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Old 01-30-2019, 11:58 AM   #1
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Boat offers and the negotiation process

We missed out on a boat that could have been a good fit for us and I wanted to get some advice on what happened. When I came to look for a second time with a more thorough eye, the broker told us they had a good offer in hand. I believed him, it was a desirable boat at a reasonable asking price.

After looking, I went home and put my list together of things the boat needed, it was about 10% of the asking price. Items like teak repairs, new batteries, new inverter, engine services, etc. I made a verbal offer to the seller's broker, which he said was solid but the one they had was very close to ask. We discussed his commission, the tender being excluded and not asking for anything on survey, but ultimately he didn't think the offer was strong enough to top the existing offer so we didn't submit it in writing. It seemed like they had an eager buyer who was willing to pay top dollar and overlook the things on my list. So be it.

Fast forward a few weeks later. I bump into a service guy I know who worked on the boat. I told him I looked at it and he goes on to tell me he just replaced the batteries, inverter, is working on teak, engines, etc after the trial. I was flummoxed, because I think my offer would have been a better net result for the owner after all the work they did. Furthermore, the broker would have represented both sides of the deal, netting himself a higher commission and a lower rate for the seller.

What went wrong here? I've bought and sold a few boats and have always felt you are in a weaker negotiating position once you've paid up for a sea trial. When selling, I'd rather cut the buyer a break then pump a bunch of money into items from the survey. Is this the wrong approach or maybe the broker made a miscalculation? I'd consider this a random deal that didn't go my way, but I had a similar situation occur a couple of months ago on another boat. There was a lot of work to be done which I was factoring into my offer and we never got past the verbal stage. Maybe I'm approaching the negotiations wrong? Any feedback appreciated. For context the boats I'm targeting are in the 50-60ft range and 8-12 years old.
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Old 01-30-2019, 12:48 PM   #2
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Well perhaps the boat was well worth the price that the first buyer paid even considering all of the stuff that he added after the sale closed. Many times buyers look at the asking price and do what you just did and add up all of the stuff that is needed to make it nice from their point of view and they immediately take that extra stuff off of the price they are willing to pay. But maybe the boat was priced to take all of that into consideration. That seems to be the case with the first buyer.

All you can do is offer what you are willing to pay. Usually your first offer should be about 5-10% below that because the seller always expects you to come up when he counters. And most boats close at 5-10% below asking in a normal market for just that reason.

I think that boat was just not destined to be yours. And you sure don't want to start a bidding war with another buyer.

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Old 01-30-2019, 01:25 PM   #3
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Old 01-30-2019, 01:37 PM   #4
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Could be the broker was really a upstanding guy. The kind of guy you would want helping you find and buy a boat.
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Old 01-30-2019, 01:59 PM   #5
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I'm sorry perhaps I wasn't clear. The work that was being done by the service guy was being paid for by the seller as a result of the sea trial findings. There was, I would assume, a big price reduction in terms of the net going to the buyer. All things I had accounted for and would have paid for on my own at a lower price, but likely more than they will net.

The broker I spoke with would represent both myself and the seller. The person who is ultimately buying had their own broker. I don't understand the upstanding comment @RusselClifton?
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Old 01-30-2019, 02:01 PM   #6
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Having just recently going through a purchase, our broker advised us to present a signed offer within our capability - then once accepted and after surveys, there would be an opportunity to further negotiate. This is exactly what happened and we ended up at 15% off asking price. We are extremely happy with the outcome.

Good luck with your next hunt.
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Old 01-30-2019, 02:36 PM   #7
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When selling an asset, I don't always go for the highest offer. I may go for the best offer that I think will come to a successful conclusion. A lot of intangibles might be in play. I would expect any serious buyer to make an offer contingent upon survey and sea trial. I might derate a buyer who doesn't want a sea trial. I don't want any headaches after the sale.

