In the News: Revisions to Real Estate Agency Law

Feb 15

Attention buyers and sellers! Recent updates to the Real Estate Agency Law aim to bring transparency and understanding to the way agents are compensated. This means clearer information on how your agent gets paid and what services they provide.

Let's start with a little back story:

In 2019 more than 260,000 home sellers in the midwest filed a class action lawsuit against NAR (National Association of Realtors) and four corporate defendants which alleged a conspiracy among real estate brokers which required sellers to offer compensation to buyers’ brokers. Sellers also claimed that this prevented them from negotiating fees that were paid to buyer representatives.

NAR and the corporate defendants fought back, stating that commissions for both buyer and seller representatives have always been negotiable. However, in October of 2023 a federal jury found the defendants guilty and awarded approximately $1.785 billion in damages to the plaintiffs, which will be tripled to over $5 billion under antitrust law.

To say that it came as a massive shock in the real estate industry, would be an understatement. The defendants plan to appeal the decision, which could prolong the case for years.

Key Changes?

This ruling underscores the need for transparent communication about buyer agent compensation and the services provided. The current system, where the seller has typically paid the buyer's agent fee, is being challenged.

Effective January 1st, 2024, Washington implemented significant changes to our real estate agency law, specifically impacting buyer agency agreements.

Mandatory Buyer Broker Services Agreement: Before or as soon as possible after providing services, real estate brokers must now enter into a written agreement with buyers. This agreement outlines terms like:

Duration of the agreement
Exclusivity (whether the buyer agrees to work exclusively with that broker)
Compensation rate and how it's paid (by seller, buyer, or both)
Services provided by the broker

Enhanced Disclosure of Limited Dual Agency: When a broker represents both buyer and seller (dual agency), the consent process is stricter. Buyers must now actively and knowingly agree to this arrangement after receiving detailed information about potential conflicts of interest.
Real Estate Brokerage in Washington Pamphlet: Brokers must provide this pamphlet to clients and unrepresented parties, explaining agency relationships and consumer rights.

What does this mean for the real estate industry?

For years, real estate firms were only required to enter into written agreements with sellers. For the first time, our industry will be required to have a written agreement with buyers. Buyers will sit down and discuss compensation structure and services provided with their agent and sign a contract before touring homes and writing offers. This change aims to improve transparency and understanding.

Buyers may also have to pay their agent if the seller isn't offering a fee that matches what their agent charges. This is where the buyer’s agency agreement comes into place, allowing space for that conversation and negotiation before providing brokerage services to a buyer so that clear expectations are put into place.

My thoughts?

The recent verdict regarding buyer agent commissions presents both challenges and opportunities for our industry. While negotiations have always been possible, this event serves as a powerful reminder to clearly communicate value and fee structures to our clients.

However, it's crucial to consider the potential wider impact on the homebuying journey. Adding buyer agent fees to the already existing down payment, closing costs, and competitive market pressures that buyers experience might exacerbate affordability concerns, potentially making homeownership less attainable for some.

While significant immediate changes are unlikely, the need for adaptation is clear. Sellers may choose not to offer buyer agent fees in certain situations. In such cases, agents can guide their clients through these conversations effectively, relying on established agency agreements.

Putting Transparency into Practice:

While the recent legal developments are prompting changes in the industry, it's important to know that many of these best practices have always been the foundation of my approach to working with buyers. My commitment to clear communication, informed consent, and fair representation remains unwavering.

However, I haven't stopped there. In the wake of the emphasis on compensation transparency, I've developed a unique and client-focused approach to buyer agency agreements.

If you're looking for a transparent, client-centered experience when buying a home, I invite you to connect and discuss how my approach can benefit you. Together, we can navigate the evolving landscape of real estate with confidence and clarity.