Earnest money deposit

[jimisbell]

I was working with a broker in Tampa Florida, I live in Texas, The boat was in the Florida panhandle at the owners home. We had discussed the boat on the phone and I drove 800 miles to see it. Got there and was shown the boat in the slip. I liked the boat and the price was close enough, but was told he would not take it out or even start the engines till I presented an offer and deposit. I spun on my heel and waked out on him, really pissed off. Somewhere in Alabama on the way back to Texas the broker called to see how things had gone. I was still so pissed I could barely talk but after telling her the problem she was more pissed than I was. She just lost a commission. After that I inquired as to the requirements to show a boat before even talking. I finally did buy a boat from that broker and it was in Tampa, twice the trip the earlier one had been but I knew, before I flew out to see it, I WOULD be able to see it.

 

[Boatcrazy]

On another note, if a buyer makes an offer and puts up the 10%, what recourse does he have if that same broker then accepts another later offer (from another buyer) and presents that second offer to the seller before the seller either accepts/rejects/counters the first offer? And, as it turns out, the second offer for the boat was accepted and the first buyer was left out in the cold......even though his offer, with deposit, was first in line? I'm not a lawyer, but I'd be on the warpath if it happened to me, and after that broker's accreditation. But it was my friend, not me...and he really wanted that boat!

 

[CanadianBoater]

The way he puts it, there is no signed agreement till the seller agrees to a price. In the meantime the broker has my money and I have nothing in writing.

Correct.
Until an offer is accepted, and papers signed, do NOT pay a cent.
As a lawyer, that sets my fraud alarm off.
Not really different from a real estate transaction. When both parties agree on a price, the purchaser then retains a conveyancing lawyer, and the lawyers firm will have an escrow account, where usually within 48 to 72 hours, a deposit is placed for safe keeping. The seller, and realtors, have no access to the money.
I bought a used boat in April of this year. I made no offer until after sea trials, and inspections. Then offered 80% of asking price, and said its a one time offer, no negotiations. Once accepted and the papers signed, I retained a lawyer ( no one I know to eliminate any question of a friendship backdoor deal if this ever ended up in court), she held my deposit in escrow. The day before delivery I paid the remainder into the law firms escrow account. It was transferred at 11:00 am the day of closing, and at 11:01 am we closed the deal. This is very basic contract law, not some complex deal. But a fool and his money will soon part if he/she pays a broker just to place an offer in front of a vendor.

 

[dhays]

I was working with a broker in Tampa Florida, I live in Texas, The boat was in the Florida panhandle at the owners home. We had discussed the boat on the phone and I drove 800 miles to see it. Got there and was shown the boat in the slip. I liked the boat and the price was close enough, but was told he would not take it out or even start the engines till I presented an offer and deposit. I spun on my heel and waked out on him, really pissed off.

I don't think it unusual at all to have an accepted offer and deposit before a sea trial. The reason is that it avoid the folks just looking for a free boat ride on a nice day. I seen nothing wrong with an accepted offer before a sea trial. Taking the boat out, amounts to a sea trial.

 

[BruceK]

Consideration, in this case $, is relevant at the agreement stage, not the offer stage. Nothing to stop a seller requiring the 10% with the offer, and nothing to say a "buyer" might not tell the seller/broker to get lost for asking it.
No way would I pay a deposit before I was actually entering into the purchase, even though it was subject to "due diligence", like survey etc.
I see the usual sale agreement as something of an option for a buyer, they can usually find a way out based on survey if they really want out.
But putting down 10% to negotiate? 10% of what? There is not even an agreed price to calculate the 10%. It`s just a way of getting a buyer to be, or feel,committed.

 

[psneeld]

I can see the deposit waiting till a written agreement on price....purchase PENDING survey and sea trial.....

I wouldnt waste 5 seconds on even going to the boat without a deposit, let alone take soneone for a ride.

Way too many tire kickers in many places..... ones that do it just for boat rides included.

 

[Bacchus]

The way he puts it, there is no signed agreement till the seller agrees to a price. In the meantime the broker has my money and I have nothing in writing.

Any broker worth dealing with will put your offer in writing Via a Offer to Purchase that contains your price and any contingencies you want included... including any time limitations for acceptance, inspections, closing.
It becomes the purchase agreement when the seller accepts & signs it or the broker modifies it to the accepted price and terms and you both sign it.
If you don't know or trust the broker you should consider finding yourself a buyers broker that you know and trust and let them deal w the selling broker.

Others have commented about having survey & sea trial done before any agreement on price and deposit...
I would not consider investing in a survey w/o a signed agreement and deposit as this lets seller continue to deal w others and if they sell you are out the cost of survey, haul out etc.
You always have room to renegotiate based in inspection, survey, sea trial, oil analysis results etc.

 

[Tom.B]

I can see the deposit waiting till a written agreement on price....purchase PENDING survey and sea trial.....

