Tutorial on a Buyer's Broker

[Daddyo]

At the suggestion of others I'd like to give a brief tutorial on buyer's brokers and what to expect or look for in choosing one as well as the buyer's own responsibilities in what can and should be a very pleasant buying experience.

What's a buyer's broker?
-A buyer's broker works for the buyer in helping investigate and purchase a boat.
-The broker is paid through the sharing of the commission with the listing broker. There is absolutely no cost to the buyer for the use of a buyer's broker.

What should I expect or ask of my buyer's broker?
-Your broker should have a good working knowledge of the general type of boat you are looking for. Ideally he should have an intimate knowledge of the peculiarities of the specific type of vessels you're considering.
-He should be knowledgeable of the marine industry as a whole.
-He should be knowledgeable about the type of use you intend for your boat, dock Queen, weekender, bluewater cruiser, circumnavigator etc?
-He will contact brokers to learn in detail the specifics of the boats you are considering. He should have the skill sets to ascertain the true condition of the prospective boats from the listing broker who often is not able or perhaps willing to give accurate information to the general public. You want your broker to know more about the boat than the listing broker. Having the upper hand as the third party expert can/will be a huge advantage in negotiating the price and terms of a boat both pre and post survey. When you can clearly illustrate to a seller or their broker the whys and costs of repairs or improvements they are going to be much more willing to concede to your requests. Often the seller does not truly know the condition of their own boat. You want an expert third party to inform them of their reality.
-He will handle all negotiations.
-He will handle all paperwork and escrowing etc. of funds in a manner that protects you.
-He will provide assistance in coordinating the survey, insurance, financing and any repairs etc.
-He might, as in my case, provide access to wholesale accounts for your boat equipment and supplies purchases.

What are the buyer's responsibilities?
Always communicate 100% honestly and openly with your broker. The more he knows about your preferences, timeline, budget, intended uses and your skill sets and willingness to perform tasks than the more rewarding your experience will be. Be honest with yourself and your spouse and take the time to mentally place yourself in the new vessel and all that will entail. Your broker, if he is a good one is working very hard to find the right boat at the right price for you. Reward his efforts and stay loyal to him as he only gets paid if you buy a boat through him. Imagine getting great service at a restaurant and than tipping the waiter at another table instead of your own.

 

[kev_rm]

broker. There is absolutely no cost to the buyer for the use of a buyer's broker.

There is certainly an indirect cost.

 

[mramoo]

I am having a hard time getting head around this. You now have two brokers splitting the commission, and each is trying to make a living. To me this means that they would like to get as much income as possible. This means selling the vessel for as much as they can get. So why would a broker try hard to get you the lowest price for the vessel.

 

[Jeffrey S]

There's an incredible program from Zimmerman Marine that any buyer should look into. They act as a buyer broker and provide you back with 20% of their commission in yard work. Their goal is to match the boat to your needs and provide you with a spreadsheet of things the boat needs with expected and high prices. They provide a warranty on items missed in a survey. They'll set up the surveys and generally get the best people since they know them all after being in business for 35 years. Their goal is to keep you as a customer for many years - it's a great plan.

There is a boat price limit to get into the program - somewhere higher than $150,000 or so.

We used the program for our purchase of Red Head. Before the final deadline for committing to the purchase, Steve sat down with Karen and me to go over the spreadsheet. It allows you to go into a purchase with totally open eyes.

We spent 3 months at their yard having the top, most important items of the spreadsheet completed. Their estimates were dead on. They also put all 4 yards along the mid-Atlantic ready to help with tech support on your boat whenever you need it.

It's a fantastic program. Even if you contacted a broker about a boat you're interested in, they'll get in on the purchase and provide you with the program. That's actually what happened to me. I had contacted the selling broker about Red Head. But Zimmerman was able to become the buyer broker after the fact.

The experience was exceptional. More info at:
Thinking About Buying a Used Boat? | Zimmerman Marine

Watch the video...

 

[Aquafarm]

I am having a hard time getting head around this. You now have two brokers splitting the commission, and each is trying to make a living. To me this means that they would like to get as much income as possible. This means selling the vessel for as much as they can get. So why would a broker try hard to get you the lowest price for the vessel.

