Buyer Under Contract, Seller's Leaky Secret
Dana is the managing broker at North Shore Realty in Duluth. She has a signed buyer's brokerage agreement with Maya, who is relocating for a hospital job and wants a house before Memorial Day. Dana also holds the listing agreement for Trevor's 1920s two-story near Chester Park, priced at $310,000. At the first showing, Trevor pulls Dana aside and says the basement takes on water every spring, a contractor quoted $18,000 for drainage, and he does not want the issue in the seller's disclosure because 'the buyer will freak out.' The disclosure form says no known moisture problems. Maya, touring the basement, asks Dana directly: 'Is this basement dry?' She then tells Dana she wants to offer $295,000 and asks Dana to 'negotiate hard' because the seller seems motivated. Dana has not yet reviewed agency status with either party in writing.
1. What agency options and written disclosures must Dana address before she can continue working with Maya and Trevor, and what happens if one party declines dual agency?
Read the worked answer
Before continuing, Dana must treat this as a potential dual agency because her brokerage already has a written buyer's brokerage agreement with Maya and a listing agreement with Trevor. Minnesota's agency disclosure statute (Minn. Stat. § 82.197) requires an agency disclosure form at first substantive contact and written acknowledgment of the agency options. Dual agency requires the informed written consent of both buyer and seller. Dana should explain: (1) the brokerage represents both with limited neutrality; (2) it cannot advocate for either side's price strategy; (3) confidential information from one party will not be shared with the other; and (4) the parties may choose separate representation. If either declines dual agency, the brokerage must not act as dual agent. Dana should refer one party to another brokerage and continue representing only the other, or withdraw from both if conflicts are unmanageable. She should document the disclosures in the transaction file before further negotiations. A facilitator arrangement may be an option only if the brokerage is not already an agent for the parties and the required disclosures are made; it is not a cure for an existing agency conflict.
2. Can Dana answer Maya's basement question or use Trevor's disclosure in negotiation? Explain the competing duties and the practical steps.
Read the worked answer
Dana cannot lie. She also cannot disclose Trevor's confidential statement to Maya while representing Trevor, and she cannot help Trevor conceal a known material defect. The seller's property disclosure must be accurate to the seller's actual knowledge; Minnesota law requires disclosure of material facts known to the seller. Dana should tell Trevor, in writing, that she cannot participate in a false disclosure, that he must correct the disclosure or authorize disclosure, and that she may have to terminate the listing if he refuses. To Maya, Dana should not answer 'yes.' A defensible response is: 'I cannot discuss the seller's confidential information. You should rely on your own inspections and the written disclosures, and I recommend a licensed inspection and a basement specialist.' If Trevor refuses to correct the disclosure, Dana should withdraw rather than continue marketing a property with a knowingly false disclosure. She should consult her managing broker and attorney, document the advice, and avoid any statement that could be construed as misrepresentation or concealment.
3. Maya asks Dana to 'negotiate hard.' How does dual agency change Dana's conduct, and what should she recommend?
Read the worked answer
Once dual agency is consented to, Dana becomes a neutral facilitator between her two clients, not Maya's advocate. She can present Maya's $295,000 offer, transmit counteroffers, explain contract terms, and coordinate inspections and deadlines. She cannot use Trevor's confidential motivation or the leak against him, cannot coach Maya on how low to push, and cannot advise Trevor to reject or accept based on Maya's private financial position. She should tell Maya: 'I can deliver your offer and explain the process, but I cannot negotiate aggressively for you against the seller because I also represent the seller. You may want separate representation or an attorney for strategy.' If Maya wants hard advocacy, Dana should discuss releasing Maya to another broker. If the transaction proceeds, Dana must keep confidences, disclose material facts as required, and document that both parties understood the neutrality limits. The safest course may be to refer Maya before an offer is written.