Learn About the New Washington State Home Buyer Agency Law

Starting January 1st of this year the new Washington State Home Buyer Agency laws have taken effect. There are new forms and processes. And it is going to be one of the biggest changes in our industry in a generation. Basically how we operated with buyers has been the same since the 1990s. These changes are going to impact homebuyers the most. You need to know what to expect and how to navigate this new process if you are buying a home in Seattle.

In this blog we are going to dive into the following to help you better understand these new laws and processes for a home buyer:

What is the big change for buyers?
How did we get here?
What is in the new buyer agency agreement?
What are the duties owed to a buyer by a broker doing any type of work?
How does the buyer’s broker get paid for their services?

Start Here – Roy Breaks Down the New Buyer Agency Agreement

Roy does an awesome job explaining this very detailed and complicated change to the real estate industry in this video. In the video he mentioned the Buyer Agency Agreement and the respective forms. Below are quick links to access those forms.

Now let’s dive into the changes and make sure you are one of the smartest homebuyers in the industry.

New Washington State Home Buyer Agency Law Changes

The biggest change to the real estate industry in a generation has arrived. The change is that sellers no longer have to pay for the buyer’s broker’s commission. Buyers have to sign what is called a buyer agency agreement that stipulates a lot of things (we will get into these below). Mainly the buyer agency agreement talks about how the buyer’s broker is paid for their services in the case that the seller does not offer a commission on the sale of the home.

What is the Big Change for Buyers?

Let’s get straight to the point. The seller is no longer responsible for providing the buyer’s broker with compensation to buy their home. Whattttt!!!! Yep, since the 1990s (back when I was in high school) the buyer’s broker was paid by the seller as a way for the seller to attract buyers to their home. Starting in the Fall of 2022 it is optional for the seller to pay the buyer’s broker a commission. For the most part, sellers are still offering a commission to the buyer’s broker as a way to attract them to their listings.

What should buyers plan for? They need to read through this blog in detail, watch the video, review the attached documents, and have a detailed conversation with their broker on how to navigate this situation. Many buyers simply do not have the additional funds to come up with all of the money for their down payment and closing costs AND then also have to buy a home. It is too much!!!!

How Did We Get Here?

Historically, in our real estate culture (bad and good), the seller paid for the buyer’s broker’s fees through the price of the home. Recently, several lawsuits were brought against the National Association of Realtors due to this practice under the thought that the Realtors were “price fixing” commissions. And the seller was at an advantage over the buyer because they were paying the commission for the buyer’s broker.

How were the buyer’s agents paid in the past? From the early 1990’s until this year, it was assumed that both the buyer’s and seller’s brokers were paid out of the seller’s proceeds from selling their home. This compensation was agreed to by the seller and the listing broker before listing the home. And the listing broker agreed to give a portion of that compensation to the buyer’s brokerage firm which was shared with the buyer’s broker by the brokerage firm. The thought behind this system stems from the idea that buyers do not often have enough money to pay their broker directly after coming up with the downpayment and closing costs to purchase a home. Hence the seller was offering an incentive to attract buyers.

New Changes as of Fall of 2022 On How The Buyer’s Broker is Paid

In 2022 our NWMLS passed a new rule that decoupled the buyer’s broker’s commission from the seller’s broker’s commission. Now the seller agrees to compensation with their listing broker. And can choose to offer or not offer the buyer’s broker a commission. This change now means it is up to the buyer to have an agreement in place that puts guardrails around what they will pay for their broker’s services regardless of the seller’s offer or non-offer of compensation.

What Have We Seen Since the Commission Changes in the Fall of 2022?

For the most part, the sellers are offering some type of compensation in the way of a percentage of the sale for the buyer’s brokers. This could shift as interest rates decline and the market heats up. The buyer must have a clear plan in place with their broker before they start their home-buying journey.

What is in the New Buyer Agency Agreement?

