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.

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.

David

Mod45
What model and brand?

Could be the broker was really a upstanding guy. The kind of guy you would want helping you find and buy a boat.

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?

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.

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.

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.

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.

"verbal offer" is an oxymoron. If it's not written, it's not an offer.
Oldersalt

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.

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.

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.

twistedtree said:

.... 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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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)

Action said:

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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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.

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?

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.

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.

BruceK said:

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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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.

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.

mod45 said:

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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No, by law he can't represent both. By law, he was representing the seller, had a contract to do so with the seller only. That's the way it works.

Now, you don't know all the facts as to the other offer and things found and such, so you can't really say your deal was better. The problem is the seller never saw your offer so couldn't judge it. Whether it was conveyed to him orally and whether that conveyance fairly represented what you were talking about, you'll never know. You don't know who said what to whom. Go back in your memory to the game where everyone is in a circle and the first person whispers to the second. It goes around the room and then you all laugh hard and what ends up at the final person, nothing like what started. That same thing happens with just three people. I don't trust others to accurately convey what I say to them. Too many times in business, I've seen it go wrong. Once spoke to a heavy equipment service man and asked him to have the owner of the company call me. I get the call. It goes "Roscoe said you had a problem and needed me to call." I laughed and said "I didn't tell him I had a problem or why I wanted you to call. Actually I wanted to thank you for the excellent service you provide." That is one person with a very simple message and totally screwed up.

You were taking a unique approach, not a bad one, just different than many. Honestly, one that needed to be in writing to be clear. Broker might say "I've got another offer slightly less but he's willing to let some things go" or something nebulous and vague like that. In writing, you could have said, "Offer is xxxxx, subject to sea trial and survey. Buyer already recognizes A (estimated cost $xx), B (estimated cost $yy), C (estimated cost $zz), and D (estimated cost $qq) and has taken those into consideration and will not seek any reduction after survey for those items."

Had I, as a seller, seen such an offer as that, I might have said, "ok, he seems serious, he's examined it, I think his estimates on those items are high but still at least perhaps he's less likely to seek a huge reduction on survey. I like his approach." Now another seller might have said "The guy is pointing out things in advance. He won't ask for anything from them after the survey but he sounds like a guy who will ask for item after item post survey. No thanks." You don't know how it would have been received but at least the final decision maker would have been the one making the decision.

Action said:

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.

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Yes that's a solid explanation. Maybe he was surprised the sellers agreed to the repairs. All the more reason to get a written offer in front of them going forward, it would have been in the back of their mind.

BandB said:

You were taking a unique approach, not a bad one, just different than many. Honestly, one that needed to be in writing to be clear. Broker might say "I've got another offer slightly less but he's willing to let some things go" or something nebulous and vague like that. In writing, you could have said, "Offer is xxxxx, subject to sea trial and survey. Buyer already recognizes A (estimated cost $xx), B (estimated cost $yy), C (estimated cost $zz), and D (estimated cost $qq) and has taken those into consideration and will not seek any reduction after survey for those items."

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Thanks, going forward I will submit offers on paper, the seller not seeing it at some point probably cost me the boat. It's funny though, many times I've had brokers chant the mantra "put it in writing, put it in writing" and in this case he didn't push for it at all. He kept saying the number isn't high enough and this other offer is at asking price. Lesson learned. If I bump into the seller around the neighborhood, I might relay this information.

