The Sign-Caller Who Wants a Secret
Priya Shah is a licensed salesperson at Lakeshore Realty, where Hal Menendez is the broker of record. Priya holds an exclusive listing on 1428 Maple Street at $315,000; the listing agreement pays Lakeshore 3%, with 1.5% offered to a cooperating buyer's broker. Derek, who has signed nothing, calls the number on the sign and asks Priya to show him the house. She shows it twice over one weekend. On Monday Derek says: "I'll offer $300,000. My dad is gifting me money, so I can actually go to $325,000 - but don't tell the sellers that. And since you're the only agent I've talked to, can you negotiate for me too?" The sellers have already told Priya, in confidence, that they will not accept less than $308,000.
1. What must Priya disclose to Derek about her role, and when should that disclosure happen?
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Priya must disclose, in writing and early, that she represents the sellers - not Derek.
- Michigan licensees are required to deliver the brokerage's written agency disclosure statement to a prospective buyer before any buyer agency agreement is signed; the safe practice, and what a brokerage policy should require, is delivery at first substantive contact, before services are performed and before confidential information is solicited.
- Derek has signed no buyer agency agreement, so he is a customer, not a client. Priya owes him honesty and fair dealing, but not loyalty, advocacy, or confidentiality.
- Because Priya is the seller's agent, anything Derek tells her is information her clients are entitled to receive. She should have interrupted the "don't tell the sellers" speech and explained this rather than accepting the confidence.
- The disclosure should be documented (signed acknowledgment or dated email) so the file shows when and how Derek was informed.
2. Can Priya honor Derek's request to keep his $325,000 ceiling secret while continuing to represent the sellers?
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No. Loyalty and confidentiality run to the sellers, and a buyer's willingness to pay more is precisely the information a seller's agent must deliver.
- Priya's duty is to obtain the best price and terms for the sellers. Derek's statement that he can reach $325,000 is material, and withholding it while urging the sellers to accept $300,000 would be a breach of loyalty - and, if she affirmatively told Derek she would keep it quiet, a misrepresentation to him as well.
- The countervailing duty is honesty toward Derek: she may not lie about the sellers' $308,000 floor, may not invent competing offers, and may not tell Derek the sellers will take less than they will.
- The correct move is to decline the confidence at the moment it is offered: "I represent the sellers, so I can't hold that back from them. If you want an agent who can keep your confidences, you should have your own representation."
- Priya may still present Derek's $300,000 offer and negotiate hard for her sellers without disclosing their floor.
3. Derek asks Priya to represent both sides. What must occur, and how does her role change if the sellers consent?
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Dual agency requires full written disclosure and the written consent of both parties before it begins; and it strips Priya of the ability to advocate for either side.
- Priya must explain the consequences in writing: the brokerage will receive compensation from both sides, neither party gets undivided loyalty, and the agent cannot advocate for one party over the other.
- If the sellers decline, Derek stays a customer. Priya may still show property and, with proper disclosure, prepare an offer at Derek's direction - clerical and ministerial help - while negotiating for the sellers.
- If both consent in writing, Priya may proceed as a dual agent, but must keep each party's confidences (she cannot tell the sellers Derek's ceiling, nor tell Derek the sellers' floor), must not favor either side, and must refer questions about price strategy to the principals themselves.
- Simply having a different licensee in the same office write Derek's offer does not eliminate the issue: the agency relationship belongs to the brokerage, so the disclosure and consent requirement follows the brokerage, not the individual licensee. Broker Hal should be consulted before any dual representation begins.