Article Updated: In 2024, Washington State introduced a landmark change in real estate with the Real Estate Agency Law, effective from January 1st. This significant legal change is reshaping the dynamics of buying and selling homes in the state of Washington.

Additionally, the National Association of Realtors (NAR) settlement will further impact agency laws nationwide later this year, particularly in how broker compensation is handled.

However, the Northwest Multiple Listing Service (NWMLS) has announced that it will not opt into the NAR settlement, maintaining its independent rules regarding compensation transparency.

In this blog, we’ll delve into the intricacies of the 2024 Real Estate Agency Law and its profound impact on Seattle homebuyers and sellers. This comprehensive exploration will cover:

• The background and significance of the 2024 Real Estate Agency Law, including important documents.
• Detailed analysis of the key revisions in RCW 18.86 affecting buyers and sellers.
• The impact of these changes on the real estate transaction process.
• Practical advice for buyers and sellers navigating this new legal landscape.
• The implications of the NAR settlement on broker compensation and how NWMLS’s decision to opt out affects local transactions.

Join us as we unpack these topics, offering insights and guidance to help you adapt to and thrive in Washington’s new real estate environment.

Did you know? Prior to 2024, real estate brokerage firms in Washington were only mandated to have written agreements with sellers, not buyers.

This new law marks a transformative step in ensuring equal transparency and protection for both parties in a real estate transaction.

Additionally, the NWMLS’s independent stance on broker compensation continues to lead the industry in transparency.

What’s New in WA Real Estate Agency Law? Video

Overview of the 2024 Changes in Buyer Agency Law

The 2024 Real Estate Agency Law in Seattle, built on revisions to RCW 18.86, represents a landmark shift in real estate transactions. Effective January 1, 2024, this law modernizes the decades-old Real Estate Agency Law in Washington, introducing significant improvements in transparency and consumer protection for both buyers and sellers.

A key change requires real estate brokerage firms to enter into written agreements with both sellers and buyers. Previously, only sellers needed such agreements. This new requirement ensures that buyers, like sellers, are fully informed about the terms of representation and compensation.

A written services agreement between the buyer and the firm must be entered into before, or as soon as reasonably practical after, a broker begins rendering real estate brokerage services to the buyer.

What Is a Real Estate Brokerage Service?

Real estate brokerage services to the buyer refer to the range of services provided by a real estate broker or agent to assist a buyer in purchasing property. These services typically include:

• Identifying potential properties
• Arranging viewings
• Providing market analysis and advice
• Negotiating terms and prices on behalf of the buyer
• Assisting in the transaction process

The services are designed to represent the buyer’s interests in the real estate transaction, ensuring they get the best possible deal and that all legal and procedural requirements are met.

Compensation

The 2024 law introduces a new approach to agent compensation, transforming how buyers and their real estate agents engage and transact. Traditionally, the seller paid the buyer’s agent’s commission, but this law shifts that financial responsibility directly to the buyer. This change aims to enhance transparency in real estate transactions across Washington State, requiring buyers to be more involved and informed about the financial aspects of their property purchase.

This legislation emphasizes the need for clear, direct agreements between buyers and their agents, promoting a more explicit understanding of the services provided and the corresponding fees.

Important Documents

The New RCW is Outlined In The “Real Estate Brokerage in Washington” Pamphlet: (that is required to be delivered before any written agreement is signed)

You Can Learn More About The RCW in the “Important Information For Home Buyers” Handout:

You Can Learn More In the John L. Scott “Be Prepared For Today’s Market, Understand Your Options” Handout:

This Is The New Buyer Representation Agreement Form: (that is required to be signed before, or as soon as reasonably practical after, a broker begins rendering real estate brokerage services to the buyer)

Historical Context Leading to These Changes

The recent changes in the 2024 Real Estate Agency Law can be traced back to significant legal actions within the real estate industry. A pair of class-action lawsuits filed against major U.S. real estate brokerages followed a landmark $1.8 billion verdict in Kansas City federal court. These lawsuits, representing home sellers, challenged the industry’s long-standing practice of requiring sellers to pay commissions to brokers representing buyers, often ranging from 5% to 6%. The cases alleged this practice as a conspiracy in violation of U.S. antitrust law. This legal backdrop has influenced a broader reconsideration of traditional real estate practices, leading to more transparent and equitable regulations like the 2024 Real Estate Agency Law in Seattle.

The need for these changes is rooted in the evolution of the real estate industry over the past few decades. Historically, real estate practices heavily favored sellers due to the structure of brokerage agreements and representation. For many years, real estate brokerage firms were only required to have written agreements with sellers, leaving buyers in a less defined and often less protected position.

