A Rant About Brokers

[nautical62]

Originally Posted by DavidGC

What is the commission rate for boat brokers?

I have no idea how it works for boats, but anyone who thinks a real estate broker -- buyer's or seller's -- is working for anyone but themselves is living in a dreamworld. They both have a monetary interest in getting the house sold -- for ANY price -- as soon as possible.

Common real estate commmissions in my area are around 6%.

Say I want to get $200,000.00 for my property. If my broker tries to get me to accept an offer $20,000.00 less than I want (a 10% reduction), I am out of pocket $20,000.00. as long as my house is on the market, the broker makes $0. Six percent commission on my $200,000.00 house is $12,000.00. Discounting my house by 10% only results in a single broker coming down $1200.00 in commission. If there are two brokers in the deal (as is common these days), they are each only discounting their own profit by $600.00.

So, I lose $20,000.00. The Broker makes $10,800.00. Does the broker have an incentive to get me to accept that lower offer? You bet he does.

So, tell me now -- who is the broker working for?

DGC

I've never worked in the field, but my understanding is it works much the same as with a house, but the commission is often 10% instead of 6-7.

Of course a broker is working for themselves as we all are in our jobs. However, that doesn't mean it's not in your interest to work with a broker, just as we do with other professionals all the time. However, whenever one is dealing with a broker, I think one should always keep in mind some interests may be different, just as you pointed out. For example when I sold a condo a while ago, my broker suggested I re-carpet. My view was that this would help sell the home more easily which would be in her interest, but in the end the home would sell for the same price anyways. I didn't replace the carpet and we got the asking price. Does that mean I should have sold myself? No. I didn't have the flexibility with my job to show the place, and certainly didn't have the advertising advantages she did. As it turned out, she knew someone who had looked at these condos earlier and jumped at the chance. Selling it myself, this person may never have known the unit was for sale. I feel the same principles apply to pricing and after home inspection/boat survey negotiations. A potential buyer may want you to take care of something and your broker may agree as it will help push the sale along. However, it's up to to you. If you feel confident that after investing in a survey, the buyer is not going to walk away because of that issue, say no.

You may come out better, by realizing the interests of a buyer and broker may in some regards be different to yours. Stick up for yourself in these situations. However, the fact that some of these situations may exist doesn't mean working with a broker isn't worth your while.

In your example, you make many assumptions. In reality, many of the assumptions may or may not be true and getting a handle on these difference is in my opinion key in making the decision as to employ a broker or not. You may pay 10% to a broker, but that doesn't mean you lost 10% compared to selling a boat yourself. You lost 10%, if you could have sold the boat at the same price in the same amount of time and you place no cost to the extra effort required of you. In reality, this probably is not the case for most boat sales. If it is the case, don't even consider a broker.

If you feel you can sell your boat easily yourself for a good price, then by all means do so, but remember that every day that your boat goes by unsold likely costs you dockage, insurance, depreciation and maintenance in addition to the fact, you may not reach as many potential buyers and end up selling the boat for less. These tradeoffs will be different for different people, so I don't think one can say the decision to go either way is either right or wrong.

Also remember, hiring a broker on a ten percent commission to sell your boat is not the only way to hire a broker. You can market the boat yourself, but hire a knowledgeable broker to handle the paper work, escrow and be a go-between for much, much less.

I've sold two cruising boats myself and in those situations, it was the right decision, but I can envision other situations where it might not be. For example, selling a cruising boat myself could be difficult if the boat is in Florida and I live in the midwest.

[shawnkillam]

A NEW HIGH IN LOW
I think I may have found the individual who qualifies as the worst broker on this side of the grass. We are on a quest to find "the boat". We have cash to spend and are hitting every marina we come to. The harbor master directed us to a boat. It looked promising. The broker lives on a boat in the marina less than 200 yards from the boat in question. We called him explained the situation and were told he couldn't show us any boats today and he was busy for the next couple days but check back on wednesday. We walked by his boat and he was sitting in the cockpit watching TV.
Maybe he is independently wealthy or maybe his clients don't really want to sell, or maybe it was his favorite TV show, who knows

[xxuxx]

We were about to purchase a catamaran from a major manufacturer. The broker had met us before. The cat was over $500k. We were coming to the boat show and asked for VIP tix for the day before the public comes in. His response was astonishing. He would not give us these tickets because they cost twice as much as the normal day tickets. His commission would have been in the thousands of dollars. This was the last straw, we went with a competitive brand, bought new/used without the broker involved!!

