NEW BUYER AGENCY AGREEMENT IN 2024

Starting in 2024, there are major changes to agency and broker services between Real Estate Agents and their clients. Buyers will no longer be able to meet with an agent and tour homes casually without a signed buyer agency agreement. Everyone is now required to sign an agency agreement for a broker to provide real estate services.

This legislation is the first of its kind in the country and will increase transparency for buyers and prevent ambiguity. This change is an adjustment for both the consumer and Real Estate professionals alike. You need to know what to expect for you to be an informed consumer in this ever-changing housing marketplace.

CHANGES TO THE LAW

Most people around Seattle have likely never signed a buyer agency agreement when working with an agent. While home sellers have always had to sign a similar agreement, no such requirement existed for buyers. The home-buying process relied on a casual approach intended to give buyers more freedom.

Few agents wanted their buyers to sign contracts because The Law of Real Estate Agency already applied. It stated that any broker who performed “real estate brokerage services” had formed an agency relationship with that client already. In doing so, the standard agency duties would have already been applied to protect the buyer. Also, the agent could rightfully represent the buyer and be provided with compensation for their work.

Now, the changes are intended to make the agent’s compensation clear to the buyer from the beginning. The new agency agreement specifies the rate of compensation an agent will work for and how they will receive compensation. Much like how a contractor will provide a list of services and the cost, so will real estate agents through the agency agreement.

WHY THE REQUIREMENT FOR A BUYER AGENCY AGREEMENT?

The law surrounding broker agency agreements remained largely unchanged for 25 years. The last major change came in 1998 and allowed agents to represent buyers in real estate transactions. Before that, buyer’s agents were considered to work for the seller which put brokers and buyers in a precarious position. With that arrangement, it left no one explicitly working for the buyer’s best interests. That is why they initiated changes outlining that brokers owed their buyers specific fiduciary duties to protect home buyers.

While the buyer agency was improved in 1998, buyer’s agents continued to receive compensation paid out of the seller proceeds. For that reason, the impression could be that they did not cost the buyer anything, which isn’t correct. The cost of the buyer’s agent is included in the purchase price and should be considered to have been paid by both parties. Although in many cases that was never made explicitly clear.

These most recent changes are part of a concerted effort by Washington State and the NWMLS to improve transparency for the consumer. Other recent changes allowed sellers to list homes on the NWMLS that did not offer a buyer’s agent compensation. It also made the compensation public so that buyers could see the rate at which their agent would be paid.

WHAT YOU NEED TO KNOW ABOUT THE BUYER AGENCY AGREEMENTS

This change requiring a Buyer Agency Agreement is certain to create some confusion and misgivings among brokers and their clients. However, the goal is to help home buyers become more aware consumers and avoid any implication the seller pays compensation. Knowing these key points will make you a more informed and proactive buyer in this ever-changing housing market.

TERM LENGTH

The default term that any buyer agency agreement lasts is 60 days. Of course, the buyer and broker have the option to extend that term length at the initial signing or after it expires. Many brokers may want to extend that from the beginning. As anyone who purchased a home in a competitive market knows, it can take months to find the right house. If you trust your broker, it would be prudent to go ahead and extend that agreement beyond 60 days from the beginning.

EXCLUSIVE OR NON-EXCLUSIVE

EXCLUSIVE BUYER AGENCY AGREEMENT

Buyers will have to specify whether the agreement gives that agent the exclusive or non-exclusive right to represent them. An exclusive agency agreement means that only that agent may represent that buyer in purchases. For brokers, such agreements give them certainty that the work they do will lead to payment in the future. Of course, that only happens if the buyer finds a property they want to buy.

An exclusive agency agreement would also put more pressure on the broker to provide the best possible service. Brokers will know if they don’t live up to their client’s expectations, they will simply cancel their agreement and find someone who will.

As a potential home buyer, you should be aware that the agent you signed an exclusive agency with is owed compensation when you purchase a property. That stands even if you use another broker to purchase that property. If the exclusive agency is still active, that broker could attempt to claim the compensation.

No broker wants to go through the effort and bad appearance of suing a former client to get paid, but this new legislation opens the possibility. Be sure to cancel any exclusive agency agreement you may have signed if you decide to work with a different broker.

NON-EXCLUSIVE BUYER AGENCY AGREEMENT

Many buyers may feel more comfortable with a non-exclusive agreement. That would allow them to sign similar agreements with multiple brokers, should they feel the need to do so. 

For those who are looking for properties across a large geographic area, a non-exclusive agreement could be a good option. That would allow multiple agents to help you in locations that the others may not cover. Your agency agreement may also specify geographic areas that it covers and could allow exclusive rights for just that area.

Regardless of the location, many brokers will not want their clients working with other agents within their area. This agreement will help buyers and their representatives clarify ahead of time what the relationship will cover and provide certainty for both parties.

COMPENSATION

The clarification of buyer broker compensation is the most notable change to buyer agency in Washington State. It clarifies the amount that a broker is to be paid as soon as they begin offering buyer services. In doing so, it also allows buyers to negotiate that compensation ahead of time.

With this change, buyers could request that any amount of compensation above a certain threshold be credited to themselves. At the same time, brokers could set a minimum rate at which they agree to be paid at closing. It also allows brokers to negotiate with a seller if they are not providing compensation or it does not meet their minimum.

Currently, buyers are not able to pay their agent’s compensation as part of their home loan. By allowing brokers to negotiate with sellers for their pay, they can avoid putting an extra financial burden on the buyer. 

CANCEL YOUR BUYER AGENCY AGREEMENT ANYTIME

If you are a home buyer, you may feel uncertain about signing a contract with a broker early on. Keep in mind that the law states that the Buyer Agency Agreement: “must be entered into before, or as soon as reasonably practical after, a broker begins rendering real estate brokerage services to the buyer.” (RCW 18.86.120).

The consensus among real estate professionals is that this requirement will left up to interpretation, at least initially. What exactly qualifies as “rending real estate brokerage services” is not clearly defined. Many agents will insist on signing one early on to avoid inadvertently breaking the law. At the same time, others will not feel comfortable forcing clients to sign a contract early on and may wait. There will certainly be some discrepancies in how different brokers handle it, especially in the early period of these new requirements.

Fortunately, home buyers working with us at Windermere only need to provide written notice to terminate the buyer agency agreement. As long as you have not had an offer accepted, you can unilaterally cancel your agreement with no recourse. The goal of this change is to ensure that the control remains in the hands of the consumer. Brokers do not want to force anyone into a working relationship they are unhappy with.

MORE TRANSPARENCY IS A GOOD THING

These updates to buyer agency agreements are the biggest change in how we buy and sell homes in a quarter of a century. Through increased transparency and buyer education, buyers can ensure they have the level of control they want over their home purchases. It will require adjustments for brokers and their clients, but the result is a more informed and happier homeowner. Be sure to do your part as an informed consumer and