Really no different than real estate brokers. They split their fees and also with the "house" (brokerage). As with real estate, your income is based on as many sales as you can close...small and large. Reputation, successful purchases and happy clients get you more clients. It adds up. Plus the last word on how much the boat sells for is usually the seller.

 

[Ski in NC]

True the buyer's broker has an incentive to maximize his commission, but the alternative is to deal only with the selling broker who absolutely works for the seller. At least on the surface, the BB is working for the buyer.

I work indirectly with brokers often. I know of a few that absolutely take seriously the BB role as that is where their reputation is built. These guys have been in business for a couple of decades each. If they did not represent their clients well, their reputation would be damaged in short order.

I think D-O has it right. I recommend a buyer's broker if you are shopping. Just do your homework on picking one that is reputable and knows the boat type well.

If you really know your boats, then buying without a broker makes sense, but that is not really an option if seller has already listed it. In that case, go ahead and get a BB and at least someone will work for you in exchange for the com.

 

[Bacchus]

I am having a hard time getting head around this. You now have two brokers splitting the commission, and each is trying to make a living. To me this means that they would like to get as much income as possible. This means selling the vessel for as much as they can get. So why would a broker try hard to get you the lowest price for the vessel.

I've used a buyers broker and had a great experience.
I gave him my upper limit for the boat I was interested in and he negotiated a better price than I expected.
The buyer broker wants to make the sale (or they don't get anything) so they are trying to satisfy you the buyer. Actually the seller broker is in a similar situation so they want the deal to go through even if it means at a lower price and slightly smaller commission - hold out for top dollar and they may have to invest lot of time to find a willing buyer.

In my situation the buyer broker actually got more than 50% of the commission - the selling broker apparently was motivated to make the deal and a broker with a seriously interested buyer can have power in the negotiations...listings don't get brokers anything until the deal is done.

 

[Ka_sea_ta]

I would encourage the use of a buyers broker unless the buyer has access to all the information that a good broker does. They typically have access to soldboats.com which will indicate the selling price of similar boats. It may not be accurate to 100% but it is great place to start. The broker I have used schedules the haul out, schedules the surveys... plus he is very candid about the strengths and weaknesses of each boat..

 

[Retriever]

Great post. I'm a big believer in having a buyers broker.

I tried to buy a trawler without a buyers broker and it didn't go well. The listing broker didn't think I was a serious buyer (I was 24...) and told the client that. Despite a cash offer (subject only to sea trial and survey) 12% below asking price, they refused to negotiate. (Many months later, that boat eventually sold for less than I'd offered! Talk about a bad broker!)

After that experience I got my own broker. He vouched for me with other brokers and provided market insight. After a round of negotiations I was still pretty far from where the seller was. My broker wrote a letter to the seller explaining why my offer was reasonable, including lots of comps. The seller accepted the offer and I got the boat! I'm not sure, but I think having another broker (rather than me or the listing broker) explain to the seller why the boat was worth less than the seller thought was really helpful in making the deal happen.

 

[Wood]

Great post. Thanks.

When my real estate brokerage acted as a buyer agent we would structure the offer so that the commission was being paid from the "buyer's" funds. The seller and seller's broker then had the option to accept or reject. Ultimately, the selling broker would reduce their commission creating the split - but our fee was paid from buyer funds. This also created the distance for effective agency representation.

99.9% of real estate agents are also Realtor's though. Realtor standard of practice require commission sharing based on the concept of "procuring cause"

I don't think boat brokerage has anything similar though.

 

[denverd0n]

Whether or not a buyer's broker "works" for you is a matter of semantics and local law.

What does it mean to say he "works" for you? The reality is that he is paid by the seller. Do not forget that because, trust me, he won't. During your career did you consider yourself to "work" for the person who paid you, or for the customers who were making the purchase? Most would say that, as much as they were determined to do right by the customer, they considered themselves to "work" for the person who was paying them.

Then local laws come into it. Ordinarily, the "fiduciary duty" of anyone doing a job is to the person paying them for the job. Some states have laws that specifically assign a fiduciary duty to the buyer, for a buyer's broker. Does your state? Or the state you are shopping for a boat in? Probably a good thing to know.

