What prevents the final buyer from just buying the property and going over me?

Question

Ok so lets say that you are going to make a really handsome profit from an assignment of contract and still get your end buyer a good deal. What prevents the end buyer from just forfeiting on a contract right at the last minute, then your contract with the seller is voided and then your buyer just buys directly from the seller? Thanks in advance for your responses!

Matt Devincenzo · Answer

What all the others said plus a nice healthy EMD. No matter how I'm closing cash, HM, financed I have no problem putting down a 5K EMD because I would have that in the deal anyway, and it shows you who at least has some cash and is willing to put their money where their mouth is so to speak. (also will help weed out the wholesalers trying to wholesale your property)

Ibrahim Hughes · Answer

I call it 'posturing'. In other words adopt the attitude that you know what you're doing (even when you don't) and can get great deals all day long (even when you can't). Make the end buyer feel as though if he screws you over, he may make an extra $20k but he'll lose ALOT more because 1) the pipeline of great deals you were going to plug him into just closed and 2) you know enough serious wholesalers out there that once he rips you off, all other wholesalers will know he's a crook as well.

Again it's more of an 'attitude' than it is a 'legal' thing. I concur with the other suggestions. But at the end of the day life is so much easier when you don't have to drag someone into court over a civil suit or send letters back and forth between attorneys reminding someone of what's legal and what isn't.

The same goes for dealing with sellers. Establish a strong enough rapport and you won't have to worry about anyone going behind your back. When they do they will see that you have the seller squarely in your back pocket.

Wayne Woodson · Answer

Like others have stated non circumvention contracts are your best weapon against this. Also you could cloud the title with a memorandum of option or memorandum of agreement but I personally have never used one. Here's why...

I am a firm believer in karma. When you start clouding people's title and taking people to court you open the door for people to file lawsuits against you, file Cease and desist orders against you, report you to the better business bureau etc, etc.

If you have a large website like mine or like to post your deals on places like Craigslist watch out! You really open yourself up to a lot of snakes who think it's cool to go around someone on a deal just to save a couple of bucks. The snakes are out there, you just have to keep the grass cut low. If someone goes over me on a deal I just blacklist them from my site and tell all my real estate friends about them.

Ryan Logsdon · Answer

Hi Niranyan Figueroa,

Depending on your state's laws, you should just need simple non-compete and non-disclosure clauses in the contract with your client.

-Ryan

Bill Gulley · Answer

Many have been guruized, non-compete agreements are not really applicable in RE, such ideas are adopted from other business arenas, for example in a franchise where I have a protected territory, you can't have a protected territory in RE so much unless it's under the umbrealla of a comapny and I've never heard of that. Non-disclosure is simply keeping an agreement, the details confidential, I can keep my deal  with you confidential and still sell without ever mentioning you or our agreement. Such is basically eye wash guys.

Just look to a stadard RE contract in the default provisions. It's customary that default will award 10% of the sale price for or as liquidated damages and if not paid upon demand the party in default agrees to pay costs of court, reasonable attorney fees and collection costs, so defaulting can get expensive.

You can never force a seller to sell, you can make them wish they had!

I suggest you look to your state sale contracts and adopt the same default provisions as has been approved and nothing more. If you need to get before a judge to enforce an agreement they will more than likely go with what is generally accepted, what is customary and has been used before. Seeing some inappropriate clause does more harm than good, the guy in the rob is either laughing under his breath or is getting ticked at the novice goings on. You'll end up having to prove actual and consequencial damages, such being reasonable under the circumstances if you get off the track of what is customary for your area. You won't be the first to try to enforce a RE contract nor will you be the last.

Just stick to customary, lots of areas in RE where it's best not to get creative. :)

Niranyan Figueroa · Answer

Thanks a lot guys. What I'm going to do is put a non-cicumvention clause as well as an EMD. Everyone's responses were really helpful, thanks!

Ryan Logsdon · Answer

Yep, just like Joel Owens said.

I had a potential partner who wouldn't sign a non-disclosure, and there's where our business relationship ended.  Easy as that to see their intentions.

Joel Owens · Answer

Having NCND's and other provisions in the contracts will show the INTENT of the buyer.

If they plan any funny business you will know it from their objections to signing your protection provisions.

It's better to know how they will act upfront and not do business with them then to learn this on a deal and lose out.

Anson Young · Answer

Enforceable contracts, reputation, etc.  It does happen I suppose, not really often enough to be an issue.

What prevents the final buyer from just buying the property and going over me?

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