Amount of Good Faith Deposit?

turfguy · #1 05-01-2010

What is the normal percentage for a Good Faith Deposit when making an offer on a boat? I have bought lots of homes and usually a $1000 is considered fine to get an offer placed and negotiations started. I have been told by a broker that 10% is required. That seems very high to me. In my case its about $14,000. Is it really that much higher then a home and if so why????

Thanks for any information,
turf

eherlihy · #2 05-01-2010

10% is the broker's commission. They push for 10% because it means that you have sufficient skin in the game, and to be sure that they get paid FIRST. They will hold the 10% check until the deal goes through.

jordanship · #3 05-02-2010

Yes, 10% is the deposit - end of story. There is absolutely no room for negotiation in this. The deposit protects the owner, yard, surveyor, etc. in case the buyer splits. For instance, the buyer is responsible for paying for the survey and haul-out. If the buyer skips, then the surveyor and yard will go after the owner and brokerage. Remember that if you decline the purchase based on survey/seatrail, you receive the deposit in full back.

turfguy · #4 05-02-2010

Quote:

Originally Posted by jordanship

Yes, 10% is the deposit - end of story. There is absolutely no room for negotiation in this. The deposit protects the owner, yard, surveyor, etc. in case the buyer splits. For instance, the buyer is responsible for paying for the survey and haul-out. If the buyer skips, then the surveyor and yard will go after the owner and brokerage. Remember that if you decline the purchase based on survey/seatrail, you receive the deposit in full back.

Yes Jordan I can understand a 10% deposit, but that would be after the offer is accepted. 10% for a "good faith" Offer seems extremely high. No surveys or haul outs would be done before the acceptance of the money offer. Seems unreasonable when no one would ever do this on a home. You say there is no negotiation on this---welll guess then I will buy a boat privately and forget the brokers. Guess this will stir alot of people up but to me everything is negotiable if someone really wants to sell something.

turf

SuenosAzules · #5 05-02-2010

10% is the going rate, however depending how hungry the broker or its firm is, it will not hurt to offer lower.

JimsCAL · #6 05-03-2010

Perhaps a bit of confusion. The 10% is standard for going into contract and proceeding with survey, etc. But a small (few hundred dollar) deposit is usually sufficient to get things rolling after you've seen the boat and want to make an offer.

svHyLyte · #7 05-03-2010

The initial deposit at the time an offer is made is up to the prospective buyer, only. Typically a few thousand dollars depending upon the cost of the yacht. The deposit is normally increased to an amount sufficient to cover the costs of a haulout and survey if an offer, subject to the survey, is accepted to cover the possibility that a prospective buyer may disapprove the survey and then be unable or unwilling to pay the costs of same. (I have seen this happen when a survey revealed conditions that a seller could not but have known about but failed to disclose to the prospective buyer. The buyer's position was that the failure to disclose was a material breach of the rule of good faith and fair dealing and that had the seller made the disclosure, the buyer would not have gone ahead with the cost of the haul and survey. Frankly, I agreed with the buyer's position but his deposit covered the costs and they fought it out later). Once the survey is approved and the sale is agreed upon and contingencies waived, the good faith is normally increased by a material amount which is non-refundable should the buyer fail to close for any reason other than a material change in the condition of the yacht. If so, the non-refundable compensates the broker for his work; and, the seller for the cost of having the yacht off the market. Some hold that the time off the market is not material but I have seen cases where a prospective buyer shows up days after an offere is made, discovers that the boat is in contract, and goes off and buys his/her second choice only to learn later that the original boat comes back on the market due to some issue between a seller the the first buyer.

FWIW...

Jeff_H · #8 05-03-2010

As someone who has bought and sold a lot of boats, as a buyer, whenever there has been a broker involved, I have always seen a 10% deposit as the price of admission to permit me to make an offer and show that I am a serious buyer. The 10% in cash shows that I probably have the downpayment for the boat. The only except is that I have been involved in deals on very expensive boats where the potential buyer put down 5% with the offer, and agreed to put down an additional 5% at the time that the offer was radified.

As a seller, if a broker is involved and the potential buyer does not put up 10% good faith money, I consider the guy a tire-kicker and I don't take the offer very seriously. I will play hard-ball with that offer figuring that the offer is from a wiseguy and the deal is not all that likely to happen, so I have nothing to lose and so why not aggressively try to get closer to my price.

If this sounds cavalier, especially in these times, all I can say is that I have had some of those guys jerk me around for a long time before totally flaking out on me. I have also made a couple of those deals and actually gotten better prices but with a lot more heartburn than the deal should have involved.

Jeff

hellosailor · #9 05-03-2010

turf, everything is negotiable. And, every tradition or custom (including 10%) has its reasons.

You want the boat or not? You've got three choices:
1-Give em the 10%
2-Give 'em a check for $2500 or $5000 or whatever you think is fair, and tell the broker your offer is good for 48 hours. In today's market he'd have to be nuts not to at least ASK the seller.
3-Walk away.

These are the ways things are done, and "why" really isn't going to give you any further options, is it?

turfguy · #10 05-03-2010

It seems traditions are formed by the people who gain the most (the brokers) and the Goldman Sachs methods are alive and well in the boat markets. I can agree with most of the posters that once the price is agreed on, then yes 10% would be fair to "invest" in the sale to make sure everything such as surveys, haul outs etc are paid for if something develops in a negative way. But to put up $15000 to just make an offer, well why doesnt make alot of sense IMHO. I am the only loser if my offer is not accepted. Who else loses anything? Seller, broker? Nope just me and the use of my money till someone decides to send it back to me, which could be several weeks. There is no time put on that in any paperwork. As someone suggested---I am walking away from this deal and will look for direct sales in future. I could make about 15 offers on homes in this market for the price of one boat. Its absurd!
Maybe the brokers should pay us for be willing to make an offer on a boat in todays market? Hmmm is that crazier in reality then asking for 15 grand to make an offer??? Tony Soprano should have been a boat broker!!! lol
turf