Agency: The Open House, the $700,000 Preapproval, and Dual Agency
Marta is a salesperson with Coastline Realty, which holds a signed listing agreement for 14 Beacon Terrace at $659,000. At Sunday's open house, buyer Elena volunteers that she is preapproved to $700,000, that she would pay $675,000 if the roof were replaced, and asks Marta 'off the record' whether the seller is divorcing. Marta deflects the divorce question, says little else, and never explains her role. On Monday Elena calls and asks Marta to write her offer and 'be my agent too.' Coastline's broker, Rob, proposes either dual agency or designating a second licensee to represent Elena, and tells Marta to get the consent form signed and move it along.
1. What should Marta have told Elena before Elena disclosed her preapproval figure, and how should Marta handle the divorce question?
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The disclosure came too late, and it must be corrected now
- Massachusetts licensees must disclose, at the first substantive contact and in writing, which party they represent: seller's agent, buyer's agent, or facilitator. Coastline's listing agreement makes it the seller's agent, so Marta represents the seller, not Elena.
- Marta should have said, before Elena said anything financial, that she works for the seller, that she cannot give Elena advice or advocate for her, and that Elena should consider her own representation before revealing her ceiling.
- Having missed that, Marta must correct the impression immediately. She should not promise confidentiality she cannot deliver, and she should not let Elena continue under the belief that she is being counseled in confidence. Creating that false impression is a misrepresentation and a c. 93A exposure.
The divorce question
- Seller motivation is confidential client information. Marta must not answer it, even 'off the record,' and must not hint at it. She may say only that she cannot discuss the seller's personal circumstances.
- Because Marta never promised confidentiality and does represent the seller, she is not obligated to conceal the preapproval figure from her own client - which is exactly why the disclosure should have come first. The defensible course is to tell Elena plainly that anything she shares may be used on the seller's behalf and let Elena decide what to say.
2. What has to happen before Coastline can act as a dual agent or use designated agency?
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Dual agency
- Requires the informed written consent of both the seller and the buyer, obtained before dual representation begins. Consent obtained after the fact is not consent.
- The consent must explain what the parties give up: undivided loyalty, advocacy, and the confidentiality of price, motivation and negotiating strategy, and it must state that the broker will not disclose one party's confidences to the other.
- If either party refuses, the brokerage must keep representing only one side and the other party must obtain separate representation. Rob cannot simply 'move it along.'
Designated agency
- The broker may designate one licensee to represent the seller and a different licensee to represent the buyer, with written notice and consent. Each designated licensee advocates for and keeps confidences from the other, and the broker itself becomes a neutral at the entity level.
- Marta cannot be the designee for Elena. She is the listing agent and already holds the seller's confidences; a proper designee is a licensee with no involvement in the listing.
- Whichever route is chosen, the choice must be documented before any offer is drafted or presented.
3. Once dual or designated agency is in place, what may Marta and Rob do with the information they hold - and what may they not do?
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Permitted
- Prepare and transmit the offer, present it, relay factual information about the property, coordinate inspections, and handle paperwork for both sides.
- Disclose material facts about the property to both parties.
- Explain the process, the forms, and the timelines.
Prohibited
- Telling the seller that Elena is preapproved to $700,000 or would pay $675,000. In a dual agency that is a breach of the buyer's confidence; in designated agency the buyer's designee must keep it from the seller's side.
- Telling Elena the seller's bottom line, that the seller is divorcing, or any of the seller's negotiating strategy.
- Advising Elena on what price to offer or advising the seller on whether to counter. A dual agent may not advocate for either side and may not steer the negotiation.
- Using one party's confidential information to benefit the other. If the parties will not consent to the limits, they must be told to get separate representation or the brokerage must withdraw from one side.