Same-Firm Buyer and Seller: Confidentiality and Designated Agency
Savannah Marsh Realty has an active written listing engagement for a $720,000 waterfront home; it states that the firm represents the seller. The firm also has a written buyer engagement with a buyer who wants to offer $680,000; that engagement states the firm represents the buyer. Both clients are represented by different licensees in the same firm. The listing licensee privately tells the buyer's licensee, “They are divorcing and will take $690,000; just don’t make them feel lowballed.” The seller separately instructed the listing licensee, “Do not tell any buyer why we are selling.” The firm has no written designated-agency policy, and the supervising broker is the listing licensee’s spouse. The buyer’s licensee wants to tell the buyer the seller’s bottom line so the buyer can sharpen the offer. No dual-agency consent has been signed.
1. What brokerage relationship exists under Georgia law, and what disclosures or consents are required before the buyer's offer is presented?
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Under Georgia's brokerage relationship law, the written engagements establish the firm as the seller's broker and the buyer's broker. Because the same firm represents both parties, the firm is a dual agent unless it has properly established designated agency. The firm has no written designated-agency policy, so the default is dual agency. Dual agency requires written disclosure and consent from both clients. The firm cannot act as an advocate for the buyer against the seller, and it cannot keep one side's confidences while using them for the other side. The supervising broker's spouse relationship with the listing licensee also creates a conflict that should be managed by an independent supervisor.
2. Can the buyer's licensee use the seller's statement about divorce and the $690,000 figure? Explain the confidentiality analysis.
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The seller's statement about divorce and willingness to take $690,000 is confidential information. The listing licensee's disclosure to the buyer's licensee was a breach of the seller's confidence. The buyer's licensee should not use it and should not repeat it to the buyer. In dual agency, the firm must not use confidential information from one client to the detriment of the other. The seller also expressly instructed the firm not to reveal the reason for selling. The buyer's licensee can advise the buyer based on market data, inspection results, and the buyer's own authorization, but not on the seller's private bottom line.
3. What should the supervising broker do to cure the conflict and protect both clients?
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The broker should stop the transaction from proceeding on the current basis. The broker should disclose the dual-agency conflict in writing and obtain written consent, or convert to designated agency if the firm adopts a written policy, appoints separate licensees, and both clients consent. Because the broker is related to the listing licensee, an independent supervising broker should handle the conflict. If consent cannot be obtained, the firm should withdraw from one side or refer one client to another firm. The listing licensee should be counseled on confidentiality. The buyer's licensee should document that the seller's confidential information was not used.