Do NCND's serve a purpose?
It’s a rhetorical question that every broker should ask themselves because transparency battles kill more deals than one has the time to count. There is a paranoia that spreads like wildfire, causing them to protect their buyer’s/seller’s contact information until the other party walks. And if they don’t, oftentimes the broker is shocked to learn that the buyer & seller already work together directly, leaving a stain on his record for failing to accurately prescreen the deal to avoid wasting time.
The severity of this seems to increase along with the size of the deals brokers handle. When they begin dealing with “customizable packages”, the probability of actually catching someone going around you declines to almost zero because A) the package is typically customized after the contact information is disclosed, and B) people don’t willingly hand you incriminating evidence so you can sue them. If the broker was asked in court to describe the particular deal, they wouldn’t have a clue.
Furthermore, there are loopholes big enough to drive an oil-tanker through. Just off hand, think of all the junk portfolios you’ve seen shopped for months. There are countless, gullible intermediaries who take the bait and disclose actual direct buyers. When that particular deal ends, the middleman is cut out and the quality tapes are brought out for Mr. Deep Pockets to review.
Circumvention can be compared to the Boogie Man – everyone is afraid of him, but nobody has actually seen him. There are no horror stories I have ever heard of lawsuits taking place due to a one or two-page contract being violated.
Where are these supposed evil-doers who betray those who bring them business over one deal? Which brokers possess the x-ray vision necessary to track what buyers, some of whom are multi-million dollar corporations, are doing and who they’re speaking to?
One can only control their own honesty and professionalism. With all of the money floating around out there, far more profitability lies with pursuing deals rather than lawsuits...unless you’re an attorney. And when you can finally afford to upgrade, buying for yourself will put you in the driver seat and make circumvention irrelevant.
NOTE: This is not meant to be used as a reference. It is merely the opinion of the author based on his personal experiences.
Comments (5)
I always operate under the premise that if you have to sue someone to get what was promised to you then you have already lost. If you are suing over an amount less than $10k the NCNDA is completely worthless!
Bryan Hancock, almost 14 years ago
My primary point is like Marco's first sentence. The hoops one has to jump through to actually benefit from seeking legal action make it too costly. I will gladly trade one deal to reveal a dishonest person/company. Some might fight it, but I move on to those I can rely on. In the end, the big players get what they want anyway.
Nate Hananger, over 14 years ago
NCNDs are difficult to enforce at best. Often, the legal fees involved to prove and enforce don't make it worthwhile unless you are talking about a suit over $100,000. Still, you want to have one if you are on that side of the table. Even as a "Boogie Man", a little deterrent is better than none. Marco Santarelli Norada Real Estate Investments
, over 14 years ago
Why do many investors assume that once you asked them to sign a NCND that you are wasting time and actually don't have control over a deal? I feel there is a lot of negative assumptions when asking a potential buyer to sign a NCND. Why is that?
Matt Castelo, over 11 years ago
Are you saying you are willing to give specific property information to a potential buyer without any legal protection such as a NCNDA? What would stop your buyer from going direct to the seller and getting a better price for him/herself and cut you out? Just curious.
Will Barnard, over 14 years ago