Broker's listing agreement language; question

[Rufus]

I'm considering listing our boat with a broker. They sent their standard contract language which has a paragraph:

"AGENCY. Broker may act as an agent for both the seller and the buyer. Owner consents to such and any related additional compensation payable to the broker from the other party..........."

There are some stipulations as to what may not be discussed with either party, but it seems like a built-in conflict of interest. ...a different spin on the buyer's broker routine? Thoughts?

 

[BruceK]

How on earth could the broker resolve a buyer/seller conflict? Delete it and see what happens. The mere fact it`s proposed is a worry. Might the priority be $ for the broker, not serving you the seller in a fiduciary capacity?

 

[tiltrider1]

Line it out initial it and then sign it. If they complain tell them you are paying a commission for them to represent you and only you. Then look them in the eye and say would you pay me to work for some other brokerage?

 

[Crusty Chief]

Rufus,

A pretty standard item in agreement contract. It allows the listing agent, or broker to bring in a potential buyer into the transaction. Many times a reputable broker will have buyers (in the wings ) that are interested in a particular boat and therefore they can represent both the buyer and seller. Typical broker fee’s are 10% with 50% to both parties representative.
When we sold our boat, the broker ( PM me if you’re interested in our broker) represented us (Seller) and one of his agents represented the buyer. This also allowed us to negotiate the total fee’s charged by the broker upfront.
To be honest it worked well for us and the buyer. It basically gave this buyer first crack at the boat before it actually hit the market.
Hope this information helped you in some way.
Cheers

 

[Arc]

It seems brokers always play both sides. You list the boat. Buyer makes contact with your broker and it’s game on. Brokers job is to sell the boat so he typically becomes the sole negotiator. The fact that someone my hire him to find a boat really doesn’t change anything. As long as your commission fee doesn’t increase, so be it. Since he may be getting it from both parties it may give you more negotiating power.

 

[BruceK]

Except the clause says "AGENCY. Broker may act as an agent for both the seller and the buyer. Owner consents to such and any related additional compensation payable to the broker from the other party."
Nothing prevents the broker introducing the boat to a buyer on his database, in fact that`s part of his job. He doesn`t need to act for the buyer as well.

 

[Comodave]

We have bought boats with a similar statement in the contract and never had any problems.

 

[Rufus]

This broker told us they sometimes split the 10% commission with other brokerages who bring a customer to the table. As mentioned above, I can't understand the additional compensation payable to the broker from another party. Maybe it's a finders fee, which seems almost ridiculous in today's internet data age, and with the buying frenzy becoming a thing of the past. In either case it seems unethical from a seller's standpoint. If this broker can't sell the boat without depending on other brokerages (and a third party on top of that), I have to wonder about their capability. Bruce mentioned a potential breach in fiduciary responsibility....precisely my concern. I realize that real estate does the shared commission routine. (Seems like it's bordering on unethical...certainly unnecessary in the age of Zillow, etc)

Comdave, I wouldn't expect that a buyer would have a concern.

I am thinking of asking them to delete that language to see if they can convince me that there is advantage to me (not them). BTW, this is apparently a boiler plate contract from an on-line entity called Yachtcloser.com....similar to DOCKWA for slip rental and boat storage.

BTW, there's another tediously worded section that appears to give the broker rights to a commission for 365 days after the initial contract ends (without a sale). It seems to officially place blame for a "no sale" on the seller rather than poor performance by the broker.

 

[Judy at JWY]

Yacht brokers frequently represent both buyer and seller. With my specialty in trawlers and subspecialty in metal boats, most clients who call me for listing their boat are counting on me to have buyers in the ready or at least be able to attract appropriate buyers. That's called reputation and I think that's where the conflict of interest question becomes somewhat moot. Do you trust your broker or not? A Listing Broker's job is to get the boat sold. A Buyer's Broker's job is to find the right boat. As long as the broker discloses all s/he knows to the Buyer and as long as the Seller agrees to the offered price, I don't see why this is necessarily considered a conflict. For me, it means one less person (Selling Broker) is involved so the deal becomes more efficient and with one less ego involved. My relationship, knowing both parties, helps me to better negotiate, explain, and keep peace in the process. It becomes more conducive to not just a "happy deal," but builds a better relationship between B and S without the Selling Broker playing buffer. Out of approximately 300 yacht sales, I would estimate that I represented Buyer and Seller on maybe 70%. With much gratitude, not one complaint.

Interview the broker, ask for references on the last deals sold with the broker representing both sides. Confirm unblemished reputation of both broker and brokerage house. Due diligence can reveal red flags or hopefully will bring confidence.

