Designated Agency When the Buyer Hasn't Signed Anything
Marcus is a salesperson with Cardinal Realty. Cardinal holds an exclusive-right-to-sell listing on 412 Birch Lane. Marcus's own buyer-clients, the Hensleys, want to buy it. Cardinal's managing broker practices designated agency and appoints Marcus to keep representing the Hensleys while another licensee in the office, Tanya, represents the sellers.
At the showing the seller tells Marcus that the basement "takes on water every spring" and that he "would knock $15,000 off before he would dig up the yard." The Hensleys have not signed a buyer agency agreement. They ask Marcus directly, "Is the basement dry?" and want to write a full-price offer tonight. The seller then texts Marcus: "Don't tell your buyers about the water yet."
1. What agency relationships exist in this transaction, and what must be in writing before the Hensleys submit an offer?
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The firm is in a dual-agency position; the individual licensees are designated agents. Cardinal Realty represents both the seller (through Tanya) and the buyer (through Marcus). Under designated agency, confidential information is compartmentalized between the two licensees, but the brokerage itself is the dual agent - so the consumer-facing disclosure and consent are still required.
Before an offer is written:
- Agency disclosure to the Hensleys - in writing, at first substantive contact and before any confidential information is received. Because they have not signed a buyer agency agreement, Marcus has no established client relationship to them yet; nothing he learns from them is protected, and nothing he is told by the listing side is owed to them.
- A written buyer agency agreement with the Hensleys, setting out the term, compensation, and the possibility of dual/designated agency.
- Informed written consent from both the sellers and the Hensleys to designated agency within the same brokerage. Without that consent, Cardinal cannot represent both sides - Marcus would be limited to a disclosed non-agency/facilitator role, or the buyers must be referred to another brokerage.
Doing this after the Hensleys write the offer is too late; the consent has to precede the representation it authorizes.
2. How should Marcus answer "Is the basement dry?" given what the seller told him and the seller's text message?
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He must thread between two duties and can do neither extreme.
He may not lie. Telling the Hensleys the basement is dry, or that he has no information when he has direct knowledge, is misrepresentation of a material fact - the fastest route to a license complaint and a civil claim, and "the seller told me to keep quiet" is not a defense.
He may not simply blurt out the seller's confidences. Although the seller is not his client, the seller's confidential information belongs to Tanya's side of the designated-agency wall. Marcus obtained it inside the brokerage relationship; relaying it wholesale to his own buyers would breach the confidentiality the firm owes the seller.
What he actually says: something truthful and non-committal - that he is not a inspector, cannot speak to the condition of the basement, and that the buyers should have it professionally evaluated. He then puts the question in writing to the listing side so the seller must answer on the record, and he recommends a licensed inspector and a basement moisture specialist, with the inspection contingency drafted long enough to get them in.
The seller's text is the real problem: a seller may decline to volunteer information, but a licensee may not participate in a scheme to conceal a known material defect. Marcus should forward the text to Tanya and the managing broker. If the seller persists in refusing to disclose a known water intrusion problem on the disclosure form, the brokerage must decline to list or withdraw - the licensee's own duty not to conceal is not waivable by the client.
3. The seller's remark that he would "knock $15,000 off" - may Marcus use that with the Hensleys, and does it create any obligation?
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It is information, not an offer, and it must be confirmed before anyone relies on it.
- The seller volunteered it directly to Marcus, in the Hensleys' presence or not, so the seller has already let it out - the designated-agency confidentiality argument is weaker here than for a fact Tanya relayed. But a licensee should never build a negotiating strategy on an unrecorded hallway remark: if the seller later denies it, Marcus is exposed on both sides.
- Marcus should confirm with Tanya and the managing broker, then get the seller's position in writing (email or a signed counteroffer). Only a written counteroffer is enforceable.
- He should not present it to the Hensleys as "the seller will take $15,000 less," because it is not a commitment and it also invites the sellers to claim their negotiating position was disclosed without authority.
Practical advice to the Hensleys: offer based on their own analysis of the property, not on the seller's aside, and let the inspection contingency do the work - if the basement moisture is confirmed, a repair credit or price reduction in that range is supportable and documented.