How Well Do NonDisclosure And Non Circumvent Agreement Hold Up In Court
Hi I a an investor who is pretty savvy finding deals for people. I can almost find you what you want however there are some times where I am in negotiations with a party and a deal isn't signed through yet. I have missed out on a couuple deasl becuase of this but a friend of mmine recently told me that if you sign a NonDisclosure and non circumvent agreement with your potential buyer it prevents him from going around you even if you don't have a deal signed yet. My question is how well does this process hold up in court. Does a investor who knows that another investor is selling a property but they haven' listed on a mls but you came across it is that information consider a trade secret and eligible for this type of agreement. Or is this only eligible to commerical real estate brokers. Please comment fellow investors.
It is possible to construct non-compete/non-circumvent agreements that will hold up in court (i.e. there is nothing illegal or against public policy in them). Although they have to be worded carefully to avoid the problem of real estate licensing requirements.
The problem is usually not in the agreement it is in the deal. Part of the problem, as you point out, is the difficulty in proving that you are the "procuring cause". One of the ways to do this is to add www.value--i.e. to do something other than just locate the properties. Prepare a financial analysis or do some other work that is not generally available. While the information that "A" is for sale is out there in the market place, the information that "A" needs a particular list of renovations, that the comps are priced at $xx, that market time in these comps seems to be a factor of the curb appeal or whatever is not generally available and this added value information strengthens your position.
The final problem is that usually the numbers in these transactions are not worth suing over. If you are getting sorta typical bird-dog/finders fee kinds of compensation are you really going to sue for your fee? Not when filing the suit is going to cost a couple thousand and taking it to trial 2 or 3 thousand more.
The answer is not to deal with investors who do this to you. So you will have invested some time on them once. But they have lost a potentially valuable source and contact.
As commercialking points out, the difficulty lies in how the agreement describes the nature of services performed. For instance, PA law specifically prohibits anyone without an RE license from suing to recover compensation for services that require an RE license. If your state has a similar law and the investor knows it, he could stiff you knowing that you would have no legal recourse.