 

[Each finger a marlinspike]

Completely normal and standard line in a yacht broker's contract. Check with another broker and you will see the same statement. You will see the same thing in a real estate contract. The listing broker has to reserve the right to represent the buyer if they buyer comes directly to him/her.
My own opinion from having been a yacht broker previously, I would always use a buyer's broker unless I personally knew the listing broker. However, I also know that the majority of buyers will just contact the listing broker directly.

I don't see it as a conflict of interest representing both sides. The broker wants the sale to close, he/she doesn't care what the final price ends up being, only that everything goes smoothly and both sides leave happy and are future customers. There's no incentive to the broker to favor one side to the detriment of the other.

 

[mvweebles]

Yacht brokers frequently represent both buyer and seller. With my specialty in trawlers and subspecialty in metal boats, most clients who call me for listing their boat are counting on me to have buyers in the ready or at least be able to attract appropriate buyers. That's called reputation and I think that's where the conflict of interest question becomes somewhat moot. Do you trust your broker or not? A Listing Broker's job is to get the boat sold. A Buyer's Broker's job is to find the right boat. As long as the broker discloses all s/he knows to the Buyer and as long as the Seller agrees to the offered price, I don't see why this is necessarily considered a conflict. For me, it means one less person (Selling Broker) is involved so the deal becomes more efficient and with one less ego involved. My relationship, knowing both parties, helps me to better negotiate, explain, and keep peace in the process. It becomes more conducive to not just a "happy deal," but builds a better relationship between B and S without the Selling Broker playing buffer. Out of approximately 300 yacht sales, I would estimate that I represented Buyer and Seller on maybe 70%. With much gratitude, not one complaint.

Interview the broker, ask for references on the last deals sold with the broker representing both sides. Confirm unblemished reputation of both broker and brokerage house. Due diligence can reveal red flags or hopefully will bring confidence.

My read of the OP's posts were slightly different. Now, I only breezed the posts so perhaps I misunderstood: First, there was murky language about additional compensation if a "third party" becomes involved. Second, there was language that if the boat sold 12-months after the listing expired, a commission could still be claimed by the listing broker.

I would think most sellers would be thrilled to have a broker with a deep Rolodex of buyers who could bring a deal together quickly ----- as long as it's transparent. While a good broker is often a mediator to bring buyer and seller together, I think it important that in the transaction, ultimate responsibility is to the seller.

To my eyes, the clauses cited by the OP listed seem to have obfuscations and questionable risk-shift to the seller (specifically, POst #6).

Thoughts?

Peter

 

[Judy at JWY]

"......a different spin on the buyer's broker routine? Thoughts?"

That was the part of the email to which I responded. You're right, Peter, there are other questions raised in the original and subsequent post.

The OP says the contract was boilerplate from YachtCloser. I do not use YachtCloser for many reasons in spite of the convenience, so I can't comment on that contract specifically. The agreements I use are from the International Yacht Brokers Assoc. It states in Paragraph 10 that the owner shall pay the commission if within 6 months after termination of the Agreement the Owner charters, donates, or otherwise transfers or conveys the Vessel to any party to whom the Brokerage or Co-Brokerage physically showed the Vessel during the Term.

 

[Rufus]

The listing broker has to reserve the right to represent the buyer if they buyer comes directly to him/her.
My own opinion from having been a yacht broker previously, I would always use a buyer's broker unless I personally knew the listing broker. However, I also know that the majority of buyers will just contact the listing broker directly.

I don't see it as a conflict of interest representing both sides. The broker wants the sale to close, he/she doesn't care what the final price ends up being, only that everything goes smoothly and both sides leave happy and are future customers. There's no incentive to the broker to favor one side to the detriment of the other.

Well, the brokers in this string all like buyers brokers...but of course...potential business for them. My expectation is for my broker is to help get the boat sold at the best possible price....not just get the boat sold and move on to the next commission. If the sole objective is to make the sale, there is a good chance the broker's presentation will be skewed toward a buyer. I call that unethical from the perspective of the person paying the big bucks 10%. The introduction of the third party is unethical....and I don't care what real estate brokers do.

BTW, my intial question was regarding my broker taking additional payoffs beyond the traditional sharing of my 10% fee that is sometimes shared with referring brokerage houses. I believe I'm going to have them delete the offending language and add that buyers brokers are not welcome in this sale.

 

[mvweebles]

" the owner shall pay the commission if within 6 months after termination of the Agreement the Owner charters, donates, or otherwise transfers or conveys the Vessel to any party to whom the Brokerage or Co-Brokerage physically showed the Vessel during the Term.

