Yacht Purchasing Issues

Hi ssydow and welcome to Yacht Forums.
Congratulations on your imminent purchase. You are a cash buyer or have your favorite banker ready at the cash drawer, right? With the credit markets tightening, it would be interesting to hear what your experience was, if applicable.

Regarding some standard percentage off the asking price: it does not exist.
Every boat has it's own story and motivation for going on the block. Is the sport yacht you are considering one of many on the market or is it something 'special' (read: not a bargain).
In the former case and if there are a dozen 48-foot "SpeedyLines" out there, some broker is going to do the due diligence by making a dozen phone calls to hear each story--just for starters-- and then even try to locate one that isn't even listed for sale yet.
You need to speak to a few brokers and find one you feel comfortable with.
While the listing broker may know more intimately the history of the boat you are lusting after, a good outside broker, who, by the way has a fiduciary responsibility to you (unlike the listing broker whose fiduciary duties are to the seller), can easily ferret out all the important information.
The brokerage commission, with one or two brokers, is still 10%. Haggling over this paltry fee is so tiresome, so please don't.

While there are many brokerage houses, the differences between their Purchase Agreements are slight and have mostly to do with the timing of acceptance of offers and acceptance of vessel relative to survey timing and the like.
If hiring a lawyer makes you more comfortable, by all means, hire one...but don't be too surprised when the time he/she spends is for naught. Yacht Brokerage Purchase Agreements have mostly stood the test of time, as well as the legal world over the decades.

Ask lots of questions because, no, they're not dumb.
The experience should be a fun one. After all, you're shopping for a toy, not researching the best deal on a convertible debenture.

Best of luck to you.
When the deal is done, drop us a note and post a photo.

You stole my words..., thanks Loren!

Are you buying new or used? It makes a difference in negotiating prices. I am now on my second boat. The first was a 50' Fairline Phantom 48 and now the second, a 80' Fairline Squadron 78. Both bought new, directly from a Fairline dealer. In both purchases I have not resorted to any lawyers, just signed the standard Fairline purchase agreement. It's straight forward and not complicated.

Good luck in your purchase.

Negotiate buyback

Thought I would share my buying experience.

We bought three new boats in the past 12 months.

All three were purchase by signing an agreement that if within the first 6 months we would trade for bigger the dealer would give us full price on our trade in.

We also got them to agree that full price on trade in was not based on buying the next boat at MSRP, which no one does.

We bought all three boats at 24-32% discount from MSRP.

Our adventure started with a 34' to a 44' and now a 48' Sea Ray.

In the past 12 months we have put over 300 hours on our boats (aggregate).

We were not boaters before, we enjoy our new lifestyle so much that we have spent 49 of the last 52 weekends on our boats (one day or the whole weekend).

Hope this helps.

That is helpful information if you are looking only at SeaRays, where dealers have a 40% margin plus incentives, but it is not the real world with other builders.

I believe you are correct.

We are trading in our boat again but this time moving on to another brand.

What we have found so far is about a 20% wiggle room, or at least with Azimut, Carver and Marquis.

We have also not been able to find others willing to sign buyback agreements.

I believe we will finally plunge in the used market. Seems like you can find near new boats with under 200 hours for at least a 35% discount.

+1...........

A rough estimate for the depreciation of boats from wellknown manufacturers would be aboat 10% per year.

Broker Fees Are Negotiable

So a $100,000 commission on a one million dollar purchase is a "paltry fee"? Since 7% goes to the selling broker, I suggest that the Buyer should figure exactly what service they will receive that is valued at $70,000.

I believe that trusted and knowledgeable advisors should be well paid. However the current system entitling yacht brokers to 10% of the deal is flawed by any rational standard of value.

Some very competent surveyors, brokers, and maritime attorneys will all work hourly and you can negotiate $50,000+ into your own pocket.

How about that point of view Loren?
.

I don´t think it is that simple to turn this system around. If both the buyer and the seller are negotiating the brokerage fees, the yacht will probably never get sold. Why making advertising and fly around the world to show boats where the income may be just "paltry money"? Better to sell another yacht...

Some boats are in your backyard and are in a high demand, if somebody steps into the listing brokers office the same day he got the central, you can off course negotiate the fee. But in reality most yachts are on the market for 6 to 18 months, some even longer.

You probably know that brokers often share their fee with the brokerage house? So with two brokers, there could be four shares. With all expenses and all time spent before a yacht is sold, surveyed and delivered, the hourly fee may not be much to brag about.

The recent years have been good to some brokers and many expensive yachts have changed hands, some of them certainly with reduced commissions, but you can not change the system between good and bad years. It is always free to negotiate, but the 10 % will probably remain the normal fee for the seller to pay.

