There are actually two ideas when we speak of the words real estate confidentiality agreement. One is real estate, the other one is confidentiality agreement. Before we can digest the whole real estate confidentiality agreement thing, let us try to dissect the two.
A real estate is a land or lot that includes the buildings and the rest of the properties along with it. It may include the plants, trees, garden, the crop, animals.
The word real comes from the Latin term res, meaning “existing, genuine, or real.” Estate, on the other hand, is the sum total of the person’s property during his lifetime. So a real estate is more of a material property, as opposed to intellectual property. So anything that can be held, anything that is material, can be a real estate.
A confidentiality agreement is an agreement signed between two or more parties with the intention of protecting particular contents and materials by way of not disclosing them to the public. It is always set in terms and conditions such as that the two parties should be able to identify which content can be disclosed or not.
Protects privacy. Usually, when two parties enter into a business deal, the two can exchange some ideas. But not all the ideas or personal knowledge are supposed to be used and be understood by the public.
In a real estate confidentiality agreement, the confidentiality is between the broker and the client. The broker being the one selling the real estate, and the client being the buyer. But it could also be between the developer—the owner of the real estate, and the broker—the dealer, or reseller.
Usually the trust is in the burden of the broker. The broker is the one expected no to disclose any information for the protection of the clients. In a non-disclosure agreement, or NDA, there is a term called fiduciary.
The broker as the fiduciary makes sure that the client is protected. But it is not only about the client. It is more than that, and that is why it is called real estate confidentiality agreement. It is the whole package of protecting the deal. It protects the client, the buyer of the real estate; it protects the broker, the mediator between the real estate owner or developer; and it protects the developer. And lastly, it protects the real estate.
In any form of non-disclosure agreement—whether real estate, law, medicine—protection of information is on top of the list. It is not about money, but it is about how much money the client has. It is a practice and sometimes, a requisite for clients to divulge his bank account before he or she is allowed to buy a real estate. Disclosing a bank statement account is a very delicate matter. You do not show your asset to anyone else, do you? But of course you may tell your friends about your love life, or your the kind of flowers you like, or your dreams. Not your assets.
But is it necessary that a client or the buyer should prove to the broker or the developer his or her bank account? As they say, if you have the cash, why not. If you can buy the real estate in cash, there is no need for you to prove that you can pay the whole planet. That is, if you have the cash. But mostly, this kind of purchase is done through terms, installment, or bank financing. And when that happens, when you go through bank processing, you cannot escape but be required to show what is in your pocket. And that begins the practice of “show me the money” game for buying a real estate. And that practice is not only done in a bank financing purchase or real estate but even for people who can afford to buy by cash. And that is a good thing. It introduces the virtue of trust.
Trust in a confidentiality agreement is usually bilateral. A broker is expected to trust his client. The client, on the other hand, will show the same treatment in return. In a transaction as delicate as buying a property, it is not a surprise that the value of trust is a must for both parties. If it is just a purchase of a stick of cigarette, who cares if both parties are strangers. Not in a real estate deal. In real estate, the broker would even go as far as having the buyer be investigated—that is without malice. It is just a standard operating procedure.
The world of real estate buying is messy. It is messy or dirty because the roles of the people involved are not fixed. It is unlike a teacher-student relationship. In a real estate, the seller could be the buyer, the agent could be the owner. The principal could be the agent. It is messy because it is business. It is all about profit. And when people are into profit, they can become anyone who they wish to be. But real estate is also about professionalism. And the confidentiality agreement somehow irons these crumples or softens the rocky road. Or does it? But that is business.
Regardless, the protection of privacy is necessary. Here is how it works. If the agent becomes himself as the buyer, for whatever reason, maybe resell the property or whatnot, the non-disclosure agreement can settle the issue of inconsistency. And would you want to know how can an inconsistency happen in a real estate transactions? Well, it is in the fluctuation of the price? Prices can go there, high and low and vice versa. Depending on how a seller can take advantage in the profit, depending on the situation, he can demand as high as possible. If that is not disclosed in a transaction between the him and the seller, what do you think would happen? A third party may realize, “Oh, someone is selling this real estate that low, or that high? Why? How come mine is more expensive?”
But with a real estate confidentiality agreement, that can be avoided. And instead of telling others the actual price that one gets in a transaction, the others can only talk about the suggested retail price, the price offered to the public.
But regardless of the situation, a real estate confidentiality is supposed to primarily protect the buyer. It protects the whole package deal, but it should protect the buyer first, before anything else. But it is not always the case. The worse that could happen is when the seller protects himself in the transaction over anything else. If that happens, such as when he is reselling a real estate, and he bought it for a very, very low price, and you decided to buy if from him. The price is low, lower that the suggested price. But he bought it at a very amount, would you be willing to enter into a non-disclosure agreement? Or would you, as a buyer, be tempted to buy his offer and resell it to another party? In that case, you become the seller, not the regular buyer. And that is just business. The circle life of business.
There are nuances in every non-disclosure agreements, depending on the seller. The Internet has plenty of samples should you want to know the variances.
Now if you happened to be the seller or the buyer, and when you enter into a non-disclosure agreement, would you be willing to go as far as trusting the other party? Would you be willing to accept monetary compensations if you breach any of the terms in the non-disclosure agreement? This is big. Real estate is a serious business. It is not the same as selling fish on the sidewalk. It is not the same as selling your laptop to your friend. Real estate is a legal business, serious and with documentation. Should you enter in a confidentiality agreement, make sure you are ready to accept for some consequences.
One last thing, if you should enter in a confidentiality agreement, who should you be loyal to? Now, that is another question. If you are the seller, or the agent, should you be loyal to the developer, the property owner, or should you be loyal to the buyer?