Boat Brokers
At some point in any boat-owner’s experience, you’re going to encounter a broker. Deservedly or not, yacht brokers in general tend to have a certain reputation: scheming, underhanded, sneaky, dishonest, etc. Sometimes, rarely, it’s all true. Often, it’s not at all true… well, sorta. In any event, key to your dealings with any yacht broker is a better understanding of how the yacht-brokering business works. Just a little “inside knowledge” might be able to really help you out in the long-run.
It’s important to understand how most brokers get paid. While the exact numbers may vary from jurisdiction to jurisdiction, here in the American northeast, brokers typically take a 10% commission out of the selling price. Be aware that while this amount is ostensibly being paid by the selling party (for the services of selling their boat), it is actually being derived from the monies that the purchasing party brings to the table.
In real-estate, there is usually both a buying and a selling agent, who split the commission between them. While this is entirely possible (and desirable) during a yacht-purchasing transaction, many yacht brokers privately prefer (and often actively strive) to “sell their own listing”, ie., represent the buyer directly to the seller and take the entire 10% commission for themselves. Who’s interests are being best-served, the seller’s, or the buyer’s?
It’s a safer bet for most brokers to primarily serve as a seller’s agent. There is a widespread attitude amongst brokers that buyers are fickle and without loyalty; better to take listings, sit on the inventory, and aggressively sell to whichever prospective buyer comes along. There is usually some sort of agreement in place between the seller and the broker regarding the listing of the boat, so the broker is somewhat protected against the seller taking another route. When a broker acts as a buyer’s agent, they may work for days, weeks, months, or longer with some particular buyer, only to have them ultimately purchase through another party. That’s a lot of work for nothing!
Are you a broker, buyer, or seller? Have you had some remarkable experience, for better or worse, from which others could learn? Please comment below!
Better brokers know that most commission sales earnings come down to unit volume; all else being equal they’d just as well “side” ten $10,000 boats as one $100,000 boat. Better brokers also appreciate the value of repeat-business and/or positive word-of-mouth advertising. As such, better brokers should be happy and enthusiastic to function as a buyer’s agent, seeking out the boat that best suits your wants and budget, no matter where or with whom that yacht may be listed.
Occasionally you’ll encounter a “discounted brokerage”, where they guarantee a reduction in their commission, or cash-back, or some other fee-reduction scheme. When functioning as a buyer’s agent, they may take a 3% commission instead of their usual 5% (the other 5% going to the seller’s agent). This could make for a decent savings, but remember this: you, the buyer, are paying the whole commission, to all parties. Yes, your agent is taking 2% less, but you’re also paying the seller’s agent 2% more to work harder against you during the negotiations.
It would be better, in our opinion, to pay your buyer’s agent the full 5% and strive to have them work as aggressively as possible on your behalf to secure the best deal. Better yet to have your agent negotiate a 5% price-reduction rather than rebate you some part of their fee. If you try a discount brokerage, be sure to discover and understand that brokerage’s reasons for offering such a service; some innovation or the other may well offer an unforeseen advantage to all parties.
If you find yourself looking for a yacht, and speaking to a broker, approach them as you would an employee of yours, not as you’d approach a salesperson. Let them know that you want them to work for you, not for the seller, and that you understand that you’ll be the one paying their commission. Get to know your broker, and let them know you too. A yacht might well be one of the top 2 or 3 most expensive purchases of your life. Let the broker know that you want them to specifically function as your buyer’s agent, and furthermore, honestly assure them that you’ll stick with them and involve them in whatever purchasing transaction you ultimately decide upon.
Just as when working with a marine surveyor, it’s important to clarify that your agent is working for you, not some other party. There are many excellent, reputable, honest brokers out there who are willing to really earn their commission as well as your respect. That kind of respect, however, is a two-way street, and it’s important to understand that many brokers put in many long unpaid hours just to see deals evaporate at the last minute. Ultimately, honest respect and clear dealing will gain you the best results.