As most buyers and sellers in our market know by now, effective January 1 the Law of Agency was revised in our state. The result was much more transparency and disclosure upfront on the amount of compensation paid to buyer’s and seller’s agents, and who the compensation is paid by.
My team and the agents that I work with at Coldwell Banker San Juan Islands Inc. have no problem explaining the services that we provide and the expertise and experience that we bring to the table.
Since January in Washington State, the law has required that we have a Buyer’s Agency Agreement with a prospective buyer prior to providing any real estate services, this includes showing property and providing material information.
This law is in effect nationally as of August 2024. In Washington State, the sellers may still elect to offer compensation to a buyer’s agent. Therefore, there is no monetary impact on a buyer for those listings where the seller has elected to offer compensation. However, the buyer still must sign a Buyers Agency Agreement, regardless.
If the buyer elects to purchase a property where the compensation is not being offered by the seller, the buyer will need to compensate their agent for their services or negotiate their agent’s compensation with the seller when presenting their offer.
At this point in our market the majority of our sellers have elected to offer both the listing agent and the buyer’s agent compensation.
Most of our sellers recognize that in order to stay competitive with the other listings, that offering a buyer's agent compensation has merit. Further, they realize that the comparable sales used in the analysis for the valuation included buyer’s and seller’s agent compensation. Ultimately, sellers will consider their total closing costs, including broker compensation, when setting their price and negotiating a selling price, which both the buyer and seller will agree to.
Sellers also recognize that San Juan County requires the buyers to pay not only their closing costs, but a buyer’s 1.5% excise tax. This can be very burdensome for a buyer to come up with the necessary funds to close, including their buyer’s agent compensation. Further, if a Buyer is getting a loan, at this point in our industry, the buyer is not able to borrow their buyer's agent compensation as part of closing cost so they must come out of pocket. That can make the difference between qualifying to purchase or not.
Per Annie Fitzsimmons, the Washington REALTORS Legal Hotline lawyer, the Buyer’s Agency Agreement must be signed at the outset of the relationship, or have it signed at the first opportunity prior to the agent providing real estate services including touring properties, not right before an offer is being signed by the buyer.
The buyer has the right to understand the relationship and know the amount of compensation, if any, that they may be required to pay to their agent at closing in advance of making the offer.
If the agent you are working with failed to give you the NEW Real Estate Brokerage in Washington pamphlet and did not offer the NEW agreement to you for signature, they are not in compliance with the new law.
Whether you are a buyer or seller, one needs to ask themselves, do you want to work with an agent with integrity that follows the laws and protects their client’s rights? Or do you want to work with an agent that comes up with a workaround the law, which is not in your best interest.
It would be a very unusual circumstance that an agent is not able to provide you with the Real Estate Broker in Washington pamphlet, the Buyer’s Agency Agreement and a list of their real estate services that they will be providing in advance of the property viewing. There is no excuse for not giving you the consumer protection that the law intended.
The request to a buyer is very non-threatening; for new relations with a buyer, most agents will draft the agreement for a very short term and for the subject properties that they are showing only. Then once the relationship is established, and both agent and buyer decide to continue to work together, the agreement can be amended to extend and expand the terms of the contract.
Agents should ask you at the time of discussion, if you have already signed an agreement with a different agent and whether it is still in effect. As a buyer, you do not want to be obligated to pay for more than one agent for services. Do not enter into a new agreement with a different agent until the other agent’s agreement is expired, cancelled or is for a different property.
This law was created to protect consumers and ensure that they understand agency relationships and compensation. Buyers as well as agents should understand prior to receiving or providing real estate services how their agent compensation will be paid.
BELOW IS THE CONSUMER GUIDE FROM THE NATIONAL ASSOCIATION OF REALTORS, which I modified slightly for our local market.
WHY AM I BEING ASKED TO SIGN A WRITTEN BUYER AGREEMENT?
If you’re a buyer working with an agent who is a REALTOR®, it means you are working with a professional who is ethically obligated to act in your best interest. As of August 17, 2024, you will be asked to sign a written buyer agreement after you’ve chosen the professional you want to work with. Here’s what you should know about these agreements:
What is a “written buyer agreement?” What does it do? A written buyer agreement is an agreement between you and your real estate professional outlining the services your real estate professional will provide you, and what they will be paid for those services.
Why am I being asked to sign an agreement? Written buyer agreements became a nationwide requirement for many real estate professionals as a part of the National Association of REALTORS®’ proposed settlement of litigation related to broker commissions. The requirement went into effect on August 17, 2024.
Are these agreements new? In some places, yes. Many states have required them for years, while some have not. As a result, it is entirely possible you or others you know have not used them in the recent past. Regardless, they are now a nationwide requirement for real estate professionals.
Are these agreements negotiable? As in the case of all contracts, they are negotiated by the parties. You can negotiate for the services you want to receive, the length of the agreement, and the compensation. Compensation between you and your real estate professional is not set by law. In the written agreement, the compensation must be clearly defined (e.g., $0 as a flat fee or X percent,)—and not open-ended or a range. Only sign an agreement that reflects what you have agreed to with your real estate professional.
How do I benefit from these agreements? These agreements clearly lay out what services you (as a buyer) expect your real estate professional to provide, and what your real estate professional will be paid. These agreements make things clear and reduce any potential confusion at the outset of your relationship with your real estate professional.
When do I need to sign an agreement? You will be asked to enter into a written buyer agreement with your real estate professional before “touring” a property with them, either in-person or virtually. If you are simply visiting an open house on your own or asking a real estate professional about their services, you do not need to sign a written buyer agreement.
Does this mean I have to pay my real estate professional out of pocket? Not necessarily. While you are responsible for paying your real estate professional as outlined by your agreement, you can still request, negotiate for, and receive compensation for your real estate professional from the seller.
Do agreements dictate a specific type of relationship I need to have with my real estate professional? No—you are allowed to enter into any type of business relationship with your real estate professional allowed by state law where you are purchasing a property.
Can I change or exit an agreement? Yes. You and your real estate professional can mutually agree to change your agreement. Agreements may have specific conditions under which they can be exited, so read the text of the agreement and speak with your real estate professional if you would like to change or exit your agreement.
As with all my articles, the opinions expressed herein are solely my own. And these opinions are based on my personal experience, observations, and from interviewing and reviewing both public and non-public information sources. Please visit facts.realtor.com for more information and consult your real estate professional or attorney for details about state law when you are purchasing a property.
Written By:
Merri Ann Simonson
Coldwell Banker San Juan Islands Inc.
360-317-8668
10-2024
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