[DavidGC]

Nautical62

I didn't say you lost money by hiring a broker. I have always used brokers to sell my property, and they do provide a service for the commission they charge. No problem.
It is not the broker's original commission that I identified as a "loss." Go read my post again.

What I said was that the broker (to whom you have already agreed to pay a commission), has a personal, financial interest in getting you to lower the price of your property (even if the original price is fair market value, and a little patience and some sales skill would eventually result in a sale at that, higher price), because the theoretical financial "hit" they take by a lower price is only 6%, while you are taking 100% of a real monetary "hit" for the lower price. That 100% hit is real money out of my pocket. I am losing 10% of the real value of my personal asset - my property. His 6% is theoretical. He realizes no loss, since he has not invested any assets in the deal. He makes no money at all until the deal is done, and all of the money he makes is gain. Most would be willing to take a sure $10,400.00 profit now than have to work harder to make only another $600.00.

A supposed "buyer's broker" is the opposite, and has an even bigger stake. They have a financial interest in getting you, the buyer, to make the highest offer for a property, and they have no financial interest in advising you to make what might be a lower and more reasonable offer. Not only does a higher offer make it more likely that the deal will be accepted, but they get a bigger commission on that higher price by convincing their client to make that higher offer.

DGC

[DavidGC]

Originally Posted by shawnkillam

<snip> The broker lives on a boat in the marina less than 200 yards from the boat in question. We called him explained the situation and were told he couldn't show us any boats today and he was busy for the next couple days but check back on wednesday. We walked by his boat and he was sitting in the cockpit watching TV.<snip>

If the boat is of real interest, I would ask around the marina for the buyer's name and address/phone/email address (heck, the marina itself -- after hearing the story -- might willingly give you the info). You have no contract with the broker, and there is no legal or ethical reason why you should not contact the owner directly, explain that the broker they hired refused to show you the boat, and ask them if they would like to deal with you personally.

DGC

[Pblais]

You have no contract with the broker, and there is no legal or ethical reason why you should not contact the owner directly, explain that the broker they hired refused to show you the boat, and ask them if they would like to deal with you personally.

The seller has a contract with the broker and sales they initiate after the listing contract go to the broker. Buyers don't ever pay a commission. The seller always pays. You can say it's your money but not when the broker gets paid.

In the world where everyone is out to get you the seller will lie just because they don't have a contract with you. Only closed deals pay commissions. It's all too easy to say the brokers are rigging the deal but it never actually happens. Brokers only work a deal to the point that it closes. They don't work a deal until all the prices have been readjusted to suit them. The more you attempt to rig a deal the more often they derail. No one represents any one else's interest. The smart broker works to close a deal that works.

[Hiracer]

Originally Posted by shawnkillam

A NEW HIGH IN LOW
I think I may have found the individual who qualifies as the worst broker on this side of the grass. We are on a quest to find "the boat". We have cash to spend and are hitting every marina we come to. The harbor master directed us to a boat. It looked promising. The broker lives on a boat in the marina less than 200 yards from the boat in question. We called him explained the situation and were told he couldn't show us any boats today and he was busy for the next couple days but check back on wednesday. We walked by his boat and he was sitting in the cockpit watching TV.
Maybe he is independently wealthy or maybe his clients don't really want to sell, or maybe it was his favorite TV show, who knows

I personally would have made the effort to find the owner and tell him/her about their broker.

If fact, I've done that before.

Most boating communities are pretty small and word gets out fast about a bad broker. His listings will shrivel up.

[jbinbi]

Originally Posted by xxuxx

We were about to purchase a catamaran from a major manufacturer. The broker had met us before. The cat was over $500k. We were coming to the boat show and asked for VIP tix for the day before the public comes in. His response was astonishing. He would not give us these tickets because they cost twice as much as the normal day tickets. His commission would have been in the thousands of dollars. This was the last straw, we went with a competitive brand, bought new/used without the broker involved!!

I would send your story to the manufacturer. I am astonished that the dealership would not give you these tickets on a new 500k catamaran. Are you saying this was a used cat with a broker, not a dealer? If so, then I would relate that you purchased a competitve product back to the brokership's owner.

[Hiracer]

Originally Posted by Pblais

The seller has a contract with the broker and sales they initiate after the listing contract go to the broker..

The contract is that the broker gets a fee in exchange for reasonable efforts to sell the boat.

