Here at Boatinglaw, we were recently contacted by a seller who told the following story: he sold his boat the week prior through a broker on Kent Island, Maryland.  The buyers surveyed and sea trialed the boat before closing, paid their money and received the keys and title.  Then the buyers took the boat out and a pulley on the serpentine belt failed, the engine died, it was not clear if there might be other damage.  The sellers were in the process of buying a new house, and really needed to have the boat sold and lien paid off.  Uh oh.  Before I describe what happened next, let me say that this transaction was an aberration.  Most of the boat brokers and dealers that I have contact with are scrupulously honest and extremely professional.  The point of this article is to make sure that if you are buying or selling a boat, you end up in the care of a good, honest broker.  Those are the brokers that should receive your fee; their services will be well worth the money. 

Back to the blown serpentine pulley: the seller's broker inexplicably took up for the buyers.  He refused to pay off the boat loan and refused to provide the executed closing documents unless seller paid for the repairs.  When we read the agreement, there were many onerous terms: the "sale" was not complete at closing or delivery of the vessel, but when "consummated" (which according to the dealer meant when he decided to release the funds).  If a seller filed suit that related in any way to the agreement, the broker and the purchaser were entitled to attorneys' fees - but the seller was not, even if he won.  If the seller was successful in a suit, his remedy was one half of the deposit, less the costs incurred by the buyer, such as sea trial, survey, hauling charges, etc.  On the whole, the agreement provided many protections for the broker and buyer, but none for the seller - and this broker was supposedly representing the seller.  Perhaps the nastier aspects of the contract could be overcome, but at what price?  After we negotiated a resolution, we finally received the closing documents.  In addition, we learned that the settlement had actually taken place a week prior to the date represented by the broker - a week prior to the broken serpentine pulley.

For many people, the first step in buying or selling a boat is to find a boat broker.  Boat brokers are analogous to land-based real estate agents.  Depending on the agreement entered into, they may represent the seller, they may represent the buyer, or they may seek consent to represent both.  A savvy consumer will also recognize that at some level the broker also has his or her personal interests in mind.  A brokerage fee is generally around 10% of the sale price, so a broker may wish to maximize the price, or if times are lean, the broker may want to drop the price to move a sale.  These factors may be to the benefit or detriment to the individual buyer or seller.  Unlike land based real estate agents, there are no significant regulations on the industry and there are not even requirements that they maintain funds in separate trust accounts.

At the Lochner Law Firm, P.C., we are constantly working with boat brokers.  We work with them on boat tax issues and legislative questions, represent them when sales go wrong, refer business to them when our clients need assistance, and have clients referred to us as needed.  Here are some of the lessons we have learned about brokers and their agreements. 

1. Read the Broker Agreement: Read every contract carefully to be sure that it reflects what has been discussed orally, and be sure that you are comfortable with the terms that are set out.  Many reputable brokers use the Yacht Brokers Association of America form contracts - and we consider these pretty even-handed.  If you are not comfortable with the terms you read, consider finding another broker.  Also, it's usually a good idea to have a broker representing YOU only.  The total broker's fee is going to be the same total amount whether there is one or two in the transaction, so why not have a broker in your corner asking the right questions and looking out for your interests? 
   
   
2. Cheaper is Not Necessarily Better: Good brokers usually do not negotiate the brokerage fee down, particularly not at the beginning of a relationship.  You may be able to find a broker that does, but you may loose more than you gain through added costs or unprofessional conduct.
   
   
3. Write in the Added Terms: Ask what efforts the broker is going to take on your behalf, and write the important ones into the deal.  "Broker to visit the boat on October 1, 2005, take pictures, and report back."  "Broker to attend survey and sea trial." "Draft listing to be sent to seller for review by October 15, 2005."  With this information on your contract, you can measure whether the broker delivers on his or her promises.  Also if communications really break down, a hand-written addition to a contract is much better than a "he-said, she-said" situation.
   
   
4. Tax, Tax, Tax: If you own a boat on which a sales tax has not been previously paid, such as a federally documented boat, Delaware registered boat, or brand new boat, you need to pay or have a plan for tax.  If you are bringing a boat in, ask your broker for the appropriate DNR form to file with the DNR.  If you are buying here, and plan to leave under Maryland's form B110 (Certificate of Principal Use), be sure you comply with its terms, and document accordingly.  (eds. note: please see other articles for information on vessel tax).
   
   
5. The Money Trail.  At closing, your broker is going to have a big pile of your cash, so they better be trustworthy.  Documentation and finance companies or lawyers may be a better alternative for cash repositories since they will have trust funds and understand their fiduciary obligations.  Here are some things to look out for. 
   1. If commissioning is to be paid for out of the dealer's portion, make sure that a sum certain is held in reserve for this purpose, and it is only to be doled out at appropriate intervals. 
   2. Make sure that settlement proceeds are sent out immediately. Every minute that passes increases the chance that something bad or unanticipated may happen.  We see cases where the trade-in doesn't get paid off; the loan is not paid off; the total amounts are inexplicably short; and all manner of greed-based human failings.  You don't want your broker headed to the Bahamas with your loan pay-off.
   3. If you tell your broker, "you make the deal, I just need to clear $40,000" you still need to make sure you know the whole deal.  We had a case last year like that.  The seller was told the deal was $10,000.  The buyers received papers at $15,000.  Where did the $5,000 cash deposit go?  You guessed it: it went to the Bahamas and ate a hole in the broker's pocket.  No one wins in that situation. 

Most brokers and dealers are honest, hard-working folks who make it their business to assist their customers, sometimes even at their own expense.  But, just like there are bad lawyers, doctors and politicians, there are a few bad apples in the broker bunch.  And even good people can make an honest mistake or get over-extended.  Boat owners need to sit down and read their agreements, choose their brokers wisely, and stay in command of the situation.