Open-House Disclosure and the Buyer's Ceiling
Lisa is the designated seller's agent at XYZ Realty for a condominium listed at $849,000. The seller has authorized a dual-agency relationship only if both sides consent in writing. At the first open house, Tom and Priya tour the unit and tell Lisa they are preapproved to $900,000, plan to offer $875,000 cash, and ask her not to reveal their ceiling to the seller. Lisa has not yet given them any agency disclosure. She also knows the seller would accept $860,000. Tom and Priya ask Lisa to write their offer that evening and to 'keep it quiet' that she is also the listing agent. No buyer-agency agreement has been signed. Lisa's broker is out of town. The property has been on the market for 11 days.
1. What must Lisa do at this first personal meeting before taking any offer information, and why does timing matter?
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Lisa must give the written agency disclosure at the first personal meeting and before Tom and Priya volunteer confidential financial information. Massachusetts law, M.G.L. c. 112, § 87AAA 1/2, requires licensees to disclose whom they represent and to explain the available relationships: seller's agent, buyer's agent, dual agent, or facilitator. Timing is not a formality. Once Lisa learns the buyers' ceiling while acting as the seller's agent, she cannot later claim that information was confidential to them. She should stop the conversation, identify herself as the seller's agent, provide the disclosure form, and explain that as seller's agent she owes loyalty and confidentiality to the seller, not to them. If they want her to represent them as buyer's agent, that requires a written agreement and broker approval. If they want dual agency, both parties must give written informed consent. Until then, she should not draft their offer as their agent.
2. Can Lisa keep Tom and Priya's $875,000 ceiling and $900,000 preapproval confidential from the seller? Explain under each possible relationship.
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As seller's agent, no. Lisa's duty of confidentiality runs to the seller. The buyers' ceiling and preapproval are material to the seller's negotiating position, and Lisa must share them with the seller unless the buyers first become her clients in a relationship that creates a duty to them. As a facilitator, she still cannot keep material information from either side; a facilitator assists without representing either party and does not owe the advocacy or confidentiality of an agent. As a dual agent, she would owe duties to both, but dual agency does not let her actively conceal material facts or use one side's secrets to benefit the other. The cleanest path is to disclose her seller's-agent status immediately, let the buyers decide whether to be represented by someone else, and avoid learning their ceiling in a way that creates a false expectation of confidentiality.
3. If Lisa wants to represent both sides, what must happen, and what should she tell them about the seller's $860,000 acceptance price?
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Dual agency requires the written informed consent of both the seller and the buyers, and the broker must approve the relationship. Lisa must explain that a dual agent cannot advocate exclusively for either party, cannot disclose one party's confidential information to the other without consent, and must treat both fairly. The seller's $860,000 willingness to accept is confidential seller information. Lisa cannot tell the buyers that number to induce a higher offer, and she cannot tell the seller the buyers' $875,000 ceiling in a way that breaches a duty owed to the buyers. In dual agency, she should not use either side's confidential bottom line as a bargaining tool. If either party is uncomfortable, the proper alternatives are for the buyers to use their own agent or for Lisa to act as a facilitator with written disclosure, not to proceed silently as a dual agent.