The Broker deal

[Hampton]

I'm double posting because I need a response ASAP!

We have signed a contract pending inspection, survey, and sea trial. My broker insists upon having 10% deposited before I travel down for the inpections. Is this a red flag or is this standard? I asked what the big deal was. Why couldn't I hand him a check? He said it had to be deposited and cleared prior to trial. Is this ok?

 

[MLauman]

It's not uncommon for them to want a deposit prior to a sea trial - to weed out 'boat riders'. Not so sure about the 'cleared funds' aspect of this - kinda seems to interject a sense of distrust into the deal.

Does the contract you signed address this? Do you have contractual assurance of a full and immediate refund if the inspection or sea trial fails to meet your expectations?

There are plenty of brokers and plenty of boats out there (it might be helpful if you indicated your location in your profile). If you're uncomfortable with this then tell him YOUR terms and be prepared to move on.

 

[bliss]

Yes is the short answer. It is "sincere" money. Otherwise the seller/broker would be giving free rides to a lot of people that say they are ready to buy. There is- in my opinion- no magic to the 10% number. If the purchase price is $480,000. they won't run away if they have $15,000 in hand. If the agreed price is $48,000 the broker/seller is probably going to insist on the $4,800. downstroke.
You should be dealing with a very well known broker of excellant reputation. His agreement with the seller probably has language something to the effect that in case you back out for no reason the first use of the 10% is to offset his expenses.
Good luck.

 

[bliss]

I believe the the broker has every right to want the check to have cleared. In lieu of that a cashier's check on a local bank. Otherwise all he has is a piece of paper. Nothing about trust or distrust, just good businss practice.

 

[WFYB]

A couple thoughts:

1. Have you seen the boat yet? I would ask for a courtesy showing prior to inking a contract and writing a check. It is difficult to get out of a deal without spending significant money once you have an executed contract. AT a minimum you will have to hire a surveyor and maybe a captain, pay for a haul out and bottom cleaning, etc. etc. You can learn allot about a boat by conducting a thorough visual inspection. Get the hull and engine serial numbers and run them by the manufacturer for service history. Ask for the maintenance log etc.

2. Who is holding the earnest money? My deposit was being held by MMax brokerage. I was comfortable with that. A very small or unknown broker - I might have been more cautious.

3. The others are correct. The broker represents the seller. It is not in the seller interest to proceed to sea trial or survey etc without a contract and deposit. This makes sense. The seller is exposed to incurring cost and liability when the boat is sea trial-ed and/or surveyed.

 

[chazaroo]

We put down 10% prior to survey. The broker deposited the money and I beleive it cleared prior to survey. That was due more to the survey appointment date than a broker rule.

 

[ByOwnerBroker]

No big deal, standard operating procedure. I'm sure if you just brought the check with you though it would be no big deal either. What you risk by bringing the check with you is going to the expense of the trip while not officially having a contract on the boat, so somebody could buy it out from under you.

You can easily ink into the contract that your offer is "Pending acceptable personal inspection to buyer". We usually include an expiration date with this clause. That way if you don't like it when you see it you can get out of the contract right away. This clause is essential for long distance transactions.

 

[Hampton]

Thanks for the quick replies. It's a long distance deal. The funds go into escrow at the brokerage. I do have clauses written in which state that everything is pending personal inspection, sea trial, survey, and even financing!

I haven't seen the boat. It has already been surveyed, and I talked to that guy. I'm having it surveyed again.

 

[fwebster]

John,

See the PM I sent you, but here is one final point......the deposit forms your consideration in the contract process. You do not have an enforcable contract unless both sides have consideration in the deal...your is the deposit funds, his is removing the boat from the market for you to do your due diligence.