In the end, a buyer's broker can provide a very valuable service. I have used them more than once, and almost certainly will on my next large boat purchase. Nonetheless, I think it is important to understand just exactly what the legal relationship is between you and your buyer's broker. When you say that he is "working" for you, understand just what that means.

 

[Ski in NC]

The seller pays neither the selling broker nor the buyer's broker unless the buyer decides to put money in the pot. From there, funds get dispersed according to the various contracts.

It is a matter of semantics to discuss who is paying whom. The money comes from the buyer. The seller is contractually obligated to give the selling broker some. The selling broker is contractually obligated to give the buyer's broker some. So who has a fiduciary duty to whom?

Another way to put it is that brokers are working for an entity called "the sale".

The bottom line is that a good buyer's broker who wants to preserve his very important reputation will actually represent the buyer. Word of crappy brokers is freely spread around the dock.

 

[oscar]

There is an important distinction between real estate and boat brokerage here. In most states, "representation" and "fiduciary obligation" when it comes to real estate, including seller's brokers, buyer's brokers and in some states dual agency are clearly defined in the regulations, and there's paperwork, disclosure, to be signed by all involved to go with it. Who gets to see what file in which office is regulated, period.

I am not aware this is happening anywhere in the boat brokerage business, but set me straight if I'm wrong.

If I am correct it's really nice for a boat broker to play buyers broker and I am sure some are doing that with a self imposed fiduciary obligation to the buyer, whilst building a solid reputation doing so, but since it is not regulated there is no recourse on the buyer's part if things go pear shaped, and they do. Often.

 

[Wood]

<snip>... when it comes to real estate, including seller's brokers, buyer's brokers and in some states dual agency are clearly defined in the regulations........

I am not aware this is happening anywhere in the boat brokerage business, but set me straight if I'm wrong.<snip>

I agree. It's no accident or "semantics" that it's called "Real Estate MARKET"

Agency is well described and regulated. A Buyer Broker is a firm exclusively representing buyers. A Buyer Agent may be from a dual agency firm - and information restrictions, among other things, will need to be employed

For over 100 years there has been a "Multiple Listing Service" updated monthly when only in paper form. That data - alone - drove the "market" and continues to do so, even with sites like Zillow and Redfin, etc. It is the definitive source for real estate market data anywhere in the USA.

Boat re-sale - is not a market in that sense. It's a free for all with no coordination, very limited sales data - and, ummm - no enforced building codes, or broker qualifications.

I've bought and sold a few boats w/o brokers. Finding FSBO is extremely difficult - even with a script like searchtempest. Now I'm shopping for a different animal with much more downside if I get it wrong.

I'm in conversation with a buyer broker now. I'll be interested to see an agency agreement - if they are used. If they are not - I've done more than one high value business deal on a hand shake. Like B&B said elsewhere it's all about relationships.

The OP's posted expectations have high value.

 

[denverd0n]

It is a matter of semantics to discuss who is paying whom. The money comes from the buyer.

True, of course. Obvious, in fact.

The seller is contractually obligated to give the selling broker some.

Exactly. It is the SELLER who is contractually obligated to pay the broker's commission, which is then split when two brokers are involved. The buyer has no such contractual obligation. So you can say that it is just a matter of semantics, but in this case the law would clearly view it as the SELLER paying the commission. That means that the fiduciary duty is owed to the SELLER (because fiduciary duty is a legal issue, not a semantic one).

Another way to put it is that brokers are working for an entity called "the sale".

You can put it that way, and I understand the point you are trying to make. Nonetheless, "the sale" is not a legal entity. It has no legal standing, so it has no bearing on where the fiduciary duty lies.

The bottom line is that a good buyer's broker who wants to preserve his very important reputation will actually represent the buyer.

Once again... True, of course. Obvious, in fact.

I hope that you don't think I am criticizing the concept of a buyer's broker, or trying to put any sort of negative light on the idea of retaining a buyer's broker. I tried to make that clear in my last paragraph. I have used buyer's brokers. They provide a very valuable service. I strongly recommend them to anyone who is new to boat buying.

