both sides in a transaction that I have had the pleasure to read. What amazes me is that so few people see a problem with this practice, but as you said, it is that very ignorance that agents/brokers are counting on.

TaoJones

[swami maximus]

Thank you for that summary. By some serendipitous fortune, we ran across the seller the other day and had a nice amiable chat and found that we are all on the same page. We are going to proceed with this sans broker. He is not pleased with him as a "sellers" broker either. From this safe distance, its all quite funny now. It has been very interesting to hear all chime in on this and I really appreciate "the contributions of those saltier than I."
SM

[TaoJones]

It's nice to read that, in the end, you can get the boat you want, the seller has a happy buyer, and the unethical (in my view) agent/broker gets skunked. Perfect!

I don't know if the Santana 22 you list in your profile is the boat you're buying, or one you already have, but below is a link to another thread you may, or may not, have seen. The boat in question is a Santana 22.

http://www.cruisersforum.com/forums/...ting-7845.html

So, if you're going to sail her down from the Delta, and out the Gate, best to come back in through the center span.

TaoJones