Effective Jan. 1, 2024, the state of Washington will require 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.

Washington is the first state to enact such legislation.

Looking at the law

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.

So, then, why weren’t these laws in place prior to Jan. 1?

Prior to 1998, agents only represented sellers. Then the Law of Agency was changed in 1998 so that agents could represent buyers, too, but the systems didn’t change with it. In that sense, the new revision to Agency Law seems long overdue.

However, agents may be wondering how the legal updates will affect their day-to-day work after Jan. 1. As the designated broker at Keller Williams Greater Seattle, Lindsey Sargent said she’s been fielding lots of calls from concerned agents or those who simply have questions about the changes.

“Things will be a lot tighter around [questions like], ‘Are you my client or not?’ The gray area goes away [when] the relationship with the client becomes formal at an earlier point in the process,” Sargent said. “I think there’s space out there for all brokers to have a business … You just have to be able to articulate the cost and benefits to the client.

“For folks that have been around a long time and do business a certain way, they’re more stressed,” she continued. “It’s a shift in how they’ve had to do business in the past. It’s not comfortable talking about money — defending your value.”

Defending your value

Defending one’s value is sure to become core to Washington agents’ business in 2024, but it’s something Cassie Walker Johnson has been emphasizing to agents in her statewide real estate class, “Buyer Agreements or Bust.”

Affiliated with Windermere Real Estate since 2005, Managing Broker Cassie Walker Johnson and her husband/business partner Jeremey Johnson have utilized buyer-broker services agreements religiously since 2018. When news broke of the changes coming to Agency Law, Windermere asked the pair to educate agents on the changes coming to their business.

In their class, Walker Johnson and her husband teach agents to follow an eight-step process to seamlessly incorporate buyer-brokerage service agreements into their business and avoid problems that may arise due to the law’s ambiguous wording.

The first step of Walker Johnson’s process is intake, where she’ll first introduce the concept of a services agreement. She maintains that almost no clients will reasonably feel comfortable signing anything at this point in the transaction — and as the agent, she doesn’t need to panic before getting to know them as a client.

Secondly, Walker Johnson makes sure that her clients are pre-approved for loans prior to showing them any property. Then, on the day of the first home tour, she has her clients sign a nonexclusive agreement, which gives her coverage under the language of the law. Then, at the conclusion of the tour, she’ll direct clients to the addendum of her buyer-broker services agreement, at which point she asks them to sign an exclusive agreement.

“From that moment on, we don’t provide any more services without the exclusive commitment,” Walker Johnson said. “[The agent] becomes our number one priority at that point, and [the buyer-broker services agreement] is the tool to officially hire us.”

After agreements are signed, Walker Johnson leads clients through offers, mutual acceptance, inspection, escrow and closing, making sure her clients know they have her as a resource for life. She says maintaining a step-by-step process helps keep her organized while offering her clients transparency. In short, it shouldn’t be a secret to buyers what their agents are doing for them.

“Everybody has a process,” she said. “It’s super important that we label that process, name it, give it steps, and use it throughout all of our marketing. Our industry has done the public a huge disservice by making it look like this process is smooth and easy and beautiful. Meanwhile, we’re paddling like crazy under the water to make it look like that. I think we need to be educating our people more and saying, look, these are all the things I can and will do for you.”

Walker Johnson says the new legislation also effectively separates the processes of buyer and seller agent commissions.

“The seller and buyer both have control over what they’re going to pay,” she said. “For the first time ever, a client can turn to their agent and say, ‘Please filter the listings. Don’t show me any homes where the seller is not offering to pay our agreed upon compensation rate.’”

It’s not lost on any agents that this change in Washington law comes in the wake of industry-shifting lawsuits over inflated buyer commissions.

Protecting consumers

While some awkward situations are sure to come up as agents adjust, Walker Johnson that difficult conversations prompted by the new legislation will help their buyers through a much more transparent transaction. Another plus: Under the revised law, brokers won’t have to wrestle with clients who don’t want to sign agreements, for example, because another agent at another brokerage didn’t ask them to.

“Our opinion is that this is a big change for our industry in a very positive way,” Walker Johnson said.

Washington has also tried to build in protection for consumers. Under the law, brokers are required to deliver a copy of the Agency Law pamphlet prior to the consumer signing a brokerage agreement — so, ideally, all consumers have read the laws before signing anything.

The Northwest MLS also offers statewide forms for agents and to use, although many brokerages, including Windermere, have adopted their own.

“We have seen disruptions — or things we thought would be disruptions — for decades, and they’ve all kind of fizzled out over time. It ends up being not as life altering or as drastic as we think it will be,” Sargent said, reflecting on the altered Agency Law. “Plug back in with your brokerage and with classes. Be on the forefront of these changes. Be connected with your peers. All of us ride this together.”

She continued: “We’re going to get more formal. We’re going to do the right things. We’re going to formalize the whole process for everyone.” In the end, she thinks this will benefit both the client and the broker. “It’s the right thing to do, and it’s what we should have been doing all along. Now we all just have to get used to it.”