There can be responding (by this mind/body organism) to Reality or to Story.
This is not a choice, it is a statement of observation.
Whether there is responding to animate or inanimate others (people or things), the moment meaning is applied, then i am responding to story. Any meaning is speculative and thus response is to actuality plus meaning. The response itself is actual and can be given the label of reality, but the meaning component of what was responded to, is imagined, is concept, is thought content and may or may not turn out to be accurate.
It would seem that Reality is confined to direct Experiencing as everything outside of this can only be thought about. (until it is encountered)
When it comes to other people, it is exactly the same. If you see them, there is a visual experiencing. If they touch you there is a kinaesthetic experiencing. If you hear them, an auditory experiencing. Of course it doesn't stop with the raw sensory stimulation. Almost always there is association with past experience. This is still Reality. It is the belief that past experience 'means' something about this person, that is where story starts to influence reality.
When i imagine that i know what another thinks or feels, when i imagine that the others personal... the others persona, their personality can be known by anybody else, then i am totally outside of reality and completely inside concept, imagination.
Of course, this is a somewhat simplistic description. At the other end of the spectrum is relationships.
My relationship with a rock brings with it a history and preferences. For reasons beyond awareness, i prefer solid rocks to crumbly ones. i like smooth surfaces as opposed to jagged. i am taken by unusual shapes, etc.
When it comes to relationships with other people, the complexity and extent of history and preferences is huge and unknowable.
The unknown component presents the 'most likely to corrupt', influence.
The question "What is actual, and what is imagined" is the best chance for a healthy relationship. It may well be the most difficult too, as we react so quickly and unconsciously to the stuff of our thoughts while thinking that we are reacting to the other.