The Listing Agent Who Befriended an Unrepresented Buyer
Rick owns and supervises Premier Realty. His listing agent, Diane, holds an exclusive right to sell 412 Alder Court at $865,000, with a 5% total commission and 2.5% offered to a cooperating broker. Buyer Tom walks in unrepresented and asks to see the property. Diane shows it, learns Tom is preapproved to $850,000, and tells him the seller has already bought a condo in Tucson and 'would probably take $825,000 to be done with it.' She also offers to 'write the offer for you at no extra charge' and gives Tom no agency disclosure and nothing to sign. Tom offers $790,000. Diane presents it, then tells Tom, 'I think they'd come down to $820,000 if you push.' The seller accepts at $848,000.
1. Whom does Diane represent in this transaction, and what was required before she could treat Tom as anything other than a customer?
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Before the conversations above, Diane is the seller's agent. She works under Rick's broker license and acts for Premier Realty, which is the listing broker; the seller is her principal. Tom, unrepresented, is a customer, not a client.
What was required:
- Agency disclosure, delivered as soon as practicable and before Tom signed anything. The statutory disclosure form explains that the listing agent represents the seller, that a buyer may be represented by his own agent, and that the agent owes the buyer honesty and fair dealing but not confidentiality or loyalty.
- Informed written consent from both sides if Diane intended to act for Tom as well. Dual agency is not illegal in California, but it requires disclosure to, and the consent of, both principals; it also converts her role into a limited one in which she cannot advocate for either side.
- A written agreement if she was going to act as Tom's agent on an exclusive basis - a buyer's exclusive representation must be in writing.
Her offer to 'write the offer for you at no extra charge,' made with no disclosure and no consent, is best characterized as undisclosed dual agency - the most disciplined form of agency failure.
2. Identify the specific fiduciary and statutory breaches and the realistic consequences for Diane, Rick, and the commission.
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Breaches.
- Confidentiality. Telling Tom the seller's motive (already bought in Tucson) and the seller's likely floor ($825,000) is a direct disclosure of the principal's negotiating position and confidential financial information. This is the most damaging breach.
- Loyalty and good faith. Coaching Tom to 'push' to $820,000 is advocacy against her own principal.
- Undisclosed dual agency / secret representation. Offering to prepare Tom's offer without disclosure or consent.
- Statutory disclosure failures. No agency disclosure before Tom signed; no confirmation of the agency relationship.
Consequences.
- Diane: exposure to DRE discipline for fraud or dishonest dealing and for incompetence/negligence in the performance of acts requiring a license; discipline ranges from a citation to suspension or revocation.
- Rick: as the broker of record he is responsible for supervision of licensees acting under his license; a pattern of unsupervised listings is its own violation.
- Commission: the seller has a strong argument that Diane's breach forfeits or reduces the compensation, at minimum the buyer's-side portion, and potentially supports a claim for damages measured by the difference between $848,000 and what the seller would have netted. The seller may also have grounds to rescind or to claim constructive fraud.
- Tom: not a victim in the obvious sense - he got information he should not have - but he received services from someone he reasonably believed was helping him, which supports a claim that a de facto dual agency existed without consent.
3. Rewrite the sequence of events as it should have happened, assuming Diane wants to earn a buyer's-side fee from Tom.
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- At first contact, before showing or discussing price, deliver the agency disclosure and explain in plain terms: 'I represent the seller. I can show you the property and treat you fairly, but I cannot keep your confidences or negotiate for you. You have the right to be represented by your own agent or attorney.'
- If Tom asks her to represent him, explain dual agency, obtain the seller's informed written consent first, then Tom's, and document both. From that moment she is neutral: she may not reveal the seller's motivation or bottom line, may not tell Tom what the seller would accept, and may not advocate for Tom on price.
- If either side declines dual agency, Tom can be referred to another brokerage or proceed as a customer - in which case Diane may prepare the offer only in a purely clerical capacity and only after the disclosure makes clear she is not his agent and is not advising him on price or terms.
- Never volunteer the seller's motivation or a target number to anyone, including a buyer who asks directly. The correct response is that the seller will consider any written offer.
- Document everything, including the disclosure delivery, any consent, and the substance of price conversations, so that the file supports the version of events if the seller complains.