Regardless of that, I still think it is best to be aware of what the legal relationships are, and what it REALLY means when you say that a buyer's broker "works" for you. That's all I'm saying. Be sure you really understand the legal relationship you have with your buyer's broker. Because if things go wrong, and everybody ends up in court, it WILL matter.

 

[Seevee]

.....................

The experience was exceptional. More info at:
Thinking About Buying a Used Boat? | Zimmerman Marine

Watch the video...

Jeff,

Good video and a good program. Looks like he takes the initiative to present a good experience.

 

[Seevee]

I've done a lot of buyers broker with real estate. And, yes, there's usually a contract you sign with the broker, and can say whatever. But there's usually a disclaimer that says the broker is not responsible for any statements or information, just like there is in the sales agreement (unless you write your own, which I occasionally do).

The buyer's broker can negotiate for you and disclose information that the seller's broker cannot do (ethically in the board of real estate's code of ethics). Like the buyer's broker can tell you that the buyer is desperate and has to decide between feeding his kids or making another boat payment, or he needs to get out of town by the weekend because of his ex wife.

As for who pays who, I could argue for the buyer to pay for his broker. Could be a commission, flat fee or combination. It could be a commitment with a minimum payment even if there's no sale, or not. The offer is made with a clause that states that the sellers broker will take half of the agreed upon commission, and the sellers broker will sign, as well as the seller.

Sure, the real money comes from the buyer, but the logistics can make a difference.

Also, there's nothing wrong with working with more than one broker. Brokers have different skills and different opinions and worth pursuing all sources, but I feel that it should be disclosed. I've had some realtors that don't like that and I simply tell them that's just good business, but never had a boat broker object.

And regarding "tire kickers" and "bottom feeders".... a good broker would not discard them as a good buyer. You never know if some snot nose 22 years old kid doesn't have a chunk of change in his back pocket. I like the philosophy of show the boat to anyone. If you discriminate you eliminate 100% of the chance of a sale. If I show it 20 times, mostly to folks that look like they don't have a pot to piss in, and one buys, then I've done the job. I had that happen to me several years ago when this snot nose kid wanted to buy a plane I was selling.... wrote a check for it and got full asking price.

Another real pet peeve of mine is how brokers won't let you do a trial run without a deposit. No frickin way. Don't mind paying for expenses and a captain, but not going to put 10% into his account, regardless of what they say.... and never had an issue with that.

 

[Wood]

True, of course. Obvious, in fact.<snip>0

Ding, ding, ding...... Wrong.

There is already case law on this for "real estate" transactions.

You have a contorted logic.

For boat brokerage who knows what it is?

 

[Wood]

^^^
Oh well

Sorry if I brought this so far off track

Seevee - You're just wrong man.

 

[utazo89]

Another real pet peeve of mine is how brokers won't let you do a trial run without a deposit. No frickin way. Don't mind paying for expenses and a captain, but not going to put 10% into his account, regardless of what they say.... and never had an issue with that.

I agree with you, although, some members here suggested that the 10% proves your seriousness towards the seller. If you don't put the check down, the seller might not be interested dealing with you.

Talking about seller's interest. Since, there is no regulation to this, how can I tell that my offer, high or low, has been presented to the seller? Going through a listing broker, there is no way to negotiate properly, as you can do in other businesses. Every business deal can have particular situations, when the sale suddenly becomes urgent or important and the seller is willing to accept a not perfect offer. It happens everyday. But when you have a broker in between you and the seller, there is no way to know. I am not wishing hard time to any seller, but deal is a deal. We all want the best of it.

Another problem with the listing broker/buyer broker situation is the split of the commission. I have made an offer recently and the negotiation was moving along very slowly. We should not even call it a negotiation. At the end, the deal fell apart and the boat is still sitting there, soaking. We were really close, because I was willing to go up and up. Looking back, I had the impression that the listing broker did not want to share the commission. That is his right, of course. But how can I know that the seller would not take my offer, without a broker? I could locate the seller if I wanted to, but I like to play the games honestly. Who knows, if the seller would change his mind and put pressure on the broker to active himself and make a deal? My broker did what he could, but nobody can force the listing broker to share the deal, or even to present a particular offer to the seller. We will never know, if my offer was even known by the seller, at all?

