Circumvention: How to Stop It

Can sign a Noncircumvention-NonDisclosure Agreement with investors you work with. Other DG members have been asking about this agreement, but I don't know where to find it. Possibly your lawyer knows about it or can write up one for you. There is a thread on here somewhere on here, that someone else was asking for the same thing.

RENinja

I've used NCND's in the past, but I've also heard that those do not hold there weight in a court of law.

Hey Jason,

unfortunately there are some unethical people out there, and we cannot change that. In the future, I would be very cautious with any investors who you have not done any deals with (yet); ask them about their last deals, names of other investors they have worked with, and screen them just like you would screen a prospective tenant or buyer whom you would show your properties to.

You can also have the investor sign a non-circumvent agreement prior to showing him any properties

Wishing you success,
Valerie

Really? Then what do you do when that situation happens?
I guess it would be best not to give out the address or show the property until you got it under contract.

RENinja

Don't know I've never taken anyone to court over it. Also I had the property under contract, somehow he still got the buyers information.

Jfree98, then you have the right to sue the seller for damages right? Your contract shouldn't allow the seller to back out for an arbitrary reason as "I want to sell to some other person".

RENinja

Who said that the NCND wasn't solid in court?

I guess I could do that. But I guess my question is how do I prevent the circumvention altogether. And I guess the only real way is an NCND. Someone just told me that I can record the contract between me and the seller.

NCND aren't worth much. What do you do if you get one signed, divulge the information, and the other person says "Oh, I already knew about that property." They are usually used in a daisy chain where someone knows someone who knows someone who thinks they have a deal. Driving this guy around and doing what you did looks like you were an agent. Were you doing a double close or an assignment?

Just what I've heard from other investors.

Just an assignment. And he knew I was not an agent...in fact he's asked me that on numerous occasions. I've considered double closing however my fee was only $1500 so I don't think it is worth paying two closing costs.

We are not attorneys. You really want to make sure that you qualify who ever you're getting advice from. Only a attorney can answer that. The best thing to do would be to contact a local attorney that has had some experience with real estate investing and the agreements you're asking about.

Ask your investors what they want, tell them you will go find it and lock it up, and THEN they can get info on the property. Don't drive for properties with them. If you can't do NCND, then you can't stop this problem, except by getting the property under contract. Having investors who perform, and perform quickly, and who are honest will solve this.

RENinja

No need to treat this guy like his behind is made of gold. All the stuff you were doing for him were things an agent would do. In the future, ask for a non-refundable earnest money deposit from the buyer. What did the original wholesaler get out of this deal?

I am not a lawyer and I don't play one on TV. I offer this only as a suggestion and it should not be taken as legal advice:

I asked my personal friend (who is a lawyer) to supply me with a non circumvent Non disclosure contract, which he did. Why would he have one if it didn't hold any weight in court? Just something to think about.

Have your lawyer write up an agreement in which your buyer is obligated to pay you what would have been your fee on the deal PLUS any court or legal fees it requires to command that he/she pays should he/she try to circumvent your agreement. Maybe if he/she knows from the beginning that he/she is signing an enforceable contract with serious repercussions, he/ she will think twice before trying to cut you out.
That being said, NEVER show a property to a potential buyer until you have it locked up unless you are dealing with a bank or other professional institution. I seriously doubt that they would try to pull that kind of a stunt.(Hopefully I am not wrong on this.) Private individuals are another story. Unfortunately, I don't believe you can stop a seller from withdrawing from the sale (check with your attorney on this) but you can stop the buyer from getting the house without paying you. "I already know about this property" isn't a valid reason once they sign the NCND agreement unless they have a previous agreement on paper for the same property. (Once again, have this confirmed with your attorney.)

Obviously this guy is one of the scum bags you hear about in this business. Remind him that he just lost every other deal you would have had for him. Scratch him off your buyer's list and find a better buyer. Make sure everyone in your REIA group knows what happened so they don't get burned too. Just make sure that what you heard is true or else it's slander and you could be facing charges. I have always found that reputation is a trump card. A good one gets you everything. A bad one gets you nothing.

It comes down to your being in control of the situation. I'm sure most courts would frown upon such activities especially in today's times. Become friendly with your legal professionals. They may become your greatest ally.

Hope this helps...

Andy Sager
DG's AndyS

Awesome information Andy. I just talked to another investor I know and he told me that once money exchanged hand that the seller cannot back out of the contract. He also told me I can cloud the title. Have any thoughts on that?