It is now mandatory that a buyer’s broker has to have a signed Buyer Agency Agreement before doing any type of buyer services (showing a home, doing a buyer intake, referring a lender, etc…). The buyer ALSO has to have received (and hopefully fully reviewed) the Real Estate Brokerage in Washington pamphlet before signing that agreement. In other words, they need to know what their rights are as a consumer of real estate services.

Here is What is In the Buyer Agency Agreement:

The Term of the Agreement. How long are you and this broker going to work together?
Names of The Buyers Representing Brokers. The Name of the Broker or Brokers appointed to act on behalf of the buyer.
Exclusive or Nonexclusive Agreement. Determine if the agreement is exclusive (only working with one broker) or nonexclusive (working with multiple brokers).
Dual Agency – the broker can represent the seller and the buyer at the same time.
- Just a note on this. Team Diva does not allow dual agency. We believe it is near impossible to fully represent the buyer while fulfilling our fiduciary duties to the seller to get them the highest price for the home.
The Terms of Compensation. Basically, how is the buyer’s broker going to be paid for their services?
Seller Compensation Offer. The seller may offer compensation to the buyer’s broker. This section covers what to do if the compensation is the same, more, or less than what was agreed to with the buyer.
Compensation Terms. This section goes over the terms and conditions of the agreed-upon compensation. Go over this section in detail with your broker and make sure you understand the details.
Showings, Listings, and VA Financing. You, the buyer, and your broker can agree to not show any homes that are not being offered some form of compensation by the seller. This section of the agreement also gives the buyer the option to say I do not want to see any houses that have views, are townhouses, don’t qualify for conventional financing, etc…
Inspection Recommended. Duh!!!! Buyers are responsible for doing their due diligence. Washington State is a buyer-beware state. You are responsible for the actions you took while buying a home to do your own due diligence. Just in case you need a refresher on inspections here is a link to our blog >
No Distressed Home Conveyance. Basically, you cannot take advantage of someone who is having to sell their home under duress as a result of a foreclosure or short sale.
Fair Housing. Washington State has one of the most detailed laws on who is covered by Fair Housing laws. Housing cannot be denied to people who are considered a protected class. Now the question we have at Team Diva is that housing cannot be denied to VA buyers but sellers can deny paying compensation to a VA buyer’s broker. A VA buyer cannot get financing to buy a house unless the seller pays their buyer’s broker commission. So our question is the following: “Are sellers effectively violating fair housing laws when they do not agree to pay for a VA buyer’s broker’s commission?”
Attorneys’ Fees. The buyer and the seller are more than welcome to hire a lawyer to review this document and any part of the transaction. We often encourage our buyers to have a conversation with a real estate lawyer. Especially if we are in a tricky transaction, for this section, this form goes over what happens in case you have to take this agreement to trial and who pays for those fees.
Other. This is open for the buyer and the buyer’s broker to review and add other terms to this agreement. Mind you real estate brokers are not allowed to practice law. This has to be a limited section.

Whew – now mind you I had to call several of my team members to go over this form in order to get this right for you.

When is the Buyer Supposed to Sign the Agreement?

Brokers have to have a signed Buyer Agency Agreement with a potential buyer before they start any part of the real estate process. The brokers also have to send the Real Estate Brokerage in Washington Pamphlet prior to having the buyers sign the agreement. So to put this in layman’s terms. You have to have received the Real Estate Brokerage in Washington pamphlet and signed a Buyer Agency Agreement with the agreed upon terms before looking at a home with a broker you just met at an open house. Or before doing a buyer intake with a broker, even if you still want to interview other brokers.

How Do You Cancel the Buyer Brokerage Services Agreement?

Good question! Right now there is no form that clearly rescinds a Buyer Brokerage Services Agreement between a buyer and a buyer’s broker. Our best advice is to sign the Amendment to Buyer Brokerage Services Agreement and in the “Other” section detail out that you wish to cancel the original Buyer Brokerage Services Agreement. But before you do this make sure the broker has a conversation with their Principal Managing Broker about how to do this.