And when the broker fails to take reasonable steps to sell the boat, the broker has breached that contract and thereby forfeited all or some of broker's claim to the fee--which is why the seller needs to know about the broker's failure to act.

At closing, the closing agent, getting conflicting instructions between seller and broker about how to disburse the fee, will refuse to disburse the fee. Broker will not sue for the fee because broker doesn't want broker's actions to be publicly aired. If mediation or arbitration is mandated by the contract (guess why brokers like these private processes), broker still may not initiate the process because it's time consuming and might be expensive. Eventually, broker will voluntarily agree to a fee reduction. Practically speaking once the emotions clear, broker will realize fee reduction is broker's only real course of action--as long as seller hangs tough and lets closing agent hold the fee.

[shawnkillam]

Re new high in low.

We talked to the marina about the broker and tried to get the name of the owner. They wouldn't tell us but said they would give him a message next time he came in. We haven't heard from him. However there are so many boats for sail in florida that the chances of that one being the only one are slim.

sk

[Celestialsailor]

Well...I thought I would kick start this thread up again. On of my earlier post, I stated I did not want to voice an opinion of a broker on my latest purchase of "Trust". This was because I wanted to give him time to redeem himself. I did and he did not.
Let me re-cap what this deal was like. First of all the guy could not stop tooting his horn on what such a great broker he was...Geezz! Secondly, the guy could not mail anything to me to save his life. The first time it was an incomplete address that was sent back to him. Then the next piece of mail from him (boats papers) he had not put on the zip code...<broker.
In the ad on Yacht World showed a Simrad Wheel pilot. Now, I'm willing to admit, The wheel pilot was not listed in the inventory. My main gripe and I feel it's a good one is a 12ft Porta Bote was listed and after I paid for the boat and found the phone listing of the previous owner, I was told by the previous owner there was never any Porta Bote which he was aware of. <broker. I know why there was no Simrad...because the broker listed the pictures from an old survey report when it was surveyed in 2006. The guy was too lazy to even take his own pictures or do an inventory list.
I then followed up with a few phone calls...Guess what? No return calls. <me. Soooo...I decided to drop a dime on him to the NY BBB. Nothing may come from it but at least I will light a small fire under his arse.

[MarkJ]

Why dont you stick his name up here so people may get a warning?

[Traveller]

Originally Posted by Celestialsailor

First of all the guy could not stop tooting his horn on what such a great broker he was...Geezz!

Isn't it usually the case. Have you ever noticed "General Motors - Mark of Excellence" on the keys and door sill. Where is GM now? Mind you, they never produced anything of excellence.

Originally Posted by Celestialsailor

Secondly, the guy could not mail anything to me to save his life. The first time it was an incomplete address that was sent back to him. Then the next piece of mail from him (boats papers) he had not put on the zip code...<broker.

They're brokers (be it real estate or boats) because they didn't have the intelligence to do anything else in life. Its amazing the commissions some of these people make for adding absolutely nothing to the equation. I have zero respect and use for them. Sellers should just list their boats privately...its not like they move all that fast in the first place, even with a broker.

[Microship]

One of my favorite broker-moments took place when I was getting far too close to a 53-foot steel pilothouse cutter that had been foamed to the bilge and was already becoming a corrosion disaster.

I was getting concerned that I couldn't see the prop shaft or stuffing box, as it was on the other end of a hydrostatic transmission down in the keel, under the engine. I finally got an image by shooting blindly with my digital camera, reaching way into the darkness through a tiny opening, and happened to ask him how one would perform routine maintenance.

"Aw, no problem, mate. You haul the boat, take your cutting torch and open up the keel, do your work, slap a plate back on it, and splash her. Boom! You're done."

It cost me over $3K (survey, rig inspection, engine consultation) to disprove most of what I had been told (which, as a newbie at the time and in love with the boat, I was all too willing to believe). Dodged a bullet, though.

This guy now owns a brokerage. Be careful out there.

-Steve

[bmiller]

You guys have me concerned. My wife and I are headed out west to see a few broker listed boats. We have been in contact with a broker who is listing one of the boats in question. He seems on top of stuff but that's based on a few calls and e-mails.
What specific questions should we ask any broker prior to using them on a serious transaction such as a cruising boat?
A couple come to mind:
How long have you been in business?
Can you provide a list of recent transactions?

And additionally can anybody recommend a surveyor in the San Francisco bay area?