Investor Non-Circumvention Agreement before P&S Agreement

Member since 2018 · 4 posts · 0 votes

Hi all.

Would it be considered acceptable or ridiculous to ask an accredited and very active RE investor who is interested in a deal you are looking at (whom you hope to develop a positive relationship with and or/ partner or invest with you) to sign a non-circumvention agreement, prior to them seeing the deal AND prior to having the deal in question under contract?

I do realize this may be a chicken before the egg scenario. Just trying to gauge it.

Thanks.

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Ned CareyPro Member
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Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes
7y
@David Dunne if you put a non compete non circumvent in front of me , I know you are an idiot newbie. It tells me a few things.
- You don't trust me. That is a red flag in my book.
- Two, you may not have the property under contract,
- Three, you don't know how to control a deal.
PS: of course there are investors without any integrity and maybe you should use a NDNC I generally just choose not to do business with them
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Don KonipolBusiness Member
Investor · The Woodlands TX / Avon, CT · Member since 2009 · 6k+ posts · 10k+ votes
7y
@David Dunne
I concur with Ned. While most of our deals are brought to us by brokers, these brokers usually have an agreement or contract with the seller or borrower.
Less experienced people trying to ‘partner’ in a deal are worried, and sometimes rightfully so, that the deal will be done by someone they’ve contacted with themselves “cut out”. The solution is to get the property under contract before promoting it to outside investors.
Many newbies are of the misguided belief that because they’ve identified what they think is a good deal in the marketplace they can find a money partner and get 50% ownership for finding the deal. The problem with this is that (1) the deal they think is ‘great’ is probably mediocre at best; their lack of experience and expertise causes them to either mis analyze or exclude information , (2) the ‘off market’ deal they found is not off market, it’s just not listed with a broker, and (3) with no money or experience they don’t bring anything to the table worth an equity position.
At best they might be able to obtain a broker fee. However, since they’re not a licensed broker they are probably not entitle to a fee. At least legally.
In my opinion a person trying to orchestrate a real estate transaction in which he has little money or credit to use should either get the property under contract or reach an understanding with the seller before he approaches any investors. For me personally unless the finder has one of these two things I don’t want to deal with him at all.
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