I wouldnt waste 5 seconds on even going to the boat without a deposit, let alone take soneone for a ride.

Way too many tire kickers in many places..... ones that do it just for boat rides included.

I dunno... It doesn't take much for me to want to go out for a boat ride. Given the two options, I would rather take a tire kicker out for a "free" boat ride that MIGHT buy a boat, than to not

The seller of our current boat took us out for a ride before we ever agreed on a price. Perhaps this is not the norm, but it went a long way to help convince us to buy. Moreover, he let us spend all the time we wanted, unsupervised, on the boat looking around... AND... let us send a surveyor, again unsupervised, to the boat for a pre-offer inspection.

One thing this thread proves is that there is more than one way to make a deal. There are no absolutes and no "standard" way brokers and sellers approach the process of selling. We need to avoid making comparisons to real estate. These are to different coins and not opposite sides of the same coin. Boat deals more closely resemble car deals that real estate. Real estate deals are highly regulated and there ARE procedures in place that are both regulated and industry standards.

 

[jimisbell]

I don't think it unusual at all to have an accepted offer and deposit before a sea trial. The reason is that it avoid the folks just looking for a free boat ride on a nice day. I seen nothing wrong with an accepted offer before a sea trial. Taking the boat out, amounts to a sea trial.

I think that the 1600 mile round trip to see the boat tells the owner I am serious.!!!!! I WONT make an offer on a boat that I dont know if the engines are running!!!


I think in the old days before there were broker,we were better off. Lawyers and brokers take a cut out of the legitimate market by providing un wanted and un needed services if the seller and buyer are honest.


When I buy property I usually cut out 70% of the closing costs by eliminating un needed services and I WILL NOT make ANY transaction broker to broker. I WILL meet the seller or there is NO DEAL!

 

[Sailor of Fortune]

IMO there is no way to force a buyer to close the sale. IMO deposits are really only forfeited if there is real damage to the seller.

A short timeframe to close doesn't need a big deposit because the seller will have no real cost involved if the sale doesn't close. Al long time to close is a different matter as the seller is unable to sell to someone else during that time.

You can't force a buyer "to buy"...in boat sales,real estate etc. The due diligence period is a necessity for survey, sea trial and financing if needed. There has to be some element of good will and trust on both sides of the transaction..Purchase and sales agreement specifies the details.

 

[jimisbell]

I can see the deposit waiting till a written agreement on price....purchase PENDING survey and sea trial.....

I wouldnt waste 5 seconds on even going to the boat without a deposit, let alone take soneone for a ride.

Way too many tire kickers in many places..... ones that do it just for boat rides included.

You would NEVER sell a boat to me.

 

[psneeld]

No big deal..... every boat I have sold was the same way and quick....show me the money...

And never wasted much of my time......

 

[Seabiscuit34]

Earnest Money deposit

We just purchased a boat, the first in 16 years, and we emailed our initial offer and a photo of the check for 10% that we snail mailed. No wire fees.

We finally did settle on a price more than our original offer, however the broker did not request additional funds to get the escrow to 10%. The check was not cashed until the agreement was signed by both parties.

In the end, after the survey and concessions, the original deposit almost covered the 10% requirement. Of course everything was squared away with the final settlement.

 

[ghost]

You can see my boat for free, at that point you assume it is legit and can make an offer contingent on successful seatrial & survey. I might start the engines, there should be no risk in that. But we’re not going for a ride. I’ve certainly seen tire kickers before who think it’s like a car and the should just go for ride after ride. Nope. Seatrial usually means running engines harder than I would normally. I’m taking zero risk for someone who is also committing to zero risk. Same, Same.

I’ve always found seatrial to be considered typical only after offer has been made. If you want to go outside the standard process, I’d expect it to be on your responsibility to request such a deviation to expectations before driving 800 miles. You certainly demonstrate intent and I would likely consider it and probably accommodate to an appropriate degree, but not if you show up without asking first. That would put you into the craigslist penalty box and make me defensive and skeptical, no matter how far you drove. I’d expect you were going to lowball me After with an amount I’d never consider. There really is little reason why an offer could not be made based on appearances. After all, if the seatrial does not pass muster, you would have the right to back out. The boat should be assumed to either be running satisfactorily, or that the price would be adjusted to get it there. So no reason the offer could not be made based on that assumption. No reason to get as serious as a seatrial without knowing if the money is in the right ballpark. Still think the standard process is the best.

 

[Eddieandgail]

We have bought, and sold, boats in TX, MD, NC and almost in FL. In all those cases the earnest money deposit was made after buyer and seller agreed on a price. I am now dealing with a broker in LA who insists that I submit a 10% deposit with my original offer before he will even contact the buyer.


Seems fishy to me, why pay the wire charges if you may never agree on a price?


