A real estate buyer non-disclosure agreement is a legally binding document that protects a seller who reveals sensitive information to a potential buyer. This document is standard in commercial real estate to protect real estate buyers’ interests and preserve their competitive advantage over other buyers working in the same realm.
If you’re renting a property and want to prevent a prospective tenant from sharing information, consider using a landlord-tenant NDA instead.
Purpose of a Real Estate Buyer NDA
A real estate buyer non-disclosure agreement protects the seller because it prevents a prospective buyer from spreading property-related information to external parties, including other buyers, sellers, and the general public. This confidentiality agreement can prohibit a buyer from disclosing the following information a seller reveals to them:
- Lease information
- Appraisal data
- Environmental reports
- Property income and expense information
By keeping this information private, sellers can protect themselves from receiving unsolicited low-ball offers from eager buyers.
A real estate non-disclosure agreement can also be helpful for a seller who doesn’t want current tenants to learn of an impending property sale, as they might experience decreased rental revenue on their commercial property.
Potential Benefit of an NDA for the Buyer
A real estate buyer may be encouraged to sign a non-disclosure agreement because it might reduce competition from other buyers. They may have information that other buyers lack, so other buyers may not be as interested in a property due to a lack of information.
How to Write a Real Estate Buyer NDA
Protecting sensitive information is crucial for sellers to conduct business. Here are steps on how to write an NDA to ensure a real estate buyer maintains confidentiality:
Step 2 – Identify the real estate buyer (the receiving party) and the seller (the disclosing party).
Step 3 – List the information you (the real estate seller) want the prospective buyer to keep confidential. Please provide as many details as possible so the buyer knows what they cannot disclose to the public or outside parties.
Step 4 – State any exclusions from confidential treatment so the agreement is fair. Some information might be too difficult for a buyer to keep confidential, as it could be too broad or demanding to keep secret.
Step 5 – List the desired duration of the agreement. Some sellers may want the non-disclosure to last indefinitely, but a buyer may be more willing to sign if it has an end date. You can also ensure to list the state’s laws that will govern the contract.
Step 6 – Obtain both parties’ signatures. If either party has a representative, you can obtain their signature instead.
Frequently Asked Questions
What’s the difference between disclosure and non-disclosure in U.S. states?
Disclosure U.S. states must release a property’s sale price as part of their public records. Non-disclosure states don’t demand a property’s sale price to become part of public records.
Currently, the following 12 U.S. states are non-disclosure states:
- Missouri (partial)
- New Mexico
- North Dakota
The remaining 38 states are disclosure states. You can only include the purchase price of a property as part of an NDA if you live in a non-disclosure state. Otherwise, the information won’t be confidential, as it’ll be available to the general public.
What happens if a real estate buyer breaches an NDA?
A breach of an NDA is a civil matter, so a real estate seller can take a buyer to court to seek financial damages for the harm inflicted. They can also seek injunctive relief, meaning they get a court order to have the buyer stop spreading the confidential information. This action can reduce further harm to the seller.
When should I draft a real estate buyer NDA?
You should draft a real estate buyer NDA before you share confidential information with a potential buyer.