Two Desks, One File: Confidentiality Under Designated Agency
Salesperson Dana lists 1428 Elm at $425,000 for sellers who are divorcing. In confidence the sellers told Dana their walk-away number is $395,000 and that they must close before the school year starts. The brokerage practices designated agency and has a written policy. Buyers Priya and Tom, represented by Dana's colleague Marcus, write $405,000. At the water cooler Marcus asks Dana, 'Are they flexible? My buyers will stretch to $418,000 if they have to.' Dana also learns from the sellers' attorney that a contractor's lien must be cleared before closing, and the sellers tell her to 'keep that quiet and handle it privately.'
1. May Dana answer Marcus's question, and may Marcus share the buyers' $418,000 ceiling?
Read the worked answer
No in both directions.
- Designated agency lets one brokerage represent both sides, but confidentiality runs to the individual designated agent's own client. Dana may not pass the sellers' floor or their timing pressure to Marcus. Marcus may not pass the buyers' ceiling to Dana.
- At the brokerage level, the firm owes both clients the duty not to use one client's confidences to the other's detriment. That is why written information barriers and file segregation matter.
- Verify the paperwork actually supports the practice: a written designated-agency policy plus the required written agency disclosure to both clients. If those were never signed, the firm may be operating an undisclosed dual agency, which is the real exposure.
What Dana says: 'I can't discuss my seller's motivation or numbers. Write your clients' strongest offer with supporting data and I'll present it.'
2. The sellers want Dana to tell them what the buyers will pay. What may Dana tell her own clients?
Read the worked answer
Only what the sellers are entitled to know.
- Dana may present the $405,000 offer as written, provide market data, and confirm whether other offers exist.
- Dana may not reveal Priya and Tom's $418,000 ceiling. That is another brokerage client's confidential information acquired by the firm, and it does not become Dana's to use simply because her client is the seller.
- Practically: tell the sellers the offer is $405,000, explain the comps and net proceeds, and let them counter or accept. If the sellers push, document the refusal in the file.
Watch the pressure point: the sellers' divorce and school-year deadline are their confidential facts. Dana may use them to advise the sellers but must not let slip enough detail that Marcus's buyers can infer desperation.
3. How should Dana handle the contractor's lien and the instruction to keep it quiet?
Read the worked answer
It cannot be kept quiet.
- An unresolved lien is a title defect that the buyer's lender and title insurer will find. Concealment is misrepresentation of a material fact and can support rescission, damages, and a license complaint; it also makes the seller's property condition disclosure inaccurate.
- Correct path: disclose to the buyer's side, order the title commitment early, obtain a payoff letter or lien waiver, and plan for the lien to be paid at settlement from seller proceeds, or bonded/held in escrow if the amount is disputed.
- If the lienholder will not release in time, the contract needs a written extension or a cure provision. Do not let the closing date pass silently on an unresolved title item.
File note: document the advice given, the sellers' instruction, and the disclosure made. Dana should also notify her broker-in-charge because a title defect plus a concealment instruction is a supervisory issue.