Off-Market Property Goes on Market, is a Contract Still Enforceable?

[CalBayArea2]

My question involves real estate located in the State of: California.

I do "Bird-Dogging", or scouting per se. I find off-market property deals for developers that they would not be able to find otherwise and have no knowledge of. I provide pictures, inside information, connect them directly with the owner, set-up a walk through, and they have the chance to buy it off-market exclusively. If they do buy it, they agree to privately pay me a finders fee of the sale price.

I've been doing this for several years. I am not an agent, I do NOT handle any of the transaction aspect, so yes it is legal.

I always have them sign an NDA, and a non-competition agreement first- stating that they will not try to go around my back and approach the owner, or cut me out of the compensation agreement, etc....

But the thing is, I had a developer that said he was not interested in the property, but actually was waiting until it went on the market a couple weeks later, as the owner was intending to list it if he didn't buy it off-market. The second it hit the MLS, the developer was waiting and made the very first offer on it with the listing agent, and I got nothing out of it.

Can a NDA/Non-Competition contract force them to still compensate me if it goes on the market despite it now being public info?
Because if you think about it, they've already seen the property and have a huge head start with everything I provided them did for them.

 

[adjusterjack]

All I can suggest is that you take the contract to an attorney for review and then decide if you want to sue the guy.

 

[LdiJ]

All I can suggest is that you take the contract to an attorney for review and then decide if you want to sue the guy.

I agree, but for the future. I would suggest tightening your standard contract by adding a clause that says that if they opt not to purchase the property, that if it goes on the market within 90 or 180 days (or whatever you think is appropriate) and they choose to buy the property then, that they still owe you the compensation.

 

[quincy]

My question involves real estate located in the State of: California.

I do "Bird-Dogging", or scouting per se. I find off-market property deals for developers that they would not be able to find otherwise and have no knowledge of. I provide pictures, inside information, connect them directly with the owner, set-up a walk through, and they have the chance to buy it off-market exclusively. If they do buy it, they agree to privately pay me a finders fee of the sale price.

I've been doing this for several years. I am not an agent, I do NOT handle any of the transaction aspect, so yes it is legal.

I always have them sign an NDA, and a non-competition agreement first- stating that they will not try to go around my back and approach the owner, or cut me out of the compensation agreement, etc....

But the thing is, I had a developer that said he was not interested in the property, but actually was waiting until it went on the market a couple weeks later, as the owner was intending to list it if he didn't buy it off-market. The second it hit the MLS, the developer was waiting and made the very first offer on it with the listing agent, and I got nothing out of it.

Can a NDA/Non-Competition contract force them to still compensate me if it goes on the market despite it now being public info?
Because if you think about it, they've already seen the property and have a huge head start with everything I provided them did for them.

Do you have a contract with the property owners?

 

[Zigner]

My question involves real estate located in the State of: California.

I do "Bird-Dogging", or scouting per se. I find off-market property deals for developers that they would not be able to find otherwise and have no knowledge of. I provide pictures, inside information, connect them directly with the owner, set-up a walk through, and they have the chance to buy it off-market exclusively. If they do buy it, they agree to privately pay me a finders fee of the sale price.

I've been doing this for several years. I am not an agent, I do NOT handle any of the transaction aspect, so yes it is legal.

I always have them sign an NDA, and a non-competition agreement first- stating that they will not try to go around my back and approach the owner, or cut me out of the compensation agreement, etc....

But the thing is, I had a developer that said he was not interested in the property, but actually was waiting until it went on the market a couple weeks later, as the owner was intending to list it if he didn't buy it off-market. The second it hit the MLS, the developer was waiting and made the very first offer on it with the listing agent, and I got nothing out of it.

Can a NDA/Non-Competition contract force them to still compensate me if it goes on the market despite it now being public info?
Because if you think about it, they've already seen the property and have a huge head start with everything I provided them did for them.

I believe that what you are doing is illegal. You are entering the territory of what a broker/agent does...in other words, you are not simply finding the property and introducing the buyer to the seller. Providing pictures, setting up walk-throughs, etc. is broker/agent territory and requires a license. You simply saying that the scope of what you are doing is legal doesn't make it so.

 

[quincy]

I believe that what you are doing is illegal. You are entering the territory of what a broker/agent does...in other words, you are not simply finding the property and introducing the buyer to the seller. Providing pictures, setting up walk-throughs, etc. is broker/agent territory and requires a license. You simply saying that the scope of what you are doing is legal doesn't make it so.

I do not think CalBayArea needs a license to set up meetings between would-be buyers and would-be sellers. His business seems more like that of a matchmaker, bringing two parties together who might otherwise not have met.

California Bus & Prof Code: https://law.justia.com/codes/california/2016/code-bpc/division-4/

The problem I see is that he is signing contracts with the wrong terms and the wrong parties.

The property owner is not prevented from listing the home and selling it to one of CalBayArea's developers. The property owner has no contract with CalBayArea (at least, it hasn't been said that he does). The developers are not violating nondisclosure or noncompete clauses by purchasing a home that is listed.

