New Year, New Rules in Real Estate
It’s official: if you are using a real estate agent (hopefully it’s me) and are actively looking to buy a home, it is now law that you will be required to sign a Buyer Brokerage Service Agreement. I like to think of this agreement as the “ring,” but unlike an engagement, you do not have to make it exclusive and you can dissolve this contract at any time with a written notice.
If you’ve known about Neighborhood Experts for any length of time, you know that we are constantly improving so we can continue to lead in the local market. However, it’s been 30 years since the real estate industry as a whole has updated their service agreements, and we applaud these changes that continue to level-up the professionalism in the real estate world.
What does this new agreement mean for you? Here are all the details on the changes that took effect January 1, 2024.
Buyer Brokerage Service Agreement
The Buyer Brokerage Service Agreement brings more transparency on how buyer’s agents are paid. (If you are interested, here is a sample of the document.) We’ve been ahead of the curve here in Washington state with transparency online, but the formal agreement that has always existed was rarely used and it didn’t list out with this much clarity how your agent gets paid. This is now SUPER clear.
We’ve always had clear listing agent agreements when we represent the seller, and this new agreement gives the same professionalism to the buyer’s representation. We hope it will make buyers more thoughtful when they hire an agent because whether the seller offers compensation or not, YOU as the buyer are really the one paying your agent. (It’s always been this way, that even if the seller does offer compensation to the buyer’s agent, it is wrapped up into the purchase price. But more on that below.)
If you are a buyer, it is now required to have a Buyer Brokerage Service Agreement in place as soon as reasonably possible. Want to tour a home? Like to see comps on a home you love? Need to write an offer or ask your agent for local knowledge and market expertise related to buying? All of these warrant a service agreement prior to delivering those services.
Who Pays What?
Most buyers think the seller pays the buyer’s agent. Not true. In Washington state, the listing agreement that the seller signs has a separate compensation line for both the listing broker AND the buyer’s broker. Sellers are not required to pay a buyer’s broker compensation, but most often they do. This is due to the large amount of money that buyers already have to bring to the table in order to close, and while most buyers would not be able to afford to pay a real estate agent as well, they want representation on such a big financial decision. When the seller offers compensation for the cooperating broker it also helps attract more buyers to a listing. In addition there are some loan types (such as VA and FHA) that do not allow a buyer to pay a broker directly and thus the buyer pool for a listing would be restricted if no compensation was offered.
With that being said, we always remind our buyers that they are actually the one paying their agent, although indirectly. The compensation for the buyer’s agent is “baked” into the price of the home so that the net cost (after real estate fees, seller closing costs, and Washington state excise taxes) is something a seller is happy with and willing to accept. The new agreement allows for more transparency around this conversation.
Note: If you have heard about any buyer’s commission lawsuits, be assured that Washington is not affected at this time. As a state the NWMLS has been proactive in bringing transparency to these conversations long before it was an issue. However, other states have not recognized the need to decouple the listing agent compensation from the buyer’s agent compensation, thus leading to the lawsuits that have bubbled up around the US. Our proactive behavior has kept our MLS, Washington association of realtors, and brokerages out of the negative spotlight. Go us!
Listing Broker Service Agreement
If you are a seller, you will see a separate line for “buyer’s agent commission” and you can choose to offer compensation (and the amount) or not. This has always been an option but now is very clearly laid out. The listing agreement can now also be signed months in advance of your listing, which is helpful for the type of listing preparation we prefer to offer our sellers.
There are a few other minor changes, which I will walk through if we get a chance to work together, but for now this is pretty much all you need to know.
I hope this has been helpful. If you have any questions, feel free to give us a call at (818) 625-6171 or book a call at your convenience.
Stefanie Pollack
Local Realtor, Studio City Neighborhood
Your neighborhood expert, Stefanie Pollack, has all you need to know about our wonderful community here in the Valley. Visit Stefanie’s Blog to learn more.
Interested in selling your current home or starting the search for your dream home? Call Stefanie today at (818) 625-6171 or book a call at your convenience.