New Year, New Laws

Effective January 1, 2024, the statute in Washington that governs real  estate brokerage relationships (RCW 18.86) otherwise known as the  “Agency Law” – was significantly revised. The revisions modernize the  25-year-old law, provide additional transparency and consumer  protections, and acknowledge the importance of buyer representation.

KEY REVISIONS

For  decades, real estate brokerage firms were only required to enter into  written agency agreements with sellers, not buyers. The Agency Law now  requires firms to enter into a written “brokerage services agreement”  (agency agreements) with any party the firm represents, both sellers and  buyers.

This change is to  ensure that buyers (in addition to sellers) clearly understand the terms  of the firm’s representation and compensation, much like a listing  agreement. The new agreements are called Buyer Brokerage Service  Agreements (BBSA) and they are to be initiated in writing prior to or  upon rendering real estate brokerage services, such as showing homes.

The services agreement with buyers must include:

• The term of the agreement (with a default term of 60 days and an option for a longer term);
• The name of the broker appointed to be the buyer’s agent;
• Whether the agency relationship is exclusive or non-exclusive;
• Whether  the buyer consents to the individual broker representing both the buyer  and the seller in the same transaction (referred to as “limited dual  agency”);
• Whether the buyer consents to the broker’s designated broker/managing broker’s limited dual agency;
• The amount the firm will be compensated and who will pay the compensation; and
• Any other agreements between the parties.

Clearly  communicated expectations between the buyer and their broker are an  advantage to the buyer. Every party deserves representation and it has  been a long time coming for the law to pay as much attention to buyers  as it has to sellers. Having competent representation on both sides of a  transaction makes the process go smoother and reduces liability during  and after the transaction. After all, everyone deserves competent  representation during one of the biggest transactions they will partake  in.

These changes are  intended to elevate transparency in agency relationships for the  consumer and encourage more detailed conversations about representation,  compensation, and the overall home buying process with the broker they  chose to align with. This will also cause sellers to gain a better  understanding of how buyer brokers are compensated.

What  a seller chooses to offer a buyer broker could have a positive effect  on their return. The only way a buyer can compensate their broker is  with liquid cash or negotiating with the seller within the purchase and  sale agreement when their BBSA doesn’t match the seller-offered  compensation for the buyer broker. If their BBSA matches what the seller  is offering in the listing for the buyer broker compensation, then the  buyer does not have to rely on the prior.

Compensation  offered in a listing that mirrors the BBSA will allow a buyer to solely  focus on the offer price of the home as they will not have to calculate  the math of the compensation against their down-payment funds, as  lending regulations do not allow for broker compensation to be financed.  If a buyer has to set aside funds for compensation it would likely  reduce their down payment amount which would increase their monthly  payment and make them more price sensitive. It will also eliminate the  compounding effect of compensation and the offer price being  simultaneously negotiated.

I  have always run my business in a very detailed fashion and pride myself  on having a deep knowledge of the laws and the forms, and these changes  are paramount. As an independent contractor affiliated with Windermere  Real Estate, the leading company in our region, it is up to me to dig  into the research and gain understanding to help guide my clients  through these advancements in a compliant and service-oriented fashion.  There are even aspects of these new laws that I have been practicing  before the changes, as transparency is a cornerstone of my value to my  clients.

These are the  biggest changes we have seen in our industry in over two decades. Be  aware that not all brokers will adapt as quickly or accurately. We are  already seeing a gross difference between the informed and not informed;  who one chooses to work with matters! If you have any further questions  about how these new laws affect you, please reach out. If you are  considering a move, I am committed to navigating the process with the  utmost compliance and my client’s success at the forefront.

REVISED PAMPHLET: The pamphlet entitled “Real Estate Brokerage in Washington” provides an overview of the revised Agency Law.

REVISED AGENCY LAW: Substitute Senate Bill 5191 sets forth the revised Agency Law in its entirety.