 

[CalBayArea2]

I understand the skepticism, I get it all the time when people hear about what I do. However, Quincy is correct. It's like being a matchmaker.

I'm not stealing the pictures- I am in direct contact with the owner, and they are on board with it all. For instance, I tell them I know a developer that is interested in buying it, and the owner themselves provide the pictures and reports, etc. I just had a homeowner send me her inspection report she did recently, soil reports, and title report. Nothing wrong about that.


Also, as far as I understand, you do not need a license to buy a house off someone directly. You can set-up a standard contract, settle on a price, pick out a escrow/title firm, and proceed. I've had sellers specifically ask me if we could not use an agent in order to save the commission. I know several people that do this all the time that are not licensed agents. (I'm guessing licenses are only required for marketing on the MLS? Not sure.)

I do not think CalBayArea needs a license to set up meetings between would-be buyers and would-be sellers. His business seems more like that of a matchmaker, bringing two parties together who might otherwise not have met.

California Bus & Prof Code: https://law.justia.com/codes/california/2016/code-bpc/division-4/

The problem I see is that he is signing contracts with the wrong terms and the wrong parties.

The property owner is not prevented from listing the home and selling it to one of CalBayArea's developers. The property owner has no contract with CalBayArea (at least, it hasn't been said that he does). The developers are not violating nondisclosure or noncompete clauses by purchasing a home that is listed.

 

[quincy]

I understand the skepticism, I get it all the time when people hear about what I do. However, Quincy is correct. It's like being a matchmaker.

I'm not stealing the pictures- I am in direct contact with the owner, and they are on board with it all. For instance, I tell them I know a developer that is interested in buying it, and the owner themselves provide the pictures and reports, etc. I just had a homeowner send me her inspection report she did recently, soil reports, and title report. Nothing wrong about that.


Also, as far as I understand, you do not need a license to buy a house off someone directly. You can set-up a standard contract, settle on a price, pick out a escrow/title firm, and proceed. I've had sellers specifically ask me if we could not use an agent in order to save the commission. I know several people that do this all the time that are not licensed agents. (I'm guessing licenses are only required for marketing on the MLS? Not sure.)

You should sit down with an attorney in your area for a review of your business operation and a review of your current contract.

The nondisclosure clause in your contract offers only limited protection and noncompete clauses are (generally) unenforceable in California.

Good luck.

 

[justalayman]

I do not think CalBayArea needs a license to set up meetings between would-be buyers and would-be sellers. His business seems more like that of a matchmaker, bringing two parties together who might otherwise not have met.

California Bus & Prof Code: https://law.justia.com/codes/california/2016/code-bpc/division-4/

The problem I see is that he is signing contracts with the wrong terms and the wrong parties.

The property owner is not prevented from listing the home and selling it to one of CalBayArea's developers. The property owner has no contract with CalBayArea (at least, it hasn't been said that he does). The developers are not violating nondisclosure or noncompete clauses by purchasing a home that is listed.

They are doing much more than setting up meetings between owners and prospective buyers. I believe if this was taken before the cal real estate commission they would likely find the activities to fall under actions that require a brokers license, especially given this is in California.

Anybody can argue all they wish it isn’t illegal. Doesn’t make it so.

Section 10131 of the Code requires the licensure in California of a person who, for a compensation or in expectation of compensation, regardless of the form or the time of payment, does or negotiates to do one or more of the following acts for another or others:
• Sells or offers to sell, buys or offers to buy, solicits prospective sellers or purchasers of, solicits or obtains listings of, or negotiates the purchase, sale or exchange of real property or a business opportunity.

sounds like op is soliciting prospective buyers if not the sellers as well. He is acting as a buyers agent although limiting his activities to what he believes keeps him from requiring a license. I don’t believe he has done that.

You won’t find the law requires the agent handle any of the transaction to be required to be licensed. The mere solicitation of either buyers or sellers causes it to fall under the law requiring a license.


From the op

Because if you think about it, they've already seen the property and have a huge head start with everything I provided them did for them.

Sure sounds like op wants to make a “procuring cause” argument. Care to explain how he can claim to make such an argument without claiming he is acting as an agent? Simply pointing to a house and saying; you’ll like that one, does not create a procuring cause argument.


Holy cow. I missed this in my first read. From the op:

For instance, I tell them I know a developer that is interested in buying it, and the owner themselves provide the pictures and reports, etc. I just had a homeowner send me her inspection report she did recently, soil reports, and title report. Nothing wrong about that.

that is the specific description of what s real estate broker does. Where the pics or reports are obtained is meaningless. This guy is acting as an agent. He even made the statement: I know a developer. That is a direct representation of the developer.

If the op is so certain he is in the clear, I challenge him to copy this thread, attach his name and address to it and send it to the cal real estate commission with the single question attached;

Is this legal to do without a brokers license.


