As some of you may have heard, several class action lawsuits have hit the real estate industry in the last year or so over Buyer’s Agents commissions. For as long as I can remember and as long as I’ve been selling homes and land, the commissions to both the listing agent and the buyer’s agent were paid by the seller. In actuality it was that the commission was paid to the listing firm/ broker and a portion of that (usually half) was offered to the agent that brought the buyer for that home. This was how it was and considered normal until one day some home seller got upset about it saying that they paid for a service that they didn’t benefit from/ receive which was paying the agent on the other side of the transaction’s commission.
Since our state tends to be ahead of the curve on matters like this, our listing agreements changed over a year ago and the change explained to the seller that they a choice in what, if anything, they buyer’s agent would get paid if they brought the homebuyer. If any of you bought a home in the last 18 months or so, your agent might have had a conversation with you about this because quite a few home builders were offering zero or less than what has been considered typical. This lead to some awkward conversations, agents working for free and buyer’s confused and even sometimes upset depending on how everyone decided to proceed.
Well because of all this, effective Jan. 1, 2024, the state of Washington is requiring all real estate agents to enter into broker services agreements with both buyers and sellers, changing the way agents and clients form relationships. These revisions to Agency Law require that brokers enter into a brokerage services agreement with their client before — or as soon as reasonably practical after — the provision of real estate brokerage services. This contract will include stipulations like length of partnership, exclusivity vs. non-exclusivity and the rate of compensation.
It may sound confusing, but, according to Annie Fitzsimmons, a lawyer for Washington REALTORS®’ Legal Hotline, it’s a way to ensure that buyers are informed about their real estate transactions, like what real estate services will cost and how those costs will be paid — before the buyer agent provides services." ‘Buyers and brokers will now enter a brokerage services agreement at a time that is earlier than either of them may be comfortable to enter that agreement’ … If that’s the only sound bite you hear, that probably sounds alarming,” Fitzsimmons told Seattle Agent. “But it makes sense in the long run,” she said. “Buyers need to know what it is they are entering into when they agree to work with an agent.” Fitzsimmons explained that the statute simply requires brokers to disclose to the buyer, upfront, what their services will cost, the same way that, say, a consumer would expect an auto mechanic to explain what servicing their car would cost. She called the process “identical” to a body shop asking a consumer to sign something acknowledging receipt of the repair estimate.
In short, if you are going to purchase a home, you’ll be signing an agreement to work with an agent just like you would if you were going to list a home. This will eliminate the gray area for both real estate agents and home buyers when it comes to who’s playing what role. Because of this, you will want to interview for a buyer’s agent just like you would for a listing agent since you’ll be entering into a contract with them before you write an offer to purchase a home. You both will have a clear understanding of what that agent will charge for their services in the event the home you fall in love with isn’t offering what that agent deems reasonable or fair. You’ll also discuss and agree upon if you want your agent to send you listings that are not offering any compensation for the buyer’s agent or something subpar. For instance, VA loans prohibit the Veteran from paying so our VA buyer’s will be clients that opt not to view homes not offering any compensation for the Buyer’s Agent. Another term to discuss is what is done with any extra commission if what is offered is higher that what was agreed upon in the section addressing the agent’s compensation. For instance does it go back to you as the buyer? Does the agent get it? Do you offer it to the seller to entice the seller to take your offer?
I know this sounds intense and maybe even off-putting, and a great agent will be able to explain in more depth the ins and outs of it. Really we are just formalizing the process and doing things the right way like professionals should. I don’t know of many other professions where someone works for you and never has a written agreement regarding compensation. It’s actually kind of wild that many real estate agents working with home buyers were just working on hope and good faith. Rest assured though, these new contracts are not something you can’t amend or even cancel during your home search if the agent you decided on turns out to not be a good fit or meeting your expectations. We are explaining to our clients that our Buyer Broker Services Agreement is a living document and any or all of the terms could change during our time working together.
As always, if you have any questions about this, please reach out so we can have a deeper conversation about this or anything real estate related.
Liz
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