Broker clearly suggested you weren't offering enough. After considering broker's advice you're next step should have been a written offer.
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Old 01-30-2019, 03:30 PM   #8
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The one mistake I think you made was you didn't submit an offer....not a written offer and that's really the only kind. Broker has to pass on any and all offers. If you're interested, write it up and submit.
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Old 01-30-2019, 03:33 PM   #9
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I don't negotiate until they have submitted a down payment and written offer. It separates the tire kickers real quick. If your written offer covers repairs you anticipate, declare that and the list with deduct values. Don't leave it to your broker or his to explain.

This is the same for real estate.

When you tell your broker you want to submit a written offer with a check, he is legally obligated to present your offer, or he can be sued by both parties.

When I see the check, and it is never cashed, usually just a phone picture, then I know at least the buyer has kicked it up a notch, and I respond in kind.

As a note the last boat we bought I made a fair offer, and after survey got a typical bs list of problems. I asked the seller if he wanted a check or wire transfer, the problems were calculated in my initial offer.

In away, you take control of negotiations, as much as is possible.
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Old 01-30-2019, 03:36 PM   #10
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"verbal offer" is an oxymoron. If it's not written, it's not an offer.
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Old 01-30-2019, 03:42 PM   #11
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I suspect a lot of buyers offer close to asking in order to secure a contract, knowing that the survey will surface issues and then they will negotiate the actual deal. It's probably a good strategy for the buyer because once down the path, the seller is less likely to want to return the boat to the market and start over again. But it's frustrating as a seller to get an offer that turns out was never genuine in the first place. This happened to a friend of mine. Survey turned up maybe $5k worth of stuff, and buyer wanted to take off $60k. Conclusion was that the guy never intended to pay the offered price, so was told to go pound sand.
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Old 01-30-2019, 03:45 PM   #12
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Interestingly, in real estate the law requires all transactions to be in writing. Large boats tend to follow real estate methods as they're the same cost or more and one lives on them, whether a day or all the time. In most states though there's no requirement of writing, but all I've seen is brokers and sellers still treat it the same as real estate. A written offer forces some action. Also, all those things you were trying to say can be conveyed in writing if you so choose.
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Old 01-30-2019, 04:01 PM   #13
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JUST MY OPINION:

I would say it would be foolish to believe a broker ever truly represents the seller and the buyer. The broker wants to get the largest amount of commission for himself and the largest amount of money for the seller. Who does he truly want to be loyal too?

I would also demand that all offers be taken directly to the seller. Sometimes it does not hurt to find out who the owner is and speak directly to them. This is not hard with a little investigation through your state of the coast guard database.

I would also say, unless you are 100% effecient in repairing and working on all systems on the boat to ALWAYS get a survey. Most insurance companies will want one, depending on the size and age of the boat.
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Old 01-30-2019, 04:26 PM   #14
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Quote:
Originally Posted by twistedtree View Post

.... But it's frustrating as a seller to get an offer that turns out was never genuine in the first place. This happened to a friend of mine. Survey turned up maybe $5k worth of stuff, and buyer wanted to take off $60k. Conclusion was that the guy never intended to pay the offered price, so was told to go pound sand.
For the seller, doesn't the buyer have to pay for the survey, may be haul out expenses and ??? To get to that point? So there is at least some cash/pain the potential buyer has to walk away from.

That particular buyer may have been looking to steal the yacht. However the price they paid to get to that point seems silly for the risk. (Not to say there isn't silly people in this world)

Since I have not been through the process (yet) is it possible to continue marketing the yacht and take back up offers? (Like Real Estate)
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Old 01-30-2019, 04:36 PM   #15
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Quote:
Originally Posted by Action View Post

