Washington state could provide guidance for others on buyer broker agreements

There is no doubt that the cooperative compensation structure changes outlined in the National Association of Realtors’ commission lawsuits settlement agreement will generate massive changes in the real estate industry, but those are not the only changes mandated by the terms of the agreement.

Based on NAR’s settlement, agents working with buyers will need a signed buyer representation agreement starting in mid-July, pending final court approval of the settlement. While NAR has repeatedly said that this is a practice all agents should already have in place, many agents across the country have never used buyer agency agreements,

For agents in Washington state, however, buyer representation agreements are nothing new.

“We are in a very progressive MLS in the Northwest MLS, so we’ve been really trying to stay ahead of all of these concerns with these class-action lawsuits,” said Amber Bills Clarke, broker-owner of The Amber Bills Real Estate Group. “Across the nation, buyer broker agreements have always been recommended, but the Northwest MLS required them and then the state of Washington began requiring them.”

As of Jan. 1, 2024, Washington state’s agency law requires agents to have a written agreement with buyers (as well as sellers) to spell out the exact scope of the services provided by the agent, as well as the compensation the client has agreed to pay them in return.

Bills Clarke said this is exactly how agents already work with sellers, so it shouldn’t be a big deal to implement buyer agreements into a business.

“We coached our agents to present it to buyers like they would do with a listing agreement,” Bills Clarke said. “Before we list a home, we have to have a listing agreement, so it is really no different than that.”

Due to this, Bills Clarke and other real estate professionals in the state feel like buyer agency agreements are a good thing for everyone to use.

“Agents are educating their buyers as to how real estate functions, and what a transaction and what representation looks like, but they should have been doing that years ago. The only thing different is that now they have to,” said Ken Sax, the designated broker at the Spokane-based Professional Realty Services.

“Thank your legislators because you are going to become a better practitioner and more professional now that you are required to do it.”

While the agreements themselves are mandatory, agents in Washington state say they come in a variety of shapes and sizes, and they can be tailored to fit the needs of each client.

“For the most part we are saying, at a minimum, we want a four- to six-month contract because the buying process can be a lengthy process,” said Amy Breach, a broker with the Seattle-based and Keller Williams-branded The Hill Team. “But we can make the agreement exclusive to a specific property or make it just a certain number of days, so we can cater it to the client’s specific needs.”

Based on the phrasing of the law, agents must have a buyer representation agreement signed before the buyer and seller sign a contract for the sale of a home, but it encourages agents to get agreements signed “as soon as practical.”

For many agents, this frequently means getting an agreement signed before taking a client on a home tour. This can make things challenging for both agents and buyers as they may not know right away if they are the best fit for each other.

But the Washington state contracts come with the option to make the relationship exclusive or nonexclusive. Real estate professionals say the nonexclusive option is especially helpful when meeting and working with new clients.

“It is kind of like dating,” Sax said. “So, maybe you are talking to a prospective buyer and that conversation leads to you providing them real estate services as defined in the law, so then you need an agreement in place, but the buyer may be hesitant because they’ve only known you 10 minutes, so they sign a nonexclusive agreement.”

Once the buyer and agent decide they want to work together, Sax said they can amend the agreement to an exclusive arrangement.

Designated brokers like Sax are part of the statewide mechanism responsible for making sure agents have signed buyer representation agreements.

“At the firm level, we have file reviewers who work off a checklist. They know what to look for and if they don’t see it, they’ll ask for it,” Sax said. “At the state level, the Department of Licensing deal with it by conducting audits.”

In addition, agents are not allowed to be paid a commission unless they have a buyer broker agreement that was executed before the transaction contract was signed by both the buyer and seller.

“Of course everyone has been compliant, because otherwise they are not going to get paid,” Bills Clarke said.

Although real estate professionals in Washington believe buyer broker agreements benefit both the buyer and their representative, the Consumer Federation of America (CFA) disagrees.

In a report released in February and authored by CFA senior fellow Stephen Brobeck, the watchdog group warned consumers that the agreements may be filled with “unfair provisions” that primarily protect agents and brokers.  

“The industry is given great leeway in writing the contracts, which state Realtor associations typically do, then give agencies and brokers the ability to modify them,” the report states. “Accordingly, while the contracts must conform to state laws such as those on agency and confidentiality, these agreements are written to benefit agencies and brokers.”

While CFA is not a fan of buyer agency agreements in their current form, real estate professionals in Washington state believe that even if the contracts change based on the terms of NAR’s settlement agreement, agents should view buyer representation agreements as a positive thing.

“I think it really gives us a better opportunity to differentiate ourselves from competition,” Bills Clarke said. “I see it as an opportunity to explain not just your value, but also the process of buying a home and setting expectations with buyers on what to expect and how the process will unfold.

“I feel like it just builds a lot more respect and a lot more integrity for the agents on our team. It is something to embrace.”

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