Two Clients, One Office: Structuring the In-House Transaction
Priya's four-unit listing at 1428 Wabash Avenue is priced at $289,000 under an exclusive right-to-sell agreement with Meridian Realty. Her buyer, Dev, signed a written buyer-agency agreement with Meridian two weeks ago. He is preapproved to $300,000 and has told his licensee, Tom, that he could stretch to $305,000 but wants to keep $15,000 in reserve. Tom and Priya work out of the same Meridian office, and the broker-in-charge has no written policy on in-house transactions. Dev plans to offer $272,000 with a $5,000 seller concession. Meanwhile, the seller told Priya that the basement took on water twice last spring and asked her to leave that out of the seller's disclosure. Dev's inspector now asks Priya directly whether there have been water problems.
1. Before Tom shares Dev's financing ceiling or negotiates on his behalf, what agency structure must exist at Meridian, and what is wrong with the current arrangement?
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The problem: Meridian currently has a written agreement to represent the seller (the listing) and a written agreement to represent the buyer (Dev). Two clients with adverse interests, one brokerage, and no written disclosure or consent. That is an undisclosed dual agency, which is the single fastest way to lose a license and an E&O policy.
The lawful paths (pick one before any negotiation):
- Limited agency (dual agency) with written informed consent. Indiana's agency statutes (IC 25-34.1-10) permit a brokerage to act as a limited agent for both parties only after both clients consent in writing to the reduced duties; confidentiality between the two sides is compromised and must be explained, not glossed over. Both Priya and Tom must disclose their status in writing, not verbally at the kitchen table.
- Designated agency, if the firm's written policy authorizes it: the broker-in-charge appoints Priya to the seller and Tom to the buyer, each owes full fiduciary duties to their own client, and the company acts only as a supervisor. Written notice to both clients is still required.
- Refer one side out so only one party is represented, or act as a non-agent/transaction broker for the unrepresented party with written disclosure.
Do not proceed on a handshake. Tom should not discuss Dev's ceiling, the concession strategy, or 'how low the seller will go' until the consent is signed. If consent is refused, Tom must refer Dev to another brokerage or convert to a disclosed non-agency role; he cannot quietly keep both loyalties. The broker-in-charge's decision to have no written in-house policy is itself a supervision failure.
2. Dev says: 'Offer $272,000 with a $5,000 concession - and don't tell them I could go to $305,000.' Priya then asks Tom directly what Dev's top number is. How should Tom respond, and what may the two licensees legitimately say to each other?
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Tom must decline. Dev's ceiling is confidential client information and, under either limited or designated agency, Tom may not reveal it to the other side or to the company in a way that reaches the seller. 'Confidential' means the buyer's motivation, financial capacity, and negotiating limits - not the physical condition of the property.
What Tom may say: only what Dev authorizes, or information that is already public to the transaction, such as the fact that an offer at a stated price is coming, or the terms Dev actually put in writing. If Dev authorized it, Tom could confirm pre-approval status - nothing more.
What Priya may not do: answer in kind. She may not tell Tom the seller's bottom line, the reason for the move, or the timing pressure. Under limited agency the company holds both secrets; that does not license either licensee to trade one client's secret for the other's.
The trap to name: the 'duty of disclosure' in a limited-agency situation is often misunderstood as permitting full disclosure between the sides. It is not. The duty to disclose runs to material facts about the property and the transaction as it is actually written, not to the parties' private walk-away numbers. If Tom answers Priya, he has breached confidentiality, and the buyer has grounds for discipline complaints, damages, and possibly rescission. The correct response is a version of: 'I can't share that. If Dev wants to reveal it, that's his call in writing.'
3. Priya asks Tom to 'not mention the basement,' and she answers Dev's inspector: 'the seller has never reported any issues.' Evaluate the statement and what Tom and Priya must each do now.
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The statement fails on two counts. First, it is a half-truth: literally, no written report exists - but the seller did report water intrusion to Priya, and the answer is crafted to imply there is no problem. A misleading half-truth is a misrepresentation. Second, it is a statement about a material, latent condition that affects value and habitability, made by a licensee with actual knowledge.
Priya's obligations: she may not knowingly make a false statement about the property, and she must advise the seller in writing to correct the seller's disclosure form. If the seller refuses, Priya must disclose the known adverse material fact and notify her broker-in-charge; silence is not an option even though the seller is her client. Loyalty never requires lying.
Tom's obligations: he represents the buyer and should put the question in writing, direct the inspector to look at the basement walls and any staining, and advise Dev to condition the offer on a satisfactory inspection. He should not simply accept Priya's answer.
What is at stake: license discipline for misrepresentation, civil liability for the seller and the brokerage, the buyer's possible rescission or repair credit, and an E&O claim that is nearly indefensible once the seller's admission is in a text message or email. The agent's real choice is between an awkward conversation now and a lawsuit later.