Two Agents, One Broker, and a Second Mortgage
Cardinal Realty operates under a written office policy permitting designated agency; both associates are licensed under the same principal broker. Tanya lists a seller's home at $299,900. The listing agreement contains the brokerage relationships disclosure and the seller's written consent to designated agency. Marcus, also at Cardinal, has been working with buyers under a signed buyer's agency agreement that contains no designated-agency consent, and he never delivered the brokerage relationships disclosure to them. During a broker's open, Tanya mentions to Marcus that the sellers are three payments behind on a second mortgage, must close by December 15, and would accept $285,000. That evening Marcus's buyers tell him they are prepared to offer $295,000 and ask, 'Do you think they'd take less?'
1. What may Marcus do with the information Tanya gave him, and how should he answer the buyers' question?
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The information is not Marcus's to use. Under designated agency, confidentiality runs to each client and stays with the designated agent and the broker; it is not pooled among associates just because they share a brokerage. Tanya's disclosure to Marcus was a leak, not a waiver - the seller never authorized it.
Marcus must not:
- Tell the buyers the sellers are in default, facing a deadline, or would take $285,000.
- Steer the offer to $286,000 'because that will get it done' - that is using confidential information to the buyers' benefit and the sellers' detriment.
- Hint at urgency ('sellers are motivated') as a coded version of the same thing.
How to answer the question: the buyers asked for Marcus's opinion, not for the seller's file. He can say: 'I can't speak for the sellers or tell you what they'll accept. Here is what the market data supports, and here is what you can afford.' Then do the comparative analysis - closed sales, days on market, condition - and let them choose.
Also flag: Marcus's own client file is defective. He owes his buyers the brokerage relationships disclosure at first substantial contact and a written consent before Cardinal can act as their designated agent. He is currently representing buyers under an agreement that does not authorize the relationship he is actually providing.
2. What must happen inside Cardinal before it can represent both sides here, and what are the options if the buyers refuse?
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Consent is the gate, and it must be written. Missouri permits designated agency, but only with informed written consent from each client. The seller consented in the listing agreement. The buyers have not. Until they do, Cardinal cannot serve as their designated agent while another associate represents the seller.
Steps in order:
- Deliver the brokerage relationships disclosure to the buyers now, and document the delivery date.
- Explain designated agency in plain terms: each associate advocates only for their own client; the principal broker supervises both and does not pass confidential information between them; the brokerage and broker are limited agents as to both.
- Obtain the buyers' written consent - or a written refusal.
- Notify the seller of the dual situation in writing, since the brokerage's role has changed from what the listing agreement contemplated.
If the buyers refuse: Cardinal cannot be a designated agent for both. Options: (a) the buyers proceed as customers of Cardinal while Tanya represents the seller - meaning the buyers get honesty and disclosure but no advocacy or confidentiality from Cardinal; (b) the buyers' agreement is assigned or referred to another brokerage so Marcus's clients get independent representation; (c) Marcus steps out and the buyers are unrepresented. What Cardinal may not do is proceed as though consent existed because the buyers 'seemed fine with it.'
Watch the incentive: Marcus's own commission depends on the deal closing. That is exactly why the consent must be documented before the offer is written, not after the inspection period.
3. The deal closes at $293,000. Tanya later learns Marcus's buyers were told nothing about the seller's second mortgage. Did anyone breach a duty, and what should the principal broker do?
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On these facts, Marcus did not breach by staying silent - that is the point of confidentiality. Assuming he kept the information to himself and did not let it shape his advice, silence was the correct performance.
Tanya did breach. Disclosing her client's delinquency and negotiating floor to a competing associate within the same brokerage is a confidentiality failure, even though the two agents represent different clients. The duty of confidentiality to the seller survives the transaction and, in most brokerage policies, survives termination of the listing.
The principal broker has three jobs:
- Investigate and document. Interview both associates, identify whether the leak reached the buyers or affected price, and preserve the record.
- Correct the systemic defect. The brokerage's office policy promised designated agency but never delivered the buyer-side disclosure or consent. Retrain, add a checklist item that no offer is written until consent is signed, and audit open files.
- Consider the seller's position. If the seller can show the leak cost money, the brokerage's errors-and-omissions exposure is real. The broker should not paper over it - and should not promise the seller that the leak 'didn't matter' before the facts are known.
Exam takeaway: under designated agency the wall runs between agents, not just between firms. Sharing another client's leverage is a breach even inside the same office.