Effective January 1, 2024, SB 5191 amended Washington’s real estate brokerage statute (RCW 18.86).  Among the changes was a new requirement that brokers representing buyers in residential transactions enter into a written brokerage services agreement with their clients.  The agreement must provide for a set term, exclusivity (or not), and compensation payable to the broker. 

The requirement for a written agreement is an opportunity to bring clarity to the broker-client relationship.  Previously, such agreements were optional, and therefore uncommon, in residential transactions.  This absence often made it difficult to resolve disputes arising out of the relationship.  The challenge for residential buyers now is that they are generally less knowledgeable than brokers about the issues arising from the broker-client relationship.  And the standard form for such an agreement will undoubtedly be Form 41 published by the Northwest MLS, which represent brokers. 

For example, the existence of written buyer representation agreements should help clarify when and which buyer’s broker/agent is entitled to a commission.  In the absence of written agreements, the entitlement to the commission was based on the somewhat murky “procuring cause” doctrine.  Now, the entitlement depends on having a written agreement in place. 

But buyers should also be aware of other issues, including the following:

• Dual Agency.  SB 5191 requires the agreement to state whether the client consents to his broker being a “limited dual agent”, if the buyer decides to buy property listed by his broker.  Given that residential real estate is dominated by a small number of large brokerage firms, buyers who don’t consent would face a substantially smaller pool of properties to buy because his broker would only be able to show him properties listed by other brokerage firms.  Assuming that a buyer would not want that, Form 41 includes a dual agency consent provision.  The statutory obligations of a dual broker to his client are substantially less than those of a broker representing only one party, as would be appropriate in that circumstance.
• Exclusivity.  If the parties agree on the representation being exclusive, the buyer might want to clearly delineate the Area to be covered by the agreement.  It might be possible for the buyer to have separate exclusive agreements with different agents/brokers representing the buyer in different geographical areas.  
• Compensation.  The agreement sets the minimum compensation payable to the buyer’s broker.  The buyer will be responsible for paying his broker to the extent the seller doesn’t.  The broker’s justification for this position is that the buyer should be willing to pay the stated compensation if the broker fulfills the buyer’s interest in buying a house.  The trickier question is what happens to the excess if the seller is offering more compensation to the buyer’s broker than the buyer is obligated to pay. 
• Specific Obligations.  On the other hand, Form 41 is silent on the specific services to be provided by the broker for such compensation (though language could be added to the blank “Other” section).  The broker statute lists the general duties of brokers, such as a good faith and confidentiality.  But it is likely worthwhile to discuss the broker’s specific services and consider if the agreement should describe them. 
• Term/Tail.  Buyers should be aware of a provision, common to such agreements, entitling the broker to compensation if the buyer enters into a purchase agreement within a certain period after the expiration of the agreement – if the property was shown to the buyer by broker (or in the case of nonexclusive agreements, the buyer’s broker previously made an offer on the buyer’s behalf).  This provision appropriately makes it harder for buyers to avoid the commission simply by waiting for the Term to expire.    

SB 5191 requires that the written agreement include the buyer’s acknowledgement of having received the “Law of Real Estate Agency” pamphlet, which brokers are required to provide to consumers.  This pamphlet, recently revised, summarizes Washington real estate law on matters relating to the broker-client relationship.  A good broker will make sure his client has received the pamphlet and a good client will, in fact, read it.