2024 Brings New and Exciting Changes to Washington Real Estate Agency Laws
Happy New Year!!
I hope your holidays were filled with joy and celebration, and you’re looking forward to 2024 with great anticipation for what certainly promises to be an exciting year!
I’m not sure about you, but for me and the Infinity Team, with each passing year we set goals, make resolutions, and strive to make continuous improvements in all that we do, both personally and professionally. We strive to improve the quality, detail, and transparency of our service to our clients, ensuring we meet and exceed expectations while sharing our market and transaction expertise, and provide critical resource info to you for all things real estate. We are your partners, your advocates, your advisors, your neighbors, and your Realtors.
As a small group, we are always proud of the continuous improvements we make from year to year. Unfortunately, the industry as a whole, together with our state legislature who creates the statutes defining our duties and responsibilities, is much slower to react. It may seem hard to believe in such a dynamic industry, but it’s been nearly 30 years since our agency statutes have been substantially revised.
Finally, there are exciting and significant updates to our laws that will improve the way we do business. These changes went into effect January 1, 2024.
One criticism of the real estate industry as a whole for many years has been lack of transparency. Buyers and Sellers have often been left in the dark as it pertains to representation, the duties of a broker when providing representation, and a broker’s compensation. These new changes are specifically designed to increase transparency for all parties, all across the board.
Written Service Agreements for All
If you’ve sold a home with a real estate broker you’re well aware that a listing agreement, outlining the terms of service, the duration of the listing, and the compensation you agree to pay, is required before a home can be officially listed and advertised for sale. With a listing agreement, you create a contractual relationship with your broker and you have a basis for understanding the duties and responsibilities we have to you and what you can expect in return.
Doesn’t it seem strange that a listing agreement is required for a broker to represent a seller, but to this point, no agreement has been required for a broker to represent a buyer? Doesn’t a buyer deserve to have the same degree of clarity as to what they hire a broker to do for them? Shouldn’t a buyer have the same right to discuss and agree to the buyer broker’s compensation for these services?
The answer is YES and the legislature acted. Beginning January 1, 2024, written Service Agreements are required to be executed “as soon as reasonably practicable” when you engage a real estate broker.
What does this mean?
If you’re a buyer shopping for a home, whether seriously or casually, when you ask a broker to show you homes, give personalized market expertise, or represent you by writing an offer, you will be required to execute a services agreement before these services proceed. You will also have the opportunity to discuss the broker’s compensation and fully understand how that compensation is to be paid. (Please note, the required agreement can be exclusive or non exclusive, which means if you’re not ready to commit to working exclusively with that broker, you can request a non exclusive agreement.)
If you’re a seller beginning the listing prep process with a listing broker, you’ll be required to execute an agreement even if the listing is many months down the road.
Isn’t all of the broker compensation required to be paid by the Seller?
This is probably the most common misconception in Washington real estate. The answer is absolutely not! In Washington, the listing agreements specify compensation paid to the listing broker, and, in a separate paragraph, the seller MAY offer compensation to a buyer broker. The seller does NOT have to offer compensation to a buyer broker, and this rule has been in place here for many years.
In practice, the vast majority of Sellers in Washington offer to provide some level of compensation to buyer brokers in a transaction. Buyers are required to pay large downpayments and closing costs, therefore, it’s difficult for Buyers to have the additional cash to pay their brokers. Certain types of loans, such as VA and FHA do not allow buyers to pay their brokers directly. As a result, broker compensation is usually built into the price paid by the buyer for the home and the net sale price the seller will accept. A seller desires to sell, so to attract buyers to their home, making an offer of compensation to the buyer broker is likely to continue. What is changing with the new laws and service agreements, is the transparency surrounding the compensation discussion.
Unfortunately, many states have not recognized the importance of this type of “decoupled” listing agreement, and therefore is a contributing cause to major class action lawsuits you may have heard about. Because Washington has been far ahead of the industry, none of the Washington MLS’s, Washington Assn of Realtors, nor specific brokerages have been brought into these suits. Thankfully, with our consumer friendly history, and these new laws designed to have even more transparency, we do not anticipate being affected by these lawsuits anywhere in Washington State.
Limited Dual Agency
The final important piece of the new legislation adds transparency surrounding dual agency. Dual Agency is when one individual broker is representing both the buyer and the seller in a transaction. The new law clarifies that in this situation we will now be considered a “limited dual agent” and all parties must separately acknowledge in writing that they agree to this type of representation. Why? When a broker is a dual agent (now a limited dual agent), they are no longer able to advocate directly for either party. Essentially that broker is now just a facilitator, therefore the seller and buyer need to fully understand the limitation of the broker’s duties and have the choice as to how to proceed.
Conclusion - The future is bright and it benefits YOU!
If this seems like an awful lot to digest in short order, don’t worry. We are here to answer all of your questions, address concerns, and continue providing the exceptional service we are known for.
We’ve always put our clients first, and our commitment to both transparency and ethical practice is paramount to what we do. We’re excited for this new chapter because we know that hasn’t been everyone’s experience with brokers and everyone deserves the best. At Infinity, we believe these changes will be an opportunity for us to further differentiate ourselves from our competitors. We’ll seize the moment to take the professionalism and value we provide you to the next level. That’s what we do! We’ve Got Your Back, even more than before!
Cheers with Gratitude,
Infinity Real Estate