So, my advice is;
Oh yes. Most definitely file suit against the developer. I think you will be in for a big wake up call and not only lose your suit but might find yourself in the court next door where criminal charges are handled.

 

[quincy]

They are doing much more than setting up meetings between owners and prospective buyers. I believe if this was taken before the cal real estate commission they would likely find the activities to fall under actions that require a brokers license, especially given this is in California.

Anybody can argue all they wish it isn’t illegal. Doesn’t make it so.


sounds like op is soliciting prospective buyers if not the sellers as well. He is acting as a buyers agent although limiting his activities to what he believes keeps him from requiring a license. I don’t believe he has done that.

You won’t find the law requires the agent handle any of the transaction to be required to be licensed. The mere solicitation of either buyers or sellers causes it to fall under the law requiring a license.


From the op



Sure sounds like op wants to make a “procuring cause” argument. Care to explain how he can claim to make such an argument without claiming he is acting as an agent? Simply pointing to a house and saying; you’ll like that one, does not create a procuring cause argument.

It does appear from section 10131 that CalBayArea could need a license to bring two parties together. He should speak to an attorney in California for a review.

He will want to see an attorney anyway, for contract revisions if it is found his business is one he can operate without a license.

 

[Zigner]

I do not think CalBayArea needs a license to set up meetings between would-be buyers and would-be sellers. His business seems more like that of a matchmaker, bringing two parties together who might otherwise not have met.

That's not how he described it above. His services go beyond that of just introductions. At least that's how I understood the OP.

 

[quincy]

That's not how he described it above. His services go beyond that of just introductions. At least that's how I understood the OP.

I read it differently but see how you and justalayman are looking at it, as well.

I do not see anything being done by CalBayArea that should require a license - but I also do not see him participating in the transaction beyond an introduction as you do.

 

[Zigner]

I read it differently but see how you and justalayman are looking at it, as well.

I do not see anything being done by CalBayArea that should require a license - but I also do not see him participating in the transaction beyond an introduction as you do.

Scheduling the walkthroughs...

 

[justalayman]

Scheduling the walkthroughs...

The simple act of;

Hey, i have this guy (that i have a contract with where he pays me to locate him properties just like a buyers agent would, but I’m not really a buyers agent- wink wink) that might be interested in your property. How about you give me all of the info on your property and I’ll have a chat with him.

Oh, why don’t I simply give you his name and vice versa? Well...well...hmmm, that’s s good question. Since i cannot legally do anything to move the sale forward without a real estate license, well...damn...I don’t know but I’m going to remain as a middle man and I say I don’t need a license to do so.

Quincy, you need to understand it doesn’t require the person to negotiate a sale or play middleman in the negotiation. Licensure covers actions such as, as the code states, solicition of either buyer or sellers on behalf of another party for pay.


Section 10131 of the Code requires the licensure in California of a person who, for a compensation or in expectation of compensation, regardless of the form or the time of payment, does or negotiates to do one or more of the following acts for another or others:

solicits prospective sellers or purchasers of, or negotiates the purchase, sale or exchange of real property or a business opportunity.

How this isn’t seen as the op soliciting the sale of the property is beyond me. He is doing it at the behest of another party for pay, and pay may I remind you, based soecifically on the sale price and payable only if there is a sale.


The sales papers where one can list cars truck and or real estate is a vehicle that allows the introduction of two parties. Actively knocking on a door with the intent of causing a sale to a particular party (for pay) is the act of a broker under California law.

 

[justalayman]

Op wrote:

I'm guessing licenses are only required for marketing on the MLS? Not sure.)

Holy cow x3.

If that is how op sees real estate licensing it’s no wonder he doesn’t realize he is almost certainly breaking the law.

The MLS is a subscription based service offered by the National Association of Realtors or any of their state subdivisions. It is a private enterprise and has nothing to do with the legalities of licensing. The law defines who is required to be licensed. If you do anything beyond introducing two people that seem to be a match, you are almost certainly breaking the law.

In simple terms, you can do nothing to facilitate the sale. A finder is limited to nothing more than matchmaking. You have already said you are going far beyond that point.

Your use of the term “finders fee” is wholly improper and deceptive.

Also, as far as I understand, you do not need a license to buy a house off someone directly. You can set-up a standard contract, settle on a price, pick out a escrow/title firm, and proceed. I've had sellers specifically ask me if we could not use an agent in order to save the commission.

But are YOU buying the properties?

Why would anybody ask you about skipping an agent to avoid agency fees? It’s not your place to counsel a buyer or seller. By answering that question by the principals of whatever deal you are working on you have proven you are more than a simple matchmaker.

A matchmaker:

Hi bob. I know this guy, jim, who is looking for a property. I saw yours and it looks like it might be a perfect fit. Here is his number.

That’s, seriously, about all you can do without a license. You have described facilitating the sale, counseling the principals, and alluded to aiding in much more.


Again, please, file suit against the guy you think stiffed you. I think you are in for a rude awakening.