The Lawyer Hat: Buyer Agency Agreement

Legal Issue #1

Buyer agency agreements are bad. They’re also good. Starting January 1, 2024, they’re required.

(Subtitle: Buyers, You CAN Negotiate Commission and Compensation with Your Real Estate Agent. Here’s How.)

For the inaugural issue of “The Lawyer Hat”, I thought I’d take on a matter very near and dear to the Get Happy at Home mantra: “real estate should be fun when it’s done right.”

You know what’s not fun? Buyer agency agreements. Let’s find out why.

What’s a buyer agency agreement?

A buyer agency agreement is a specific sort of contract utilized in the world of real estate sales. Depending on who you ask, a buyer’s agency agreement might be defined as:

– A contract between a home buyer and a real estate agent that defines how the two agree to work together🤝

– An agreement that “marries” you to a brokerage firm or real estate agent💍

– A Buyer Agency Agreement is like a real estate BFF contract where a fancy agent promises to help you find your dream castle, and you promise not to ditch them for another house-hunting buddy! 🏰🤝 ***

***I highly recommend following up all your ChatGPT queries with the prompt, “now make it silly.” 

In almost all instances, “buyer agency agreement” is synonymous with “exclusive buyer agency agreement.” In other words, most buyer agency agreements require the buyer to work exclusively with the agent(s) named in that agreement for some set period of time. Importantly, these agreements usually dictate that the client is legally obligated to pay commission to the contracted agent, even if they end up working with another agent or going it solo.

Why Get Happy at Home has NEVER used buyer agency agreements

Three reasons.

(1) Real estate should be fun.

Superfluous contracts aren’t fun.

Some people argue buyer agency agreements are necessary so the buyer knows who their agent is. Washington state law, and industry convention, has always held that, “[a] broker who performs real estate brokerage services for a buyer is a buyer’s agent.”RCW 18.86.020(1). In other words, if I show you homes, or write you a purchase and sale agreement, or negotiate on your behalf with a seller, or anything remotely looking like what a real estate agent does, then, by law, I am acting as your (non-exclusive) agent.

Get Happy at Home has never used buyer agency agreements before now because the law already declared that our clients were, well, our clients! Easy-peasy, no extra work or confusion needed.

(2) You should be allowed to fire us, at will.

Real estate is like a relationship. You need to be able to break up with a bad partner.

When I first joined the team, Matt told me the following: “We never make buyers sign agency agreements. If we do a bad job, they should be able to fire us.” Notably, Matt can’t recall a buyer ever firing him (and neither can I 🤞).  But, we’ve both worked with clients who came to us after breaking up with their previous agent. We believe they should have the right to break up with us as well, if they so desire. Buyer agency agreements make this harder for clients to do.

To the wise man who says “you can always use a non-exclusive agency agreement, then you don’t have to worry about locking your buyer in,” please see point numero uno, above.

(3) We’re not going to sue you; it’s not worth it.

Many brokers use buyer agency agreements to make sure they get paid for their work. Their agreements either state or imply that they will sue you for thousands of dollars in commission if you buy a house with another agent.

Realistically, we’re never going to do this.

Would it hurt my feelings if a client left me to work with another agent? Absolutely, I am a sensitive human who loves dogs, cozy falls days, the occasional pumpkin spice latte (don’t tell anyone). I have feelings, too. That said, Matt and I are fortunate enough that we don’t need to engage every potential client who comes our way. Going to court isn’t worth the lost commission on one sale. The courts have more important things to do, anyways.

What’s the upside of signing a buyer agency agreement?

Now that I’ve thoroughly lambasted these hideous wastes of energy and ink, let me tell you why I think buyer agency agreements are actually pretty awesome and everyone should have one.

I’m only half kidding.

Everyone likes to feel secure.

A buyer agency agreement is a great tool for peace of mind. Let’s say you’re in the rare situation where an agent is in such high demand that they might not have time to work with you. Or, more commonly, you’re working with an agent who is thirsty for your business but concerned you might leave him for one of the thousand other agents who might come in with promises of lower rates and free back massages. In either event, an exclusive agency agreement will, in theory, incentivize the agent to work diligently on your behalf. And both you and the agent can rest easy knowing that the relationship is secure.

You want an opportunity to negotiate.

Many people have argued that the real estate industry is little more than a cabal of greedy middlemen, preying on consumers unable to overcome its oligopolistic might. We definitely (mostly) disagree with that sort of blanket indictment. However, we do believe that buyers should have the right to negotiate with their agent. A buyer’s agency agreement makes that a little bit easier, as it puts everything down on paper in (hopefully) plain terms. It’s easier to negotiate when you know where you’re starting from and can refer back to it later.

It’s good to lay things out in writing.

My greatest argument for a contract, in any situation, is that it tells everyone what to expect. If it’s written well, it will also tell you how to handle the unexpected. This is no small thing. Imagine you go to buy a house, and, when the time comes to write the offer, the agent tells you, “I only accept 3% commission.” If the seller is offering 2% commission, you’re either (a) on the hook or an additional 1% of the sale price (ouch), or (b) going to have to find another agent fast before someone scoops up your new home. If you have a written contract, you know this won’t be an issue.

In short, it’s good to know what you’re getting into. Having everything in writing just makes life easier.

Bonus Reason: You could also argue that an agreement makes it less likely that a consumer will fall into an unwitting dual agency.

The Verdict

From a legal perspective, buyer’s agency agreements are obviously a good thing. But, from a practical and interpersonal perspective, it has long been our opinion that they just aren’t worth it.

Now What? The New Legal Requirement

For better or worse, buyer agency agreements are here to stay. Starting January 1, 2024, real estate agents working in Washