Open House Disclosure and Dual Agency
At a Sunday open house in Bethesda, listing agent Priya answers questions from buyer Marcus, who is not represented. Marcus says he is preapproved to $850,000 and asks whether the seller, who is divorcing, would take $40,000 below the $825,000 list price. Priya says, "The seller is motivated because of the divorce and needs to close before school starts; I can represent both of you and keep this simple." She shows Marcus two other homes she has listed without giving him a brokerage relationship disclosure. Marcus gives Priya his preapproval letter and asks her not to share it with the seller. Priya texts the seller: "Buyer is preapproved to $850,000 and loves the house." Priya's broker has a written dual-agency consent form in the office, but Priya has not used it. The seller has not consented to dual agency, and Marcus has not signed anything.
1. At what point was Priya required to give Marcus a brokerage relationship disclosure, and what should it have said?
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Maryland requires a licensee to disclose whom the licensee represents before providing brokerage services, at the first substantive contact. Priya was acting as the seller's listing agent, and she began showing Marcus other listings she had and discussing representation. That is substantive brokerage activity, so the disclosure should have come before that discussion.
The disclosure should have told Marcus, in writing, that Priya represents the seller; that the seller is her client; that she owes the seller loyalty, confidentiality, and obedience; and that Marcus has the right to engage his own agent or to proceed unrepresented. If Priya wanted to represent both parties, she needed to explain dual agency and obtain written consent from both the seller and Marcus before acting as a dual agent. Telling Marcus orally that she could "represent both of you" is not sufficient. Priya also should have given the disclosure before showing her other listings, because Marcus could reasonably believe she was working for him.
2. Evaluate Priya's statements about the divorce and her text to the seller. What duties did she breach?
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The seller's divorce and motivation to close before school starts are confidential client information. Priya may not disclose that information to a buyer to encourage an offer unless the seller authorizes it. Her statement to Marcus breached the duty of confidentiality and potentially the duty of loyalty. Even if the divorce is publicly known, the seller's negotiating motivation is not Priya's to reveal.
The text to the seller is also improper. Marcus asked Priya not to share his preapproval letter. Although Marcus was not yet Priya's client, a licensee should not use a prospective buyer's financial information to advantage the seller without permission. The text reveals Marcus's maximum approval and his emotional interest, which undermines his negotiating position. Priya should have kept the information confidential and should not have sent the text. The broker should preserve the text, stop further communications about the buyer's finances, and review the file for a brokerage relationship disclosure.
3. What would be required for Priya to act as a dual agent, and how should her broker respond to the text?
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Dual agency requires the informed written consent of both the seller and the buyer before Priya acts for both. The consent must explain the limits of dual agency: the agent cannot advocate for one side over the other, cannot disclose one party's confidences to the other, and must remain neutral. Priya's broker must also confirm that the firm's policy permits dual agency and that Priya has the required written consent. Oral assurance is not enough.
The broker should immediately review the text and the open-house file, stop any dual-agency discussion until written consent is obtained, and counsel Priya on confidentiality. The broker should document the corrective action, notify the firm's attorney or E&O carrier as appropriate, and determine whether the seller wants to authorize disclosure of the divorce or motivation. The broker should not simply ignore the text because it was sent from Priya's phone; brokerage supervision extends to licensee communications about the transaction.