mikehar
Veteran Member
I have to vent for a second. I’ve learned a couple of lessons the hard way selling boats over the past year. Selling a boat is a fundamentally different type of transaction than selling a house. Over the years, regulations have been put in place to explicitly protect the buyers and sellers from all manner of situations. While many brokers may use similar terminology, they are not the same.
Escrow is a great example. For instance, unless you do something special, there is no escrow when selling a boat. I was under contract for the sale of my boat. The buyer put 10% “down,” and we proceeded through the process. Everything went fine until the day of closing. After the documents had been signed, the buyer got cold feet and did not wire the funds.
I thought, “no problem, I’ll pocket the 10% and sell this boat next week for more!” It turns out that the deposit is not put in escrow but is held by the buyer’s broker, who declined to make that available. Furthermore, had he made the deposit available, up to 50%!! of the deposit would be allotted to the brokers to cover their expenses. You’re relying on the integrity of the buyer’s broker to manage this in your best interest. What I found was that neither broker thought that the deposit should have been forfeited. Brokers seem to value their long-term inter-broker relationships more than that of their transient clients.
(Ultimately, the buyer had a change of heart again and did buy the boat from me at a newly increased price.)
Another example of how there is no escrow and how the buyer’s broker can work against your interests happened to me in another instance where I was selling a boat. The buyer and I agreed to hold back some money for repairs. I wanted to close the deal quickly because I was buying another boat at the same time. Otherwise, I would have managed the repairs myself.
For a house, this would be escrow. For a boat, quite a bit different. In this case, there were two big problems. The first was very poorly worded holdback language in the closing statement that broadly defined “repairs.” The second problem was that the distribution of the holdback was at the sole discretion of the “Selling Broker.” However, the “Selling Broker” was defined (and I missed this) as the buyer’s broker! My broker was the “Listing Broker.” The sentence read, “Funds held in reserve for repairs under control of Selling Broker.”
After some time, the buyer and I didn’t agree to the repairs (and other things). In the interest of moving on, I was prepared to agree to release the funds if the buyer signed a release. He declined. Then the buyer decided that he would exercise his contractual right to have his broker take back the holdback without notifying me. Once again, this was reliant on the ‘honor’ of the buyer/buyer’s broker, which is a horrible way to do business. I have to admit; I’m super pissed about this. There was a lot of unfortunate cussing today.
I’m not sure how this will end. In a significant sense, it is over. Maybe the buyer will sign the release, but I don’t see why he would do it now since he didn't sign it before. I will run into this guy; it’s a small world. I’m not sure how I feel about that. I haven’t met him yet, which is another tangent I won’t get into (brokers wouldn’t let us meet). I generally have good and long relationships with the people who buy houses and boats from me. Not this time.
Funny side note. The closing service had accidentally released the funds in question to me the previous week. I notified them and wired it back.
So what have I learned? Pay the $ to have your docs reviewed by an attorney.
I own up to my own sloppiness. Both issues were in the contract there for all to see. The deposit language was specific. I read it at the time but didn’t give it the proper thought, and it was a boilerplate agreement that this well-respected broker has used hundreds of times. On the second issue, I should have insisted on a narrower definition of repairs (I was in a hurry, I let it slide), and my broker/representative should have noticed the problem with the control of the funds. After all, I do pay them for something, yes?
I won’t be selling a boat for the foreseeable future; we love Gallivant and I think she’ll be with us for a long time – those are truly the best days of boat ownership.
Escrow is a great example. For instance, unless you do something special, there is no escrow when selling a boat. I was under contract for the sale of my boat. The buyer put 10% “down,” and we proceeded through the process. Everything went fine until the day of closing. After the documents had been signed, the buyer got cold feet and did not wire the funds.
I thought, “no problem, I’ll pocket the 10% and sell this boat next week for more!” It turns out that the deposit is not put in escrow but is held by the buyer’s broker, who declined to make that available. Furthermore, had he made the deposit available, up to 50%!! of the deposit would be allotted to the brokers to cover their expenses. You’re relying on the integrity of the buyer’s broker to manage this in your best interest. What I found was that neither broker thought that the deposit should have been forfeited. Brokers seem to value their long-term inter-broker relationships more than that of their transient clients.
(Ultimately, the buyer had a change of heart again and did buy the boat from me at a newly increased price.)
Another example of how there is no escrow and how the buyer’s broker can work against your interests happened to me in another instance where I was selling a boat. The buyer and I agreed to hold back some money for repairs. I wanted to close the deal quickly because I was buying another boat at the same time. Otherwise, I would have managed the repairs myself.
For a house, this would be escrow. For a boat, quite a bit different. In this case, there were two big problems. The first was very poorly worded holdback language in the closing statement that broadly defined “repairs.” The second problem was that the distribution of the holdback was at the sole discretion of the “Selling Broker.” However, the “Selling Broker” was defined (and I missed this) as the buyer’s broker! My broker was the “Listing Broker.” The sentence read, “Funds held in reserve for repairs under control of Selling Broker.”
After some time, the buyer and I didn’t agree to the repairs (and other things). In the interest of moving on, I was prepared to agree to release the funds if the buyer signed a release. He declined. Then the buyer decided that he would exercise his contractual right to have his broker take back the holdback without notifying me. Once again, this was reliant on the ‘honor’ of the buyer/buyer’s broker, which is a horrible way to do business. I have to admit; I’m super pissed about this. There was a lot of unfortunate cussing today.
I’m not sure how this will end. In a significant sense, it is over. Maybe the buyer will sign the release, but I don’t see why he would do it now since he didn't sign it before. I will run into this guy; it’s a small world. I’m not sure how I feel about that. I haven’t met him yet, which is another tangent I won’t get into (brokers wouldn’t let us meet). I generally have good and long relationships with the people who buy houses and boats from me. Not this time.
Funny side note. The closing service had accidentally released the funds in question to me the previous week. I notified them and wired it back.
So what have I learned? Pay the $ to have your docs reviewed by an attorney.
I own up to my own sloppiness. Both issues were in the contract there for all to see. The deposit language was specific. I read it at the time but didn’t give it the proper thought, and it was a boilerplate agreement that this well-respected broker has used hundreds of times. On the second issue, I should have insisted on a narrower definition of repairs (I was in a hurry, I let it slide), and my broker/representative should have noticed the problem with the control of the funds. After all, I do pay them for something, yes?
I won’t be selling a boat for the foreseeable future; we love Gallivant and I think she’ll be with us for a long time – those are truly the best days of boat ownership.
Lots of other differences, bottom line read the contract, ask to see a copy of the perspective contract from your listing broker, before you list with them. If they refuse, find another broker. Oh, and on the issue of splitting any forfeited earnest money, that's making it's way into real estate too. We sold a house three years ago, one last year, and one is listed right now. All the contracts stated that in the event of forfeit of earnest money, the forfeited money would be split equally between the Seller, and the Seller's agent . . . yeah, THAT ain't happening. I don't feel that a broker (be it boat, or house) should profit from not closing a deal . . . All the realtors were told that that was non-negotiable. All three agents told me it wasn't in the contract, until I pointed it out to them. We lined through that part, and one of the agens said she would get the broker's approval before we signed the contract. One refused, so I told the agent her services were no longer required. Two days later she called back and said that her broker had changed his mind, and the lined through portion could stay. I informed her that we had already listed with another company. 