This imbalance prompted a growing awareness and advocacy for buyer rights, highlighting the need for equal transparency and protection in real estate transactions. As the market evolved, it became clear that buyers needed more explicit representation and acknowledgment in these transactions. This led to a push for legislative changes to address these disparities and to modernize the real estate transaction process, culminating in the significant revisions of RCW 18.86.

One of the pivotal changes will be the decoupling of buyer compensation from seller compensation, a concept that the Northwest Multiple Listing Service (NWMLS) began implementing back in 2019 with form 1A. This separation aimed to promote transparency and fairness, ensuring that compensation is independently negotiated and clearly understood by all parties involved.

The new law and future settlement agreements are a response to these historical inequities and aims to create a more balanced and fair real estate market for all parties involved. By requiring written agreements with both buyers and sellers, mandating clear disclosure of compensation terms, and ensuring that broker compensation is independently negotiated, the 2024 Real Estate Agency Law seeks to foster a more transparent and equitable environment in real estate transactions.

Key Revisons in Detail

The 2024 Real Estate Agency Law introduces substantial revisions to real estate transactions, focusing on enhancing transparency and consumer protection. One of the most notable changes is the introduction of mandatory written agreements for both buyers and sellers. This ensures that each party clearly understands their relationship with the real estate firm, including terms of representation and compensation.

The contents of the buyer’s brokerage services agreement are particularly detailed, including:

• The term of the agreement (with a default term of 60 days)
• The name of the broker appointed to be the buyer’s agent
• The exclusivity of the agency relationship
• The buyer’s consent to potential limited dual agency situations

Furthermore, it stipulates the amount of compensation and who will pay it, alongside any other agreements between the parties.

These revisions also enhance consumer protections by outlining specific broker duties. This includes:

• The obligation to provide accurate and honest information
• Protect the client’s confidentiality
• Act in the client’s best interest

By mandating these standards, the law aims to build a more trustworthy and equitable real estate environment, where buyers and sellers are equally informed and protected in their transactions.

Differentiating the NAR Settlement and Decoupling of Compensation

It’s crucial to differentiate between the new agency law that brought about the mandatory buyer agency agreement and the NAR settlement that will require the decoupling of commission later in 2024. While the 2024 Real Estate Agency Law focuses on written agreements and consumer protections, the NAR settlement addresses financial aspects of real estate transactions, particularly broker compensation.

NAR Settlement and Decoupling of Commission

The NAR settlement mandates that broker compensation for buyers and sellers must be decoupled and independently negotiated, enhancing transparency. This requirement will come into full effect later in 2024.

However, the Northwest Multiple Listing Service (NWMLS) had already implemented the decoupling of commissions in 2019 with form 1A. This early adoption set a precedent for transparent and fair compensation practices, requiring that the compensation for buyer brokers and seller brokers be independently negotiated and clearly defined.

NWMLS Position on NAR Settlement

On May 28, 2024, NWMLS announced that it would not opt into the NAR settlement agreement. NWMLS rules and forms, along with the revised Agency Law, already provide for consumer-friendly brokerage relationships.

Sellers negotiate compensation directly with the listing firm and decide whether to offer compensation to the buyer’s broker.

NWMLS’s decision not to join the NAR settlement reflects its commitment to maintaining transparency and consumer choice in real estate transactions. The NWMLS criticized the settlement’s potential to reduce transparency by allowing off-MLS compensation deals, which could harm buyers and limit sellers’ options.

Navigating the New Legal Landscape

Navigating the new legal landscape created by the 2024 Real Estate Agency Law in Seattle requires both buyers and sellers to adapt to several key changes.

For Buyers

Understanding the significance of the mandatory written agreement is essential. This document outlines the terms of their relationship with the real estate agent, including:

• Duration: The period during which the agreement is in effect.
• Services Provided: A detailed list of the services the agent will offer.
• Compensation: Clear information about how and when the agent will be compensated.
• Agent’s Duties: The responsibilities and obligations of the agent toward the buyer.

Buyers should thoroughly review these agreements and feel comfortable asking questions to ensure clarity and understanding. It’s important to know your rights and the services you are entitled to, and not hesitate to seek clarification on any points that are unclear.

For Sellers

Sellers must also adapt to these changes, particularly in how they engage with agents and buyers. It’s crucial for sellers to understand the implications of the written agreement from the perspective of buyer representation. Key points for sellers include:

• Engagement with Agents: Understanding the terms of the agent’s representation of buyers and how it affects the selling process.
• Negotiation of Commissions: Being aware of how commissions are negotiated and agreed upon in the new legal framework.
• Disclosure of Dual Agency Arrangements: Knowing the requirements for disclosing any dual agency situations where an agent represents both the buyer and seller.