That is eminently fair and reasonable.

BTW - I sold my house last year. The one alteration I wish I had negotiated with my broker was commission due on net proceeds of sale, not the gross selling price. In my mind, also fair and reasonable.

Peter

 

[Rufus]

Here's another paragraph from the proposed contract.

"Authorization. Broker is authorized to distribute information describing the vessle and to advertise and market the vessel in any medium and in any manner the Broker deems appropriate".

Most of this is fine, but the last phrase make me uncomfortable. i have seem many absolutely awful ad presentations with photographs taken inside dark storage buildings or crappy shots taken from docks. I have 17 years of quality phots and will ask for a phrase addressing "sellers approval of ad material" ....text and photographs. (They won't like it)

 

[Rufus]

"......a different spin on the buyer's broker routine? Thoughts?"

That was the part of the email to which I responded. You're right, Peter, there are other questions raised in the original and subsequent post.

The OP says the contract was boilerplate from YachtCloser. I do not use YachtCloser for many reasons in spite of the convenience, so I can't comment on that contract specifically. The agreements I use are from the International Yacht Brokers Assoc. It states in Paragraph 10 that the owner shall pay the commission if within 6 months after termination of the Agreement the Owner charters, donates, or otherwise transfers or conveys the Vessel to any party to whom the Brokerage or Co-Brokerage physically showed the Vessel during the Term.

The yachtcloser language says one year I don'texpect an issuebecuse I expect the boat to be sold within the initial one year contract. Of course if it's not....that would never be the broker's fault...

 

[mvweebles]

Rufus - sounds like there is a different contract template out there per Judy W. Perhaps you might consider either that or a different broker?

I spent much of my career negotiating IT service contracts. Sometimes it simply wasn't practical to negotiate the full contract - Sometimes you just have to hold your nose and go with it. In those cases, I would negotiate generous exit rights so I could at least terminate. For your example, maybe an additional clause along the lines of allowing the seller to terminate for cause including all surviving obligations, if any. If you have to micromanage the marketing, you probably don't have the right broker in the first place.

Early in my career, a mentor told me 'a good supplier and a bad contract is much better than a good contract and a bad supplier.' If you've followed my fiasco with Hack Team boat repair company in Ensenada - the previous guys, you'll know exactly what I mean. I had a good agreement with them. Did more harm than good.

Peter

 

[mvweebles]

The yachtcloser language says one year I don'texpect an issuebecuse I expect the boat to be sold within the initial one year contract. Of course if it's not....that would never be the broker's fault...

Rufus - not only does Judy's language say six months vs one year, but it also states that residual commission is only payable if the boat is conveyed to a party the broker brought to the table. I didn't see such a limitation in the language you posted. The termination for cause concept in my previous post should terminate this language as well.

Good luck.

Peter

 

[tiltrider1]

The yachtcloser language says one year I don'texpect an issuebecuse I expect the boat to be sold within the initial one year contract. Of course if it's not....that would never be the broker's fault...

No reputable broker would represent both seller and buyer. Now you could have two brokers under the same agency representing both buyer and seller.

You may or may not be dealing with a reputable broker. However, you are dealing with a slimy contract. Your concerns are well founded and as a point we did not use these terms in our selling agreements. I understand why these terms are there. It’s to protect the broker from a customer who markets the boat at a high price then dumps the broker and reduces the price. Broker did the work and got aced out. When we sold boats we simply would not take on improperly priced boats so we didn’t need this language.

The contract is negotiable, if they won’t make the changes you have the wrong broker.

 

[Gdavid]

Seems very similar to a brokered boat where the buyer is not working with a buyer's broker. The buyer needs to understand that it is in the broker's interest to complete a sale, that said, a buyers broker has incentive to complete a sale as well.

There should be a realistic expectation about the manpower that goes into the search and sale relative to the budget. There is a world of difference in a $50K boat sale and >$1M sale when it comes to compensating brokers but some boaters don't seem recognize this.

 

[mvweebles]

No reputable broker would represent both seller and buyer. Now you could have two brokers under the same agency representing both buyer and seller.

You may or may not be dealing with a reputable broker. However, you are dealing with a slimy contract. Your concerns are well founded and as a point we did not use these terms in our selling agreements. I understand why these terms are there. It’s to protect the broker from a customer who markets the boat at a high price then dumps the broker and reduces the price. Broker did the work and got aced out. When we sold boats we simply would not take on improperly priced boats so we didn’t need this language.

The contract is negotiable, if they won’t make the changes you have the wrong broker.