Bob

If I’m a serious buyer and think the boat is desirable then so might someone else. If I make an offer with no Ernest monies I would think that would allow broker/seller take other offers or use mine to help boost selling price. “We have an offer for $175k but you can buy the boat out from under them” if no deposit then you lose.
Eddie and Gail

 

[BruceK]

If I’m a serious buyer and think the boat is desirable then so might someone else. If I make an offer with no Ernest monies I would think that would allow broker/seller take other offers or use mine to help boost selling price. “We have an offer for $175k but you can buy the boat out from under them” if no deposit then you lose.
Eddie and Gail

Paying a deposit without your offer having been accepted and a binding agreement for sale and purchase made(in some enforceable form) won`t stop the seller selling to someone else.
In real estate here it`s called "gazumping", happens often in a hot market.

 

[RossWilson]

Deposits and Offers

It's a common misconception that the deposit is consideration. Legally, the deposit is merely another term of the contract. The consideration is technically the promise inherently included in the contract to fulfill all the agreed terms of the agreement.


A deposit can certainly be submitted with an offer, but should not be cashed until a contract is made since the deposit is, as I said, just another term of the yet to be agreed contract. So, aside from a broker's personal incentive, which is of no serious concern to the parties of the negotiations, there's really no justifiable motivation for a party to the proposed contract to demand or submit a deposit with the offer.



However, once a contract has been made, the deposit should, by agreement, be submitted and processed by a certain agreed date and held either in trust by the brokerage, or in the case of a private sale, in a non-interest-bearing segregated or non-segregated account pending the outcome of the conditional contract. Who holds the deposit and the terms under which is is to be returned or forfeited are, of course, subject to negotiation of the parties.


The problem with the marine sales industry is that there seems to be no oversight by a governmental body or responsible national organization. And there's certainly no ethical standards, or even contract standards. My own experience with the industry left me feeling that I had been maliciously deceived for personal gain by the brokerage who was supposedly representing my interests.


My trawler is for sale https://www.boatdealers.ca/boats-for-sale/383503/monk-mc-cruiser-42-georgian-bay-ontario privately, and I've amended what I was told was a standard contract. I found it highly deficient. It failed in clarity and completeness. The revised version is far better at protecting both parties, thus leaving little room for misunderstanding of terms. And it also reduces the possibility of litigation for a failed contract, unless, of course, one of the party reneges on his or her agreement.


I hope this helps clarify this matter. Bottom line? How and when and the amount of the deposit is subject to negotiation by the parties of the proposed contract, and not by the brokerages involved.

 

[dhays]

If I’m a serious buyer and think the boat is desirable then so might someone else. If I make an offer with no Ernest monies I would think that would allow broker/seller take other offers or use mine to help boost selling price. “We have an offer for $175k but you can buy the boat out from under them” if no deposit then you lose.

Eddie and Gail

Just because you deliver an offer along with a deposit doesn’t meant that the seller won’t receive and accept an other offer.

 

[BobH]

Never even considered asking for a sea trial or survey prior to having my offer accepted and a deposit having been made. Object to making the deposit before the offer is submitted to the seller. Once accepted and a written agreement with the seller's signature is made then a deposit is made.
All irrelevant now, seller decided to keep the boat. Found out just in time to avoid another road trip to look at it again.

 

[brcdive]

In my dealings with brokers they all demanded 10% earnest money up front with your offer. I got burned one time on $6,000. I had to get a lawyer to get my money back. The broker claimed that he had incurred expenses. He ended up $500. Never again. They all still want 10% up front. I give them a check for $500 and tell them I want the check back at closing. This has worked for the last 5 boats.

 

[IsaiMelton]

I totally understand where you're coming from – it's important to be cautious, especially when dealing with financial matters. It does seem a bit odd that the broker is requesting a deposit upfront before any price agreement.

 

[sunchaser]

I totally understand where you're coming from – it's important to be cautious, especially when dealing with financial matters. It does seem a bit odd that the broker is requesting a deposit upfront before any price agreement.

On expensive yachts it is not uncommon that a six or seven figure deposit accompany an offer. Financial surety on the part of the buyer needs assurance somehow.

We just sold our boat. No listing but a reputable broker handled the paperwork with the buyer paying the fees. A 10% deposit was put in place prior to sea trial and survey.

 

[DrakeHeyman]

In my experience with buying and selling, earnest money deposits usually come after both parties have reached an understanding.

 

[Bacchus]

I believe the 10% upfront is a brokers way of ensuring the buyer & seller don't get together and conspire to "do the deal" w/o the broker involvement.
The brokers deposit the check in their (escrow) acct and it ends up as their fee assuming the deal closes. The seller never sees it or controls the deposit.
With that said I have had my buyers broker contact the selling broker and negotiate buyers offer and brokerage sharing prior to me issuing the 10% deposit. The verbal discussions have little or no standing until it is reduced to writing, signed and deposit paid... even then there are many outs for parties involved.