Funny enough, on another boat I messaged with you about BandB, the seller's "representative" told me not to waste the paper. We were apart by about 5%. I always felt his incentives were off, as he managed multiple boats for the very wealthy owner. One less boat for him was less job security. Maybe I'll call him back up and ask that he submit it to the owner in writing. I liked that one better anyway

mod45, I get that, but the seller did not. Your offer, atypical but intelligent and sophisticated, detailing what you would accept at survey without reducing your offer, never reached the seller. He was not put under the pressure of weighing up 2 offers of differing amounts put on different bases.That was because the broker, rightly or wrongly(as it turns out) believed the existing offer superior,while acting in the sellers interests,not yours.
Now the rectification work is being done, the sale will proceed, and the opportunity is gone. Except you have increased your knowledge on negotiation, broker behavior, and sellers thinking.

mod45 said:

Thanks, going forward I will submit offers on paper, the seller not seeing it at some point probably cost me the boat. It's funny though, many times I've had brokers chant the mantra "put it in writing, put it in writing" and in this case he didn't push for it at all. He kept saying the number isn't high enough and this other offer is at asking price. Lesson learned. If I bump into the seller around the neighborhood, I might relay this information.

Funny enough, on another boat I messaged with you about BandB, the seller's "representative" told me not to waste the paper. We were apart by about 5%. I always felt his incentives were off, as he managed multiple boats for the very wealthy owner. One less boat for him was less job security. Maybe I'll call him back up and ask that he submit it to the owner in writing. I liked that one better anyway

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That's a reason I do recommend a buyer's broker who might at least get a better read on things. There is effort in a written offer and a deposit. Typically I prefer a good faith amount with offer and deposit to be made within 24 hours of acceptance or something similar.

I've known many people to say they wouldn't accept something but then see it in writing and think about it and suddenly change their mind.

BandB said:

I've known many people to say they wouldn't accept something but then see it in writing and think about it and suddenly change their mind.

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+++ Yeah this happens a lot in Real Estate as well. Especially with an earnest deposit check pinned to the offer.

Oldersalt said:

"verbal offer" is an oxymoron. If it's not written, it's not an offer.
Oldersalt

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Exactly!


No self respecting broker would present a verbal.


No self respecting seller would respond to probing BS.

Following the oxymoron trail, it`s been said "an oral offer is not worth the paper it`s written on". But,an oral offer is still an offer. Even if a written one might be more attractive.

GMB said:

No self respecting broker would present a verbal.


No self respecting seller would respond to probing BS.

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Everyone's different. I'm not offended by any offer and certainly don't need to see it in writing because a buyer can back out of it several ways. If they're serious, the followup will happen within 24 hours, if not who cares.

I've sold businesses, solidified partnerships and bought/sold real estate with numbers that were exchanged in emails/calls and minimal due diligence. Certainly there's work after that number's been agreed to and it can fall apart depending on circumstances, but at the very least it assures a buyer and seller they are on the same wavelength and not wasting time.

One of my first businesses got a letter one morning, FedEx'd overnight from a huge law firm, stating that someone wanted to talk to us about an acquisition but we needed to sign an NDA and talk to their attorney. We tossed it. The next day the attorney emails us asking about the letter and we told him we didn't want to deal with someone who did business through a law firm. The third day I got a call from the owner of the business but our relationship was off to a rocky start and it never got serious.

A year later, a public company biz dev guy sends us an email asking to "talk" that afternoon. We were on a call within 2 hours. The next day the CEO and several VPs were at our office across the country at 830am. The day after that they made an offer on the phone and 3 months later it was done. Those 3 months were like an extended financial colonoscopy, but the framework of the deal was in place within 48 hours and no lawyers.

You never know the seller's broker agreement. It can be very unique. There may be little commission on the sale, cause he is buying a bigger boat, and using the same guy.

I use a broker when I buy. He can get info quickly, and the right broker may have more knowledge than me on the mfg or model. Truth be known, I can only be an expert on women and rum.

He can cut to the chase with the selling broker.

Your deal may have been better on paper, but the other deal could have been the third boat with one of the parties, a no brainer.

Think as a broker, getting a deal that far takes a lot of dead ends first. He was not going to risk it, if he had been listing the boat for six months. "One in the hand is worth two in the bush".

You can always submit a contingency offer, just in case the buyer steps in front of a bus or gets cold feet. That is a really powerful negotiation tool few use, for both sides.