Designated Agency and the Buyer’s Ceiling
Prairie Homes Realty is a Kansas brokerage with a written designated-agency policy signed by both parties in each transaction. Amy, a salesperson, represents the sellers of a $300,000 house. Ben, another salesperson at Prairie Homes, represents the buyers. The buyers tell Ben privately, “We are preapproved to $335,000, but offer $295,000 and do not tell the sellers.” Ben prepares a $295,000 offer. Before it is presented, the principal broker, who supervises both agents, learns of the $335,000 ceiling and says to Amy, “You should know the buyers can go higher.” Amy tells the sellers, who counter at $330,000. The buyers complain. The principal broker says, “We are one company, so the company already knew.”
1. Under Kansas brokerage relationships law, was the principal broker’s statement permissible? Explain the designated-agency analysis.
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No. Kansas allows a brokerage to use designated agency so that different licensees in the same firm represent the buyer and the seller. The buyer’s confidential financial information belongs to the buyer’s designated agent and is not to be disclosed to the seller or to the seller’s designated agent. The principal broker’s supervisory role does not turn the buyer’s confidential information into information the whole company may use against the buyer. Telling Amy, who represents the sellers, breached the confidentiality owed to the buyers. Amy should not have used the information to advise the sellers to counter at $330,000.
2. What should Amy have done when the principal broker made the statement, and what should the brokerage do now?
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Amy should have refused to use the information, told the principal broker in writing that it was confidential, and avoided passing it to the sellers. Because the information was already disclosed, the brokerage should document what happened, notify its managing broker or legal counsel, and consider informing the buyers. It should separate the files, reinforce confidentiality procedures, and train agents that designated agency does not permit company-wide sharing of one party’s confidences. The principal broker should not retaliate against Amy. Depending on the harm, the brokerage may need to address the transaction directly with the buyers.
3. How would the answer change if the brokerage had instead been a transaction broker for both parties with written consent?
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The result would be similar on confidentiality. A Kansas transaction broker assists both parties but does not act as an agent or advocate for either. The transaction broker still must be honest and fair and cannot disclose one party’s confidential information to the other without consent. The principal broker could not reveal the buyers’ $335,000 ceiling merely because the firm was a transaction broker. The difference is that the firm would not owe the same fiduciary advocacy duties, but it still could not use private information to advantage one side.