 

[Seevee]

I agree with you, although, some members here suggested that the 10% proves your seriousness towards the seller. If you don't put the check down, the seller might not be interested dealing with you.

....................

True, and occasionally I'll put money down, but always with my representative. Sometimes it's really what you want and you don't want to loose this one, so you do what you have to. If the deposit is non-refundable, then I'll just write the check, and I've done a few of those, and be prepared to loose it, but has to be a killer deal.... never lost a deposit, yet.

 

[Daddyo]

Another real pet peeve of mine is how brokers won't let you do a trial run without a deposit. No frickin way. Don't mind paying for expenses and a captain, but not going to put 10% into his account, regardless of what they say.... and never had an issue with that.

Brokers are usually not the ones dictating this policy. Boat "rides" can be very expensive for the seller. Most sellers don't want to spend the money or time on a prospect who isn't interested enough to hand over the 100% refundable deposit. A buyer needs to show that he has at least some of the means and interest to purchase a boat before he should resonably expect others to start spending considerable time and money on him. The deposit is also there to cover cost incurred by the buyer if he does as you say, offer to pay expenses for a ride etc. but than doesn't pay the bills. The cost of the bills agreed to be covered by the prospect is paid out of the deposit before the remainder is returned to the buyer. Without this system the seller would be on the hook.

 

[Daddyo]

True, and occasionally I'll put money down, but always with my representative. Sometimes it's really what you want and you don't want to loose this one, so you do what you have to. If the deposit is non-refundable, then I'll just write the check, and I've done a few of those, and be prepared to loose it, but has to be a killer deal.... never lost a deposit, yet.

Do not ever agree to a nonrefundable deposit pre-acceptance of the vessel.

 

[denverd0n]

That means that the fiduciary duty is owed to the SELLER (because fiduciary duty is a legal issue, not a semantic one).

In the above sentence, I should have said that the fiduciary duty MAY BE owed to the seller. This is where local law comes into it, as well as the specifics of any contract that you have signed with your buyer's broker.

Of course, it is specifically because of the fact that this can go either way that it is worthwhile to clearly understand the legal relationship you have with your buyer's broker.

 

[denverd0n]

A buyer needs to show that he has at least some of the means and interest to purchase a boat before he should resonably expect others to start spending considerable time and money on him.

Agreed. As a seller, I would not agree to a ride until I was sure that the buyer was serious. How can I tell if a buyer is really serious? Well, him putting up a deposit is a pretty good sign.

Now, if I happen to spend enough time with him to be convinced that he is serious, or by some other means am convinced of that, then maybe--just MAYBE--I would give him a ride without a purchase offer and deposit in hand. But that would be the exception, not the rule.

Of course, the other caveat here is that offer-deposit-sea trial is the usual way of things here in Florida. I know that in other places things are done differently. I have heard that it is usual for the sea trial to come before the deposit in some parts of the world. Fine. If that's usual where you are selling your boat, then that's how you probably have to do things. Here, though, deposit first, and only then do you get a sea trial.

 

[Tom.B]

The only value I see with a buyer's broker is consistency throughout the buying process. A relationship is built and the buyer's broker can show you a lot of different listing from different brokers and you still have the same experience during them all. I do not believe, however, that without some sort of fiduciary agreement and/or flat fee payment upfront, can a buyer's broker remain completely neutral. One thing I notice is how protective brokers are to protecting a "first call" dominance. We called one listing broker first and during that call realized that we really didn't want to deal with him directly and "engaged" another broker to act on our behalf. Understandably, this didn't sit well with the listing broker. But other than just flat-out greed, I don't see how calling him first did anymore than take a few minutes of his time that could, even if the payday isn't quite as lucrative, have led to a sale.

During our last shopping experience, we did a combination of both. We called some listing brokers and some "buyer's brokers" (although without an agreement, it's hard to define them as such). In the end, we did a FSBO (too complicate to describe here), but used a broker (in fact, the thread starter) to close the deal's paperwork and were very happy at the end of the deal.

