Both Sides of the Kailua House: Dual Agency and Two Confidential Numbers
Leilani, a salesperson at Palm & Pine Realty (principal broker Marcus), represents buyers Jordan and Alex, who are preapproved to $1,400,000. She shows them a Kailua home listed for sale by owner at $1,450,000 by Sam, who is retiring to Las Vegas in December. After the showing Sam calls Leilani directly: he wants her firm to 'handle both sides,' and he will pay 3%. He adds, 'Off the record, I'd take $1,350,000 to close by December 15 - I can't carry two mortgages.' Leilani's firm has a standard written dual agency consent form, but Sam has signed nothing. Jordan and Alex tell Leilani they want to offer $1,250,000 and will not exceed $1,320,000. Sam has not asked for anything in writing, and Leilani has not yet delivered any agency disclosure to him.
1. Can Leilani act for both Sam and her buyers? Identify the steps that must occur before she can, and the fact that can block it.
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Not yet. Dual agency requires informed written consent from all parties before it happens.
Steps:
- Tell Sam in writing who she represents right now: she is the buyers' agent; he is an unrepresented customer.
- Deliver the written agency disclosure to Sam before he signs anything, so he understands what a customer is entitled to and what he is not getting.
- Explain dual agency accurately: the firm and its licensees serve both parties with limited duties, cannot advocate for either side in negotiations, cannot disclose either party's confidential information, and must deal honestly and fairly with both.
- Obtain signed consent from Sam, Jordan, and Alex before any act as a dual agent - including delivering an offer.
- Document the sequence and timing in the file, because the fight later will be about what was said when.
The blocking fact: consent must come from all parties. Buyers in a seller's market routinely refuse dual agency because they lose advocacy; Sam may refuse because he loses confidentiality. If any one party declines, there is no dual agency, full stop. Leilani should also confirm her firm's policy and Marcus's approval before offering dual representation.
2. Assume valid dual agency. What may Leilani do with (a) Sam's $1,350,000 floor and December 15 deadline, and (b) the buyers' $1,320,000 ceiling?
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She may not disclose either number to the other side, and she may not use either to advantage one party. Both the seller's price floor and motivation and the buyers' price ceiling are confidential information in a dual agency; the firm's duty is neutrality, not advocacy.
What she may do:
- Present offers and counteroffers promptly and identically to both sides.
- Ask each side for its best offer without revealing the other's position.
- Confirm, correct, and disclose material facts about the property itself.
- Encourage each party to obtain independent advice (attorney, appraiser, accountant).
What she may not do:
- Tell the buyers 'he will take $1,350,000.'
- Tell Sam 'they will pay up to $1,320,000.'
- Hint, wink, or 'confirm' either number when asked. The correct response to a probe is a plain statement that she cannot discuss the other party's position.
The escape hatch is written authorization. If Sam authorizes disclosure of his December 15 motivation in writing, she may disclose it - that converts a confidence into a disclosable material term. Until then, a deadline-driven seller is exactly the information the buyers would most like to have, which is why it cannot be volunteered. Note also that the 'off the record' disclosure came in while she was the buyers' agent; she should document when and how she received it and keep it out of the buyers' file.
3. Sam refuses to sign the consent form and says, 'Just bring me a buyer.' Describe Leilani's status and her duties to each party.
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Leilani remains a single agent for the buyers. Sam is an unrepresented customer.
Owed to Sam as a customer:
- Honesty and good faith.
- Accurate information about the property and the transaction process.
- Disclosure of all material facts she knows about the property.
- Prompt, objective presentation of all offers.
- A written agency disclosure making clear she does not represent him and that he should consider his own representation or an attorney.
Not owed to Sam:
- Loyalty, confidentiality, advocacy, or price advice. She may not coach him on what to accept, and she must not reveal the buyers' $1,320,000 ceiling or their strategy.
She may prepare and present the buyers' offer, and Sam may agree to pay her firm 3% as a cooperating broker - but that compensation must be disclosed in writing and cannot be allowed to soften her loyalty to the buyers. If Sam later wants her to represent him, the only permitted route is dual agency with the buyers' written consent; she should not drift into informal dual representation by 'helping him out' on the paperwork. A clean alternative: Sam retains his own broker or attorney, or the parties proceed on an unrepresented-seller basis with everything in writing.