Watershed changes in Washington State Real Estate Agency Law went into effect on January 1, 2024.  Evolution Real Estate responded to these changes with a bold initiative significantly reducing client fees. What follows is a summary of the reasons behind the changes and why they’re important.

Residential Real Estate commissions and fees have made headlines recently due to the  success of the bombshell $1.8 billion+ Sitzer/Burnett class-action lawsuit. This lawsuit, filed in Kansas CIty, Missouri in 2019, is part of 14+ class-action civil lawsuits targeting the National Association of Realtors® (NAR) and large regional and national real estate firms. Less well-known but perhaps more important are the antitrust investigations by the Department of Justice (DOJ) and the Federal Trade Commission (FTC). The suits and investigations center around the 100-year-old “bundled” or “cooperative” commissions system used in the US and Canada and the restriction of commission rate competition in the real estate brokerage industry. 

In the bundled or cooperative commission system, the seller pays the listing firm a commission which in turn is split with the buyer-broker firm. The commission  rate is 5-6% regardless of location or transaction complexity. In Kitsap County, the typical seller fee is $25,000-$30,000.

The Buyer and Seller class action lawsuits focus on the following: 1. Sellers are required to compensate the broker who is advocating against their interests (for example, by trying to bring the price down for the buyer). 2. Antitrust issues arise because the NAR directly or indirectly controls the vast majority of Multiple Listing Services (MLSs). 3. Buyers allege that for decades they have been unwittingly overpaying for homes because the buyer-broker compensation is built into the price and they have no opportunity to negotiate compensation rates with their brokers.

The DOJ Antitrust Division and the FTC add these concerns:  1. The NAR promotes MLS policies which filter public internet access to listings based on the amount of buyer-broker compensation offered. (Lower commissions are filtered out.) 2.The NAR  has MLS policies which hide from the public the amount of seller-paid  buyer-broker compensation. 3. The practice of buyer brokers offering their services for “free” when in fact they are being compensated by the seller. 4. The practice of not allowing state-licensed non-MLS members to show and bring prospective buyers for homes listed on the NAR MLSs.

The Key Provision of the 2024 Washington Real Estate Law Revision

The revised statute essentially responds to each of the concerns outlined above. Previously,  real estate brokerage firms were required to enter into written agreements only with sellers. The Agency Law now requires firms to enter into a written “brokerage services agreement” with any party the firm represents, including buyers.

The service agreements must include 1.The term of the agreement; 2.The name of the broker appointed to be the buyer’s agent; 3. Whether the agency relationship is exclusive or non-exclusive; 4. Whether the buyer consents to the individual broker representing both the buyer and the seller in the same transaction (referred to as “limited dual agency”); 5. Whether the buyer consents to the broker’s designated broker/managing broker’s limited dual agency; 6. The amount the firm will be compensated and who will pay the compensation; 7. Any other agreements between the parties.

Other changes to the law provide additional consumer protections related to the duties owed by brokers to all parties in a transaction.

The Effect of the Revisions

The revisions allow real estate firms and brokers to compete on both price and service because broker compensation is now the responsibility of the buyer or seller. Both have the ability to negotiate the terms of broker compensation. The seller is not required to offer compensation to the buyer-broker firm. This is a tectonic shift in the real estate brokerage industry.  Also, the transparency resulting from  listing firms publishing the amount of buyer-broker compensation offered by sellers will help eliminate the steering of buyers and the filtering of properties. Finally, there is an opportunity and mechanism to negotiate compensation at the individual transaction level. As has always been the case, a buyer is not required to enter into an agency agreement to buy a property.


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