Non-Compete and Non-Disclosure Documents

Bird Dogs, Wholesaling
1

When wholesaling, do any of you use these documents to help protect your interest in the property?

I’m kind of in the middle. On one hand, knowing some of the investors in my area, I would rather use it. On the other, I don’t want to start off a relationaship with a potential buyer overshadowed with feelings of mistrust.

I can read people fairly well. It’s the marginal situations, where I can’t get a good read on the person, I’m concerned about.

If anyone has any sample documents, or know where to get them, please let me know. TIA

2

I’ve never considered these documents in real estate…only in the business world.

I’m not sure that you can even rely on these documents to protect you. The bottom line is that they are only as good as the people who are signing them. If they want to screw you, they will.

Also, a non-disclosure agreement can not cover information that is already in the public domain, which most real estate data is.

What data, specifically, are you trying to keep confidential?

I guess I don’t understand the reason for the non-compete, too. Are you afraid that your end investor will go around you to the homeowner direct? I mean, that’s not overly desirable, for sure, but don’t you have a contract or a deed or some other document that ties up the property?

3

Paul,

Thanks for the reply.

My biggest concern was someone trying to circumvent me, and take the deal out from under me. Ultimately, as you stated, if I have a contract, I really should have no cause to be concerned.

If I can’t get the deal done, and the purchase contract lapses, or the option to purchase expires, I haven’t done my job, or the deal was crap from the start.

You’re right, if they really want to screw you, they will try just about anything in order to do so.

I guess I was just putting the “cart before the horse”, and worrying about something before it happened.

Thanks again,

Guy

4

I think you have to do it the way most people in the business do it, and that’s go without. Seems like you’ve come to accept this.

For what it’s worth, most buyers who use wholesalers come back to them for multiple properties, so it’s not taking the long term view to do an end run on you. They specifically work with wholesalers because they do not have the time, knowledge, or desire to do the legwork. They will make more money over the long haul by working with you multiple times as opposed to stealing your fee from you once.

5

There are three things as a wholesaler that you can do to help alleviate the fear of the go around.

  1. work only with reputable buyer/investors. Get referrals. Get their information. Don’t give out all the info on a deal before you know if they are even capable of closing it. Get to know the buyer(s).

  2. find good deals. Sounds simple, but I’ve seen several new ‘wholesalers’ try to offer me “great deals” OVER retail value BEFORE the repair estimate is figured in. Don’t overestimate value, and don’t underestimate repairs.

2.1) (BONUS) Give good deals. If you find good, or great, deals, pass the bonus on to the rehabber. The goal of a wholesaler is to make profit on quantity, not quality. Don’t try to squeeze every last dime out of a deal. The more left for the rehabber, the more they will buy from you.

  1. Be able to close the deal yourself. One of the main reasons that many new wholesalers get the go around is because they can’t, or won’t, close the deal themselves and they almost always tell the buyer. Money is money, and even the honest investors may decide to simply wait you out instead of paying your $3-5K fee, especially on tight deals (see #2 above). If all you offer are marginal deals, then sidestepping you isn’t seen as a big business loss, either. The simple way to NEVER get the go around is to be able to close the deal. And here’s the thing. If it’s a real deal, then you should be able to find a buyer. And if you don’t, then you’ll have a great rehab and big profits.

  2. Deliver more than promised (prime example). Finding great deals is a big plus. Having a real deal AND having multiple financing options available, if needed, seals the deal. The more valuable you are to your buyer(s), the less likely they are to disrepect you (aka the ‘go around’).

Raj

6

Thanks for the great info Raj! :beer