All-in-all, the yacht brokerage business seems very cutthroat and there is some extreme competition out there from, I assume, there just being so many of them out there now. This has led to some really unscrupulous tactics in both buying and selling. It's a pity too. You really have to search to find the good ones, and sometimes, the good ones don't turn out to be that good after all.

 

[dhays]

True the buyer's broker has an incentive to maximize his commission, but the alternative is to deal only with the selling broker who absolutely works for the seller. At least on the surface, the BB is working for the buyer.

I have used a buyers broker before and it was a great experience. The biggest advantage is that you are able to select the buyers broker, you can't select the listing broker. It gives you one knowledgeable person in the process that you trust. I have also purchased without a buyers broker and it was a great experience, but in this case I knew of the reputation of the listing broker and was confident with them.

I am not sure however that the buyers broker actually works for the buyer. I know in real estate, both the buyers and the sellers broker are actually working on behalf of the seller, and in some states this has to be disclosed, in writing, to the buyers. However, by selecting your buyers broker carefully, you will trust them to represent your interests despite the fact that they technically will be working for the ultimate seller.

There is a conflict of interest with the buyers broker, but that is where integrity comes in and is really no different than any other trade or profession. If you hire a mechanic to work on your engine, it may be in their short term financial interest to recommend additional service that you really don't need. If you come into my office for an eye exam it is in my financial interest to suggest additional testing that you may not really need. Even so folks still use mechanics and patients still come to me to seek my professional advice and service. They trust that I will put their own best interests ahead of my own financial interests. When I used a buyers broker I was confident that she was working for my own interests.

 

[seasalt007]

Let's say we have a buyer's broker and his house and a listing broker and his house. In a sale the melon will be split four ways. Sometimes the slices are so small that no one has any motivation to give up a little piece of their melon to make a deal work. There is far more incentive to deal on the price if you go directly to the listing broker...IMHO

 

[Seevee]

Brokers are usually not the ones dictating this policy. Boat "rides" can be very expensive for the seller. Most sellers don't want to spend the money or time on a prospect who isn't interested enough to hand over the 100% refundable deposit. A buyer needs to show that he has at least some of the means and interest to purchase a boat before he should resonably expect others to start spending considerable time and money on him. The deposit is also there to cover cost incurred by the buyer if he does as you say, offer to pay expenses for a ride etc. but than doesn't pay the bills. The cost of the bills agreed to be covered by the prospect is paid out of the deposit before the remainder is returned to the buyer. Without this system the seller would be on the hook.

Daddyo,

Boat rides are cheap in the whole scheme of things. If I were selling, everyone gets one who asks, unless they just piss me off. And if they don't buy, I still like showing my boat off. That's cheap. You can do a pretty reasonable assessment of the boat in about 30 minutes on the water, and 30 min in the dock.

An offer and refundable deposit makes no sense, prior to a ride. And it's to the sellers advantage to just let the buyer pay those expenses. I have not heard of a deposit where the expenses would be taken out if the buyer didn't buy and I wouldn't do that anyway.... I'd just pay for the expenses agree upon prior to the ride. Of the last 5 boats I've bought, I've offered to pay expenses and the seller said no, he'd cover them. 3 of them I bought, and the ones I didn't I went back to the seller and still offered to pay. How fair is that?

As for means, I'd have no issue proving that I had the funds to buy, and why the heck would someone spend a lot of time without some interest? I'd bet there's an interest to buy 99% of the time. I don't believe in tire kickers, with rare exceptions. I think people have way better things to do than shop for boats they absolutely won't buy.

Also, I expect the seller to tell me what his interest is, if he's firm on price or wants out fast, and that there are not major issues. I've rarely had an issue doing business this way.

 

[Seevee]

Let's say we have a buyer's broker and his house and a listing broker and his house. In a sale the melon will be split four ways. Sometimes the slices are so small that no one has any motivation to give up a little piece of their melon to make a deal work. There is far more incentive to deal on the price if you go directly to the listing broker...IMHO

Seasalt,

Maybe, depending on how agreements were written, but if the buyer's broker just took the position of a sales person the split would be the same.

However, it's often to any broker's advantage to have hundreds of other brokers out there bringing buyers that doing it himself. Also, 25% is better than nothing.