In-House Sale, a Seller’s Bottom Line, and a Buyer’s Ceiling
Broker Elena’s firm has a listing at 218 Pine Street, listed at $415,000. The seller told Elena privately, “I will take $390,000, but do not put that in writing; hold at list.” Elena’s associate, Marcus, represents a buyer client, Priya. Priya is preapproved to $430,000 and told Marcus, “I can stretch to $425,000, but I want to start at $385,000.” Marcus prepares an offer at $385,000. Elena will act as broker for both sides and will review the offer with the seller. The buyer and seller have not signed any dual-agency consent. The seller asks Elena, “Does the buyer have more money?” Priya asks Marcus, “What is the seller’s real bottom line?” The listing agreement provides a 5% total commission if the firm brings the buyer.
1. What agency relationship would arise, and what must happen before Elena and Marcus act as dual agents?
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If Elena’s brokerage represents both the seller and Priya, the firm becomes a dual agent. In Pennsylvania, dual agency requires the informed written consent of both parties. The consent should identify the brokerage, explain that the firm represents both sides, and explain the limits on loyalty and confidentiality. It should be obtained before the firm acts as a dual agent-not after the offer is negotiated.
Until that consent is signed, Elena owes her seller duties, and Marcus owes Priya duties. Elena cannot treat the buyer as her client, and Marcus cannot negotiate for the seller. The firm also needs to address supervision: Elena and Marcus should not share each side’s confidential information, and the broker should establish which licensee is responsible for which party.
A practical alternative is for one side to be referred to another brokerage. If both parties want the firm to handle the transaction, Elena must document consent, explain the compensation arrangement, and make clear that the firm will not advocate one side over the other. The 5% in-house commission does not, by itself, create dual agency; the representation does.
2. How should Elena answer the seller’s question, and how should Marcus answer Priya’s question?
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Elena should not answer the seller’s question about the buyer’s finances. She should say something like: “I cannot disclose the buyer’s financial position or negotiating ceiling. I can present the offer and explain its terms.” Even if the seller asks directly, the buyer’s preapproval amount and willingness to pay more are confidential.
Marcus should not tell Priya the seller’s real bottom line. He should say: “I cannot disclose the seller’s confidential instructions. I can advise you on market evidence and help you decide what to offer.” Priya’s own ceiling is also confidential from the seller; Marcus should not reveal it to Elena or the seller.
If dual consent is later signed, confidentiality is still limited. A dual agent must not use one side’s confidential information to benefit the other. The safest course is to keep the seller’s $390,000 instruction and Priya’s $425,000 ceiling separate, present the offer on its terms, and let each client make decisions with independent advice. If either client wants aggressive representation, the firm should refer one side out.
3. Suppose the seller tells Elena, “Tell the buyer I will not go below $410,000, and tell them the buyer can afford more.” What should Elena do, and what are the risks?
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Elena can convey the seller’s authorized counteroffer of $410,000, but she cannot tell the buyer that the seller will actually take $390,000. She also cannot tell the buyer that Priya “can afford more” based on confidential financing information. That would breach confidentiality and could undermine the dual-agency consent.
Elena should clarify with the seller what may be disclosed: “You authorize me to say you rejected $385,000 and will counter at $410,000-correct?” She should document that instruction. If the seller insists on disclosing the buyer’s financial capacity, Elena should refuse and explain that the buyer’s preapproval is confidential. If the seller wants to authorize disclosure of the true bottom line, Elena can convey that authorized information, but it should be in writing.
The risks include disciplinary action, civil liability, loss of the client, and a claim that the buyer was misled. The firm’s broker should also review the dual-agency file to confirm consent was obtained before any dual representation. A clean file shows what was disclosed, what was authorized, and when.