Since I have not been through the process (yet) is it possible to continue marketing the yacht and take back up offers? (Like Real Estate)
Yes, it is possible. Most won't continue to actively market but they may well get back up offers from those they've already marketed to.
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Old 01-30-2019, 04:37 PM   #16
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It`s quite likely the seller was unaware of the defects identified at survey. People make decisions based on the information available at the time. With hindsight, he might have made a different decision earlier.
I`d say the broker told it as it was,they had a better offer, and therefore discouraged your making an offer.You could still have made an offer, but you had the impression he was representing you, so you didn`t. A broker can`t possibly represent both parties in negotiations due to conflict of interests.
You should ask yourself, had you made a sale agreement at your price, would you have sought a reduction for defects found at survey. If so, wouldn`t that have also reduced the net $ to the seller, starting on a lower base?
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Old 01-30-2019, 04:42 PM   #17
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Thanks for the comments, seems clear that next time I should put it in writing. I find the back and forth to be tedious in boats, real estate and business deals. I loathe the worthless "here's my deposit check!" exchange. Assuming both participants are honest with their intentions and have the information they need, get to a number quickly and if something needs to be adjusted so be it. But I understand that most people don't work that way.

To clarify a few things, the broker knows me to be a serious buyer and I thought him to be competent before this deal. It was cash, obviously with a sea trial and survey, a quick close if everything checked out.

I keep thinking the broker dropped the ball, but I don't quite understand why as all of our incentives were obviously aligned. He agreed with every item I cited for repair and we ballparked estimates. I asked him if he was sure the other offer wasn't going to negotiate down post survey. I'm estimating he and the seller would have come out ahead by around 3% on the price. In my opinion he should have at least checked in with me post survey when the other buyer began making the same requests I made at the seller's cost. The sellers struck me as business savvy so I'm sure they would have understood the nuances of the deal.

@twistedtree I agree with you, but as a buyer absolutely hate to be in the position of negotiating having sunk thousands of dollars into a haulout/trial/survey. Similarly as a seller, I'd rather give someone a good price and assuming nothing major is wrong they can redirect that savings however they see fit.
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Old 01-30-2019, 04:47 PM   #18
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Agree with making all offers in writing. Also you might consider 2 offers - 1) as is w buyer responsible for repairs 2) $ w seller responsible for listed repairs. Both should include contingencies such as inspections, surveys, etc.
IMO some buyers want to maximize price and willing to do some repairs others just want out and willing to take less you probably won't know ahead so can address possibilities.
My last purhase was long distance snd my buyer broker negotiated selling $ based on everything in good operating condition W contingencies. Inspection reealed issues and gave seller option to correct them and to inspect or deduct negotiated acts. He decided to lower $ and close the deal... I took care of issues w most DIY repairs.
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Old 01-30-2019, 04:51 PM   #19
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A broker can`t possibly represent both parties in negotiations due to conflict of interests.
You should ask yourself, had you made a sale agreement at your price, would you have sought a reduction for defects found at survey. If so, wouldn`t that have also reduced the net $ to the seller, starting on a lower base?
In some cases I think it's true they can't represent both parties, but in this scenario I think he could have. He had a strong offer in hand and the sellers knew about it, I just had to submit an offer that netted the seller more. The broker would have made 50% more commission had my deal been accepted, so it certainly seems like he would have preferred for it to go through unless there is information I'm not aware of.

Regarding the sales agreement, that's the entire point of the thread. I identified the items that needed to be fixed before the survey and submitted a lower offer with the intentions of not modifying for any survey findings. He seemed to think that the other offer wasn't going to adjust for survey items which it ultimately did - by a lot according to my contact.
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Old 01-30-2019, 05:03 PM   #20
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mod45, I think you moved faster than the other parties in the transaction. I realize you discovered the issues before the other party had a survey completed. Sure the broker should understand your offer. However like Real Estate greed may have set in and the broker was hoping some of the things you brought up may have been over looked or at least discounted.


However you were way ahead of everyone. Seller and existing buyer still had a higher number at that point. If I understand what you posted. A higher number with an unknown may have been better than a lower one with know issues from a non-surveyor.
No one may know at this point either. Except the broker and the seller. Unless you are in contact with them.


Some times logic is not part of the deal. Seems illogical to me.
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