Broker Lawsuit: Mike Joyce Is Right, But Does That Really Matter?

WHO REALLY PAYS THOSE SALES COMMISSIONS?

BROKERAGE CLASS-ACTION SUITS - SERIES BACKGROUND AND OPINION

Preface: This opinion piece is presented as background for the series that Peter Swanson (Loose Cannon) and Phil Friedman (For Yacht Builders, Buyers, and Owners) have teamed up to write in covering the multiple class-action suits that have been filed against several major players in the U.S. yacht brokerage sector. It also takes up a theme introduced in a previous edition of the series, by Peter Swanson’s confidential source, “Deep Bilge”.

Michael Joyce, CEO of Hargrave Custom Yachts (Fort Lauderdale, FL) recently published an article on LinkedIn posing the question, who really pays the commission in a yacht brokerage deal? (See “Who Really Pays …”) In Joyce’s somewhat ironic view, the yacht broker does.

I’ve known Mike Joyce since I was a Senior Editor at Power and Motoryacht magazine. In the intervening years, if I learned anything about Mike, it’s that he doesn’t run with the current. Consequently, whether or not you agree with him, it’s generally worthwhile to at least consider what he has to say. And according to Joyce,

“… the seller knows he pays all the commission in yacht brokerage, right? I mean the entire commission is listed right there on the seller's closing statement…

“Anytime the subject of commissions comes up with buyers they will tell you that they pay 100% of the commissions including the seller's commission and the buyer's commission…

“The conversation goes something like, ‘There is no commission until I show up with the money, and when you brokers keep telling me I have to raise my offer repeatedly, we all know we're just talking about your commission….’"

Joyce then goes on to make the point (as did “Deep Bilge” in a previous edition of this series) that both buyer and seller know and agree to the rate of commission prior to initiating the transaction that results in the sale of the yacht. So, Mike argues, the commission rate certainly doesn’t come as a surprise to either party to the sale; and neither should have a beef about it post-closing.

He also quips that,

“When it comes to commissions, the only thing the seller and buyer both agree on is that the broker is not worth the money….”

To which assertion, Mike naturally takes exception. And says,

“The seller immediately assumes that [without] a 10% brokerage fee [the seller] will put all that money in his pocket.

“The buyer assumes that [with no] broker involved he [could] be buying the boat for way less and keeping that extra 10% brokerage fee in his or her [own] pocket….”

Which Mike argues simply isn’t true because, without broker involvement/representation in between the buyer and the seller, a high percentage of potential deals fall apart, ultimately creating added costs for both. It’s Mike Joyce’s considered opinion, therefore, that,

“Good brokers don't cost you money; they save you money….”

Look, for the most part, Mike is correct. Indeed, I said in a comment on his LinkedIn post:

“Mike… I think you make several strong points here about brokerage commissions. The bottom line is (or should be) what is the least net a seller is willing to accept, and what is the most a buyer is willing to pay all up?”

But, Is This Really What the Current Legal Actions Are About?

I think not. Irrespective of what “Deep Bilge”, Mike Joyce, or others may (rightfully or otherwise) assert about the reasonableness (or lack thereof) of a 10% sales commission, it’s a mistake to think that the amount or rate of the commission in boat and yacht brokerage sales is truly at the center of the legal actions currently before the Court.