Well put, Lars, well put, indeed.

And, georgew (Oh, by the way, welcome to Yacht Forums), if, as you say, trusted advisors should be well paid, quit whining.
The broker who keeps you out of Legalman's clutches or saves you from making a multi-thousand dollar mistake during the purchase process is... worth... every... penny.

Those two traders (and their boss) on the mortgage desk at Goldman Sachs who made billions for the company shorting the same sub-prime debt that they were simultaneously selling to their investors and who will enjoy a $5-15 million payday (per the WSJ, today's edition) might be accused of the moniker 'overpaid'.

The only time I'd attempt to negotiate commissions is if I were the buyer, and was using the listing broker as the selling broker. Since they control both ends of the deal, and don't need to share with another firm, they'll be more likely to negotiate.

I'd have reservations about that. Having the same broker representing both sides is putting someone in a potential conflict of interest situation. I'm sure that there are some situations where this has gone well for both parties but not the way I'd be inclined to deal with this transaction.

If you are purchasing a vessel for the first time then I would definitely recommend getting your own broker to represent you in the transaction. There are too many risks associated in going at it alone. When you deal directly with the listing broker you are put at the mercy of whatever ethics or ability that person has and you dont have any previous experience under your belt to recognize the pitfalls.

Good old fashioned word of mouth is what I have found to be the best way to find the right Broker. If you speak with a dozen people that all had a favorable experience with that Broker then chances are you will too. A good Broker is worth their weight in gold and deserves to get paid. Too many people get caught up in who is getting paid what commission. Who cares! Its paid for by the Seller anyway and as long as you get the boat you want for the price you want with a smooth transaction, that should be all you are concerned with.

One other point that no one has mentioned here is to not overlook the taxes involved with the purchase. They can vary greatly depending on where you purchase the vessel and can give quite the financial sting if you werent expecting it. California for example charges you sales tax for the purchase price (around 8%) and then charges you a yearly property tax (ugh!). There are certain ways to legally mitigate or dodge these taxes using corporations but it is a very complicated process and I would urge you to find a compitent tax attorney to help.

Best of luck to you and dont forget to post pictures of your new baby!

I do not see how or why dealing direct with the listing broker could be anything but the best way to go, just because the Broker is representing both parties does not mean that he or she is not acting in the buyers interests, if anything they would be more motivated to get a deal put together for you because they are getting the entire commission for the sale, as a broker who has sold 100’s of boats the ones who dealt direct got the best deals. Because I knew the seller and had a relationship with them and because I was able to reduce my commission down from the 10% because I had no other house that I had to share it with, this also enabled me to provide better service to both clients because there where fewer people involved with the transaction. If I can reduce my commission by 3% because the client came to me direct then I have also reduced the price of the boat down by 3% I win because I make 7% instead of 4% by being both agents, the buyer wins because I was able to reduce the final price of the boat by 3% and the seller wins because he sold his boat, it’s a “win win” there is no other way to reduce a commission, no good broker will represent a client as the buyers rep for less than 6% and no good listing broker will do his job for less than 4% your better off getting one good one to do both jobs for 7%

Absolutely, if you already know that you have found the yacht you will buy. But more often you are looking at several yachts all over the place, and then I would rather have my own broker helping me out..?

That is a good point; if you have quite a bit of boats to look at there is a plus side to having a good broker who is willing to do the research for you and offer you good guidance, just make sure that you find a broker who knows what they are doing; there are a lot who don’t, a good one is worth every bit of his commission. however if you are a hands on buyer and can do your own research online, on yacht world for example, and know enough about what you want, then calling the listing brokers direct is something that you may want to do.

That's the problem with the system: Both parties' brokers are compensated based on the final selling price of the vessel, and the higher the selling price, the more they get paid. Human nature is going to drive even the Buyer's Broker to try and keep the price elevated, subconsciously or otherwise. No matter how you look at it, the term Buyer's Broker is an oxymoron until such time as the system changes whereby nobody is paid based on the final selling price, but instead is paid based on the sale itself.

Perhaps a fixed fee schedule, based on differing "pricing windows". I haven't worked out an equitable solution... I just know the current system is flawed. Even real estate brokers don't make anything close to 10%.

Again, I stand by my statement re: using the listing broker as your Buyer's Broker, as it give you some room to wiggle the commission.

Another way to do it, if you've a yacht broker buddy and a boat you need to sell, is to bring your buddy into the deal on your new boat as your Buyer's Broker, and get him to list the boat you want to sell without a Listing Commission. It's not perfect, but it's something.