The Open-House Buyer Who Asked for a Secret
Renee, an associate broker, lists the Halloran house at $439,000. The seller privately told Renee the lowest acceptable price is $405,000 and that the relocation company requires an August 30 closing. At Sunday's open house, Chris arrives unrepresented. Renee texts him comparable sales, drives him through two other listings, and says, 'Between us, the seller would take $405,000.' Chris replies, 'Don't tell the seller, but I can go to $450,000 - my father is funding the difference.' Chris now wants to write an offer on the Halloran house. Renee has given Chris no written agency disclosure, and no service provision agreement exists other than the seller's listing agreement.
1. What is Renee's relationship to Chris right now, and what should have happened before she began helping him?
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Renee is the seller's agent. Her written service provision agreement is with the seller, which makes her the seller's agent under Article 25 with full fiduciary duties running that direction.
Chris has no agent. He has signed nothing, so no agency relationship exists between Chris and Renee or the brokerage. An unrepresented buyer is a customer, not a client.
What was required before she 'helped' him: Michigan requires the written agency disclosure notice - identifying whom the licensee represents and describing the available relationships - to be delivered before the buyer signs a service provision agreement and before the licensee solicits confidential information. If a licensee provides services to a party who has no agreement, the licensee may act as a transaction coordinator: a facilitator who is not an advocate for either party, owes honesty and disclosure of material facts and accounting for money, and may not disclose either party's confidential information. The buyer must acknowledge that status in writing.
What went wrong: Renee solicited and volunteered confidential information before any disclosure. She also created a reasonable impression that she was helping Chris, which is exactly the confusion the disclosure form exists to prevent. Before the next conversation, the brokerage must deliver the disclosure and obtain Chris's written acknowledgment of the actual role.
2. Analyze the two secrets. What may Renee do with the seller's $405,000 floor and with Chris's $450,000 ceiling?
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Seller's $405,000 floor - a fiduciary breach already committed. As seller's agent, Renee owes undivided loyalty and confidentiality. Disclosing the floor to a buyer hands the buyer the seller's negotiating position and costs the seller money. She cannot unwind it. Her obligations now: tell her broker immediately, tell the seller what she disclosed, and expect the seller may terminate the listing, demand a commission adjustment, or file a complaint. The fact that Chris has not yet made an offer makes it worse, not better - the disclosure will shape his offer.
Chris's $450,000 ceiling - she cannot shop it to the seller. She obtained it from a person she had led to believe she was assisting, before any disclosure. Passing it to the seller would be an unfair trade practice and would expose the firm to a complaint even though Chris is technically not a client. She also cannot use it as leverage against Chris on the seller's behalf while pretending to advise him.
The practical fix: the brokerage should place Chris with a different licensee under a buyer's service provision agreement, with the seller's informed written consent, so that each side has an advocate. Michigan does not authorize an undisclosed 'designated agency' shortcut - if one brokerage acts for both parties in the same transaction, that is dual agency and it requires the written consent of both. Until that is in place, Renee should not discuss price with either party.
3. Assume the seller and Chris both give written consent to dual agency. List what Renee may and may not do, and what she must disclose.
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Prerequisites: written disclosure of the dual role and written consent from both parties before she acts as a dual agent. Consent must be informed - each party must understand that neither will get an advocate.
She may:
- Facilitate the transaction: relay offers and counteroffers, coordinate inspections, appraisals, and closing dates.
- Provide factual information about the property, the market, and the process.
- Disclose material facts about the property and about the transaction to both sides.
- Prepare and transmit documents, and account for earnest money.
She may not:
- Advocate for either side or assert that one price is 'better' for either party.
- Disclose the seller's $405,000 floor to Chris or Chris's $450,000 ceiling to the seller - confidential information of either party stays confidential in a dual agency.
- Recommend a specific offer amount, or use one party's confidential information to pressure the other.
- Receive any undisclosed compensation or referral fee from either side.
Disclosures: the dual agency must be documented in writing at the time it is entered into and again in the transaction file; if either party refuses consent, the brokerage must not act as a dual agent and must release one side or refer the buyer elsewhere. Also note Renee's broker still owes the supervisory duty - dual agency concentrates risk and the file should show the broker reviewed it.