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The Importance Of Non-Disclosure Agreements In Real Estate Deals

When it comes to real estate deals, we will explain why a non-disclosure agreement is a vital component in protecting the legal rights of every party involved in this transaction and why it is important to sign them.

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In reality, no one should sign a contract without reading them. After all, these are legally binding documents that can put you in a dangerous position once you have violated any of the stated clauses. However, when it comes to real estate deals, they are unavoidable since non-disclosure agreements serve  to protect the vested interest of all the parties involved.

What is a Non-Disclosure Agreement Form

First, a non-disclosure agreement is a standard document within the real estate community that strives to protect not only the buyer and the seller, but anyone who is involved in the deal. A confidentiality agreement prevents poaching of both the property itself and the clients since it treats all the information that was shared between all parties that was related to the deal as classified. 

Second, the non-disclosure agreement form clearly defines the obligations and rights of each party even when a sale has not been made just yet. Since the real estate market ushers in several offers at a time, it protects the identity of those involved, especially when the terms of the confidentially contract are clearly defined and stated. The non-disclosure agreement also guarantees that the deal would not be stolen from them by people without moral compasses.

Moreover, you would be glad to know that the non-disclosure agreement can provide equally immense benefits to each party involved. Often times, those who are unfamiliar with real estate deals are startled with the concept of signing a non-disclosure agreement form, but it serves as the protection for the person who discovered the property against being cut off the deal.

Non-Disclosure Agreement: Benefits For Broker

If you are acting as a middleman for a sale of a home, you might want to request the parties to sign a non-disclosure agreement so that no one goes around your back when transacting with the other party. Without a non-disclosure agreement, it will be trickier for the middleman to protect his or her possible commission when the buyer and seller decide to keep the deal between the two of them. The non-disclosure agreement will serve as your protection against being left off from the deal that you have actually brokered in concept.

In addition to this, it also highlights your role in the transaction and the importance of your function in completing the deal. It will guarantee that you would not be eliminated from the contract and that you are properly compensated for your work and for your contribution in the deal. If they refuse to sign the confidentiality agreement, all you would need to do is to find people who are willing to agree to your terms.

After all, the real estate business is always on the lookout for properties that offer great deals so it would be easy for you to find buyers and sellers that are eager to protect the confidentiality of the deal and would not exclude you from the transaction. The absence of a non-disclosure agreement would harm your chances of scoring a commission since there is no legal document that mentions of your part in the transaction, especially since the buyer and the seller could complete the deal on their own without your presence.

Non-Disclosure Agreement: Benefits For Buyer

If you are a buyer who is looking for a cheap property, the non-disclosure agreement will serve as your legal protection, especially when it comes to the personal and financial information that you will have to divulge during the entire negotiation process. There is no need to be scared to sign a confidentiality agreement since it is a standard form in the real estate business and it also guarantees to provide bilateral protection for the buyer, the seller, and any other parties involved.

Moreover, it also ensures you that the proper information will be provided to you to enhance and expand your knowledge on the property before you make a decision on your purchase. There might be certain information that could be withheld from you if you opt to not sign the non-disclosure agreement. Nevertheless, you can also choose to add your own confidentiality clauses that can be added to the contract so that it is mutually beneficial to all the parties involved.

Non-Disclosure Agreement: Benefits For Seller

If you are a seller of a cheap property, the non-disclosure agreement will protect you from being hounded by several buyers. Since the inventory of the real estate properties is low, agents are always on the lookout for cheap purchases. However, when you don’t have a non-disclosure agreement, the sale of your property will become public knowledge and you are making room for those buyers who will try and lowball you and your property.

You might not take notice, but there will be a sudden increase in the expenses related to the sale of your property since there will be more interested buyers lurking around your property. It is better to sign a non-disclosure agreement and keep your property on the down low while waiting for a legitimate buyer to purchase it.

Requirements For a Binding Non-Disclosure Agreement

The legal necessities in signing a non-disclosure agreement might be different per state, but it is important to comply with all the legal requirements that are required to make the contract valid. A non-disclosure agreement should never be made orally since that would not be binding in any courts of law. Apart from putting it in writing, it can be beneficial to have the document notarized in front of a notary public to enhance the legal form of the agreement.

Moreover, it is vital to list the names of each person related to the transaction and have them sign the contract to ensure that they are legally bound to follow the contract. There might be instances when an entire company becomes a party to the deal, the non-disclosure agreement would then require an official representative of the company to be their signatory. In addition to this, it is also important to ensure that all parties are of legal age and sound mind to make the non-disclosure agreement an official contract.

Tips on How to Explain The Non-Disclosure Agreement Clause to The Buyer or Homeowner

One of the usual problems that have been raised by real estate brokers when it comes to the non-disclosure agreement is that the client is usually apprehensive to sign the contract. We can’t blame the clients as they are sometimes unaware of the repercussions of doing away with the non-disclosure agreement. However, you can fix this by thoroughly explaining the need to have this document.

 Start by saying that it is a common practice within the entire real estate community to have a standard non-disclosure agreement form signed before they are allowed to be shown around the property since it avoids the poaching of the property being sold. Explain to them how this contract can be beneficial to them as well and that you will give them some time to review and examine the contract before they choose to sign them.

The seller and the middleman could also explain to the buyer that this is a way of limiting the number of potential buyers to a minimum number and this means that they have a higher chance of being able to purchase the property if they wish. Moreover, the broker can also explain that the non-disclosure agreement is not a lifetime contract since the contract will eventually be dissolved once the classified information has been revealed to the public. The confidentiality clause of the contract is only effective during the time when there is some key information that is being withheld from the general public.

It is also important to assure your client that the only important thing to remember when you are asked to sign a confidentiality agreement is to keep the classified information within them and there is no legal obligation to purchase the property. You are just looking at a property that is for sale and you cannot divulge the information that the aforementioned property is up for sale. It is simply like keeping a secret for a friend, but in this case the secret involves real estate trade information involving a real  property.

In conclusion, the non-disclosure agreement is not something for you to fear because it is designed to serve as your protection against any form of information leakage. This is a simple way of legally keeping the cards within the game. The need to have a non-disclosure agreement in any real estate deal is both inevitable and mutually beneficial to all the parties concerned so we hope that this article eliminates the pre-conceived notion that a non-disclosure agreement is an unusual practice in the real estate business. Believe me; it is not uncommon because any legitimate and experienced real estate person will ask you to sign one. The key to this is just read through the contract and you can never go wrong with your non-disclosure agreement.

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Alina Osmena

Writer at AssetColumn.com

Full Time Licensed Real Estate Broker for over 5 years. Part Time Writer. I will discuss about the real estate learnings, along with proven tips and tricks of real estate experts, that I have acquired over the years through the articles that I will be posting exclusively on AssetColumn.