Brokers fees and commissions

[jcollins]

I decided to finally get serious about selling Afterglow and contacted a broker. Good guy, respected and well known name around here. This morning I'm looking over the contract and besides the customary 10%, he added a minimum commission fee.
For example my asking is 40,000. He set the minimum commission at 4000.00. To me, that's fair if he sells it for 40,000. But, if he sells for 35,000, I'm still paying 4000.00 or 11.4%.
Am I out of touch? Is this a new way to charge brokerage fees? Or, am I misunderstanding the following?

5. Commission. Upon the sale, donation, trade, charter, or exchange of the Vessel, Owner will pay Broker a fee of 10
percent of the gross sale price or a minimum commission in the amount of $4000.00 , whichever is
greater (the “Commission”). All deposits are subject to clearance. Broker may pay itself the Commission from any
deposit. Owner hereby irrevocably assigns to Broker the right to payment of the Commission from the deposit, no
matter who is holding such deposit. Any sub-listed broker involved in the sale shall receive its fee from Broker. The sale,

[hetek]

As a data point, a small, local broker I've bought/sold boats and trailers through in the past has a 10% commission but a minimum of $500.

I sold my 27' Sea Sport Pilot but the buyer didn't want the trailer with it. My broker sold the trailer for me for $1,200. I pocketed $700.

Even $500 minimum sounds like a lot for a trailer sale but I got full price for the boat. The trailer money was a bonus.

Maybe you can negotiate the minimum down a bit?

[jleonard]

I would negotiate him to a flat 10% and be ready to find another broker if he declines.
Even if the next one has the same "deal" you will have made your point.

[jcollins]

I would negotiate him to a flat 10% and be ready to find another broker if he declines.
Even if the next one has the same "deal" you will have made your point.

I agree. I sent him a note basically saying that I'm not comfortable with the flat fee. It may be that he has plenty of boats right now and is just not hungry.

[Ben423]

Remember that the broker only presents offers to you. The offer may be higher or lower than your asking price and you decide whether to accept it. The best way to work with a broker is to know the real market value of your boat and price it accordingly. For example, if an owner thinks his boat is worth $50k but the broker knows it's only worth $25k, he'll gladly set the commission at 10% or $5k minimum. But you won't be happy if you end up accepting an offer of $25k. If you know the true market value of your boat and price it accordingly you're more likely to have a quicker sale and a satisfactory outcome with the broker.

[Norseman]

10% is the usual, never heard about minimum $ amount.

Perhaps the broker thinks the boat is crap and won’t sell anywhere close to asking price and he is trying to protect himself as he works just as much selling a $25k boat as a $50k boat..

[Pitou]

Hey John -

I sure hope that the brokerage exposure will get you to where you would like to go.

The devil is always in the details that's for sure. Yes, 10% is always the standard fare, but depending upon price things can become negotiable. I would also want to know and to have in the contract what percentage of the sales price or dollar compensation that the broker will be offering to other boat brokers who might bring you the buyer. Cooperative compensation is a must to get other brokerages involved.

As far as the broker setting a minimum fee .. as a consumer I don't like it, but I get it as they need to stay motivated especially if he is an employee. Remember, if his minimum fee is $4,000 and he or she is honorable and shares 50% of the fee with a buyer's broker and he is left with $2,000 for himself and then shares 40 to 50% of that with the house the broker is getting $1,000 to $1,200 before Uncle Sam and State grab their "Fair" share. It quickly becomes hardly worth getting out of bed for! Try putting yourself in the broker's shoes.

As a lifelong straight commission sales guy I get where the broker is coming from and have often had minimum fees on the lower end of my sales spectrum as it has to be worth my time, otherwise I politely refer the business out and move on to something that compensates me to what I feel is "Adequate for my Time".

Here's a suggestion: Maybe consider a "dual rate" commission structure .. 10% if he sells it himself and a flat fee of $4,000 if he co-brokes with another boat broker.

All my best!

[Yearwood]

Brokerage commissions are negotiable and the broker can propose anything. The broker is always looking to secure the payment and the broker's loyalty is generally to the transaction. That is, get it sold, and get the commission.

Don