Tiltrider - I'm intrigued by this. Judy W I thought put forth a good case for when a broker could bring both seller and buyer to the table. In these days of internet, maybe less common than the old days, but it used to be that every marina of consequence had a broker with pictures of boats in the window and often lead to a brokerage representing both buyer and seller. But many of these agencies simply are not large enough to have multiple brokers.

I totally get your point, but I think in practical terms, a good broker represents the deal as a whole. Afterall, today's buyer will be tomorrow's seller. Your advice is good, I just wonder how practical it is in many transactions? And how to manage the inevitable conflicts that arise when only one broker need be involved?

Peter (no dog in this fight - owned my boat for 25-years with no end in sight).

 

[SteveK]

My take is the wording commits the seller to pay 10% no matter what, even if others pay the broker additional amounts that result in the sale, yup nothing odd about that.
such as buyer offering $$ to hold offers for a week, or $$ for every $1K reduced on asking price, surveyors offering $$ to be referred to buyer.
Let's face it, brokers do the job to earn, only a few may acre more about the seller.

 

[Rufus]

No reputable broker would represent both seller and buyer. Now you could have two brokers under the same agency representing both buyer and seller.

You may or may not be dealing with a reputable broker. However, you are dealing with a slimy contract. Your concerns are well founded and as a point we did not use these terms in our selling agreements. I understand why these terms are there. It’s to protect the broker from a customer who markets the boat at a high price then dumps the broker and reduces the price. Broker did the work and got aced out. When we sold boats we simply would not take on improperly priced boats so we didn’t need this language.

The contract is negotiable, if they won’t make the changes you have the wrong broker.

Yes, I understand why the language is there, but in this case the broker is recommending a higher asking price (raised twice in the past two weeks) than I had suggested at the start of discussions. "We can always lower the price in the ads". On the other hand I'm thinking "let's not chase away the early lookers". They've sold a fair number of Ocean Alexanders over the years and perhaps they're right. That said...don't penalize me at the end of the one year contract period because (you) the broker's strategy ate up the summer selling period on the Great Lakes. I guess I need to trust that they will get the job done.

Back to buyer's brokers....they compete with pre-sale surveyors whose seemingly sole purpose is to lower sell prices. BTW, I'm at a real disadvantage in all this because the boat and broker are up north, and I'm pretty much stuck in Texas with health issues. I'm probably overthinking this precisely because I'm so far out of the picture, and while the brokerage itself is top notch, I'm still not 100% confident in the assigned salesman/broker.

Waiting on a call from the broker to discuss these things....thanks everyone for the comments. Helps to understand all sides of the subject.

 

[SteveK]

BTW, I'm at a real disadvantage in all this because the boat and broker are up north, and I'm pretty much stuck in Texas with health issues. I'm probably overthinking this precisely because I'm so far out of the picture, and while the brokerage itself is top notch, I'm still not 100% confident in the assigned salesman/broker.

Actually being at distance you may have an advantage of not sending signals of interest or lack of when in the same room with broker. No need for the poker face.

 

[slowgoesit]

"......a different spin on the buyer's broker routine? Thoughts?"

That was the part of the email to which I responded. You're right, Peter, there are other questions raised in the original and subsequent post.

The OP says the contract was boilerplate from YachtCloser. I do not use YachtCloser for many reasons in spite of the convenience, so I can't comment on that contract specifically. The agreements I use are from the International Yacht Brokers Assoc. It states in Paragraph 10 that the owner shall pay the commission if within 6 months after termination of the Agreement the Owner charters, donates, or otherwise transfers or conveys the Vessel to any party to whom the Brokerage or Co-Brokerage physically showed the Vessel during the Term.

Judy, No reflection on you personally, but I would accept that clause ONLY provided there was an additional statement that stated exactly who the broker physically showed the Vessel to during the listing period.

This is not speculation, or conspiracy theory on my part. This is from real world experience with a couple of brokers in Hawaii who were known to place liens on boats which they claimed to have "shown" to the buyers. They specifically preyed on service men and women who were selling their boats in preparation to leaving Island under military orders.

Basically, "Pay me my claimed "cut", or I'll prevent your boat from selling, and you'll end up PCS'ing and your boat will be remaining behind, still unsold.

To the OP: You can strike out, or add in any items into the contract you like. The broker is free to run the proposed amendments by their attorneys, and is free to accept the amendments, or reject them. If they reject them, you are then free to find another broker. If the changes you suggest are reasonable, and the broker rejects them, personally, I WOULD find another broker.