Buyer Beware

The Buyer may owe the broker compensation at the time of closing on a property that was brought to the attention of that buyer by the broker. Let’s say you just wanted to see a house really quick and you inquired on Zillow or Redfin. Those brokers have to have you sign a Buyer Brokerage Services Agreement in order to show you that property. But you decided to use your original broker to write up the transaction. You might owe compensation to the Zillow or Redfin broker because you technically used them to show you the home.

Anyhoo – our best advice is to have a conversation with your broker about how to handle these situations.

What are the Duties Owed by the Broker Doing any Type of Work for a Buyer?

In the Real Estate Brokerage in Washington pamphlet it goes over the duties that the buyer broker and the seller’s broker has for all of the parties involved. A key point in the duties that the buyer’s broker has is to fully represent the buyer. This means the buyer’s broker will use reasonable skill and care. They will also deal honestly and in good faith with the buyer. And they will be timely with all written notices and communication. The buyer’s broker needs to disclose all existing material facts about a property. But it is the duty of the buyer to do their due diligence.

The buyer’s broker also needs to do all of the things we discussed above regarding the pamphlet and disclose who they represent. For instance, they can’t sign a listing agreement with the seller and then tell you that they are only representing you in the home-buying process for the property.

Does it Detail How the Buyer’s Broker Gets Paid For Their Services on the New Forms?

Yes in the new mandatory form, there is a very detailed section that discusses how the buyer’s broker gets paid. The buyer and the buyer’s broker agree on how they get paid for their services. In general, there are four options in our area for how a buyer’s broker gets paid.

Four Options For Paying the Buyer’s Broker:

Seller Pays Compensation: The seller pays and that compensation is the same as what was agreed to with the buyer. The buyer can accept the offer from the seller to pay the buyer’s broker.
Seller Pays More Than What the Buyer Has Agreed to Compensate Their Broker: The buyer and the buyer’s broker can agree to allow the buyer’s firm (the buyer’s broker) to keep the extra amount. They can agree to have it credited toward the buyer’s closing costs, they can credit it back to the seller, or they can come up with something entirely different.
Seller Only Offers a Portion of The Agreed Compensation Between the Buyer and their Broker. Now this is where it starts to get a bit more complicated and all the more reason to have an upfront conversation with your broker. You, as the buyer, can agree to pay the balance of the compensation. Or you can request that the seller pay the balance. The buyer broker and you can also have an agreement that covers this section.
Buyer Pays the Buyer’s Broker. The buyer can agree on an amount to pay the buyer’s broker in the case there is no compensation offered by the seller. Once again it is really important to have a conversation with your broker about this BEFORE you start looking at houses.

Bonus – Our Biggest Piece of Advice to Manage This New Process as a Buyer

It is key for buyers to be educated about the process and these new laws. We have not had a change to how buyer’s brokers are paid since the 1990s. This industry has been doing things one way for over 30 years and now is confronted with a major change. This change will impact buyers, sellers, brokers, and brokerages. As the industry works through this change – it is more important than ever that you as a buyer, choose a seasoned and well educated broker to represent you and to walk you through all of these details. Brokers like those of us at Team Diva.

Get Educated About the Home Buying Process

Read our MANDATORY blog about how to buy a home in Seattle! In 2024 we will be updating all of our buyer and seller content to reflect these new changes.

Let Us Know if You Have Questions About the New Washington State Home Buyer Agency Laws!

Hopefully, we were able to help answer many of the questions you might have about these new forms and the new process.

What is the big change for buyers? The buyer’s broker commission might need to be paid by the buyer.
How did we get here? Lawsuits and price-fixing allegations.
What is in the new buyer agency agreement? The forms are below.
What are the duties owed to a buyer by a broker doing any type of work? They need to act in care to you when doing any type of real state business.
How does the buyer’s broker get paid for their services? Typically by the seller but this is not a guarantee. It is up to the buyer to have this conversation with their broker.

Here are the critical forms we mentioned in the blog above for you to reference:

Do you have any questions about this new process? We are here to help. Our team understands that this process can take a year or two. And we are more than willing to give you a personalized plan to get the ball rolling. Feel free to contact us directly at thediva@teamedivarealestate.com or call/text 206-271-0264.