Sellers should work closely with their agents to understand how these changes might affect the selling process and to ensure they are fully compliant with the new regulations.

Practical Tips

• For Buyers: Always review your written agreement carefully, ask questions, and ensure you understand the terms before signing.
• For Sellers: Communicate openly with your agent about how the new regulations impact your sale, and ensure all disclosures and agreements are in place.

By staying informed and seeking expert advice, both buyers and sellers can navigate the new legal landscape with confidence and ease.

The future outlook for the Seattle real estate market

The future outlook for the Seattle real estate market post-2024 Real Estate Agency Law is likely to be characterized by increased transparency and fairness. This law is expected to reshape the dynamics between buyers, sellers, and real estate professionals.

For Buyers

The clarity in representation and the formalization of agreements are likely to lead to more informed decisions and potentially more competitive market conditions. Buyers will benefit from:

• Greater Transparency: Clear terms of representation and compensation will help buyers understand their commitments and rights.
• Informed Decision-Making: Detailed agreements ensure buyers have all the information needed to make educated choices.
• Enhanced Protection: Defined duties of agents and brokers provide an added layer of security for buyers.

For Real Estate Agents and Brokers

Real estate agents and brokers will see an evolution in their roles. They will need to adapt to these changes by focusing more on client education and clear communication, as their responsibilities and duties become more defined and scrutinized under the new law. This shift may also encourage more innovative practices in the industry, as professionals seek to provide value-added services in a more regulated environment. Key changes include:

• Client Education: Agents will need to ensure their clients fully understand the terms of their agreements and the services provided.
• Clear Communication: Transparent communication will be essential to comply with the new regulations and maintain client trust.
• Innovative Practices: The need to stand out in a regulated market may drive agents to adopt new technologies and approaches to better serve their clients.

For Sellers

Sellers will also benefit from these changes as they bring uniformity and professionalism to the transaction process. With a clear understanding of the broker’s role and responsibilities, sellers can engage in the selling process with more confidence, knowing that the buyer is equally informed and represented. The new law will help sellers by:

• Streamlined Transactions: More predictable and professional interactions with buyers and agents.
• Fair Compensation Negotiations: Transparent processes for negotiating commissions and understanding broker responsibilities.
• Balanced Market Dynamics: A more equitable real estate market where both buyers and sellers have clear guidelines and protections.

Overall Market Impact

Overall, the Seattle real estate market is poised to become more buyer-friendly and professional, with the 2024 law acting as a catalyst for these changes. As the market adjusts to these new norms, both buyers and sellers can expect a more balanced and straightforward transaction process. The future outlook includes:

• Increased Competition: With clearer guidelines and more informed buyers, market conditions may become more competitive.
• Professionalism in Practice: Real estate transactions will be conducted with greater transparency and adherence to professional standards.
• Innovative Solutions: The need for compliance and added value may spur innovation in real estate practices and technologies.

Conclusion

As we look toward the future of Seattle’s real estate market under the 2024 Real Estate Agency Law and the forthcoming changes from the NAR settlement, we anticipate a landscape marked by enhanced fairness, transparency, and professional integrity. These combined legal shifts represent significant strides in modernizing real estate transactions, promising to balance the scales for buyers and sellers, and fostering a more equitable environment. The mandatory written agreements and detailed brokerage service contents are set to revolutionize the way real estate professionals operate, placing a greater emphasis on client education and ethical conduct.

This post is by no means an exhaustive list of all the changes that were made. We wanted to touch on the major changes that will forever alter our industry.

The 2024 Real Estate Agency Law’s impact on buyers, sellers, and real estate agents signifies a pivotal moment in Seattle’s property market. Additionally, the upcoming changes mandated by the NAR settlement, particularly around the decoupling of broker compensation, will further reshape the industry. It is a time for adaptation, understanding, and embracing change. As we navigate these new waters, it is crucial for all parties to stay informed and seek expert guidance to fully leverage the benefits of these changes.

Whether you’re a buyer, a seller, or a real estate professional, these new regulations represent a watershed moment that demands attention and action. To navigate this new era successfully, consider reaching out to our team for insights, guidance, and support. We’re here to help you understand and utilize these changes to your advantage, ensuring a smooth and successful real estate experience in Seattle’s evolving market.

Contact us today to start your journey with confidence and clarity.