I understand that real estate and boats are different, but I've done the exact same thing numerous times in "boiler plate" listing contracts. The amendments were reasonable (at least to me), and most times they were accepted. In the other times, I found different agents. Bottom line: It's your boat, it's your sale, you are in control. Best of luck in going forward.

 

[BruceK]

Let`s keep it simple: Broker is acting for both Seller and Buyer, for reward. Both could be continuing customers. Broker is aware Buyer has more $ than he`s offering but doesn`t want to spend it. Does broker side with Buyer to sell the boat at the Buyer`s preferred price, or flush out the rest of the money in the interests of the Seller? Or, Broker knows the Seller will take less than Seller`s current position on price. Does Broker tell the Buyer?

IMO, the instant a Broker deals with issues like this, there is a conflict. One client`s position is a risk of suffering compared to the other. The instant a Broker starts compromising,eg. like a "happy deal for everyone" the Broker is preferring one over the other, in their interests, or the Broker`s own.

A Broker can run with the hare or the hounds, not with both. Someone will not be served well.

 

[tiltrider1]

Tiltrider - I'm intrigued by this. Judy W I thought put forth a good case for when a broker could bring both seller and buyer to the table. In these days of internet, maybe less common than the old days, but it used to be that every marina of consequence had a broker with pictures of boats in the window and often lead to a brokerage representing both buyer and seller. But many of these agencies simply are not large enough to have multiple brokers.

I totally get your point, but I think in practical terms, a good broker represents the deal as a whole. Afterall, today's buyer will be tomorrow's seller. Your advice is good, I just wonder how practical it is in many transactions? And how to manage the inevitable conflicts that arise when only one broker need be involved?

Peter (no dog in this fight - owned my boat for 25-years with no end in sight).

When we were still selling boats we often managed both sides. We tried to be fair to all parties and make things happen. However, on many occasions we had to inform the buyer that we were under contract to represent the seller’s best interest. We always advised buyer’s to engage the services of a qualified surveyor but since we represented the seller we never pointed out deficiencies. We also made it clear that should a legal issue arise we were contracted to represent the seller. Fortunately we were never involved in any legal issues regarding the sale of a boat.

In the end I guess one needs to decide if they want a broker who is dedicated to making a deal close or is dedicated to the customer who employed his services.

 

[Bacchus]

I would not agree to the contract as stated unless the max cost to seller was stated to be the usual 10% commission. When selling broker agrees to co- broke they share the 10%, not ask the seller to pay more.
I would also not agree to being bound to pay broker their fee for 12 mos for a sale they did not originate. Needs to be limited to those they have had contact with/ shown the boat.
As far as broker working both ends if the deal... I've done it both ways boats & real estate. But... think about it..
The seller will likely discuss their bottom line $ for negotiation... what they want to get out of it.
The buyer... if they have a buyers broker will likely discuss buyers budget/ max they would pay for a given boat.
Then let yhe negotiations begin (in earnest)
How many would even think of divulging their upper limit when buying through a sellers broker??

The one (last) time I engaged a buyer broker they got me my boat for less than asking $ and less than I stated I was willing to pay... because and only because they were only looking out for my interests. And BTW they also was able to secure a 60-40 commission split with selling broker willing to take 4% and give ip 6% to make the deal.
Win- win- win in my book!

 

[SteveK]

Disclosure has become a hot topic this side of the border for all things, not just boat brokers selling a boat. The fact is it discloses that the selling broker has always received third party remuneration which they now must disclose.
The listing agent for boats or real estate or other is hired by the seller at an agreed fee and then that fee may be split with a third party. Did you agree to paying a third party?
Then, I will call it bribes for lack of a better description are paid to the agent you contracted with to meet side deals. Did you agree to that?
Bureaucracy solution is to have a disclosure of the occurrence, it is not even considered to ban such activity. Then if you are one of a thousand who read the contract and question it, cross it off, does that mean it did not happen?

 

[Each finger a marlinspike]

Everyone considering working as a yacht broker should read this thread in its entirety, you can really see how people view yacht brokers.
90% of the boating population will immediately consider you a huckster on par with the lowest of used car salesmen as soon as you tell them your profession. Then when you do manage to convince someone to let you spend your money, your time, and your effort/reputation to list their boat and try to convince others to contact you about buying it, all without having been paid a cent in advance, your seller will then consider you to be a double-dealing fraud because you are also working with that person who contacted you to buy the boat.

Then when it comes time to negotiations between the buyer and seller they will both suspect that you are secretly working for the other, pretend that they are helpless spectators to the negotiation, and blame you for the deal falling apart or blame you because they didn't feel like they 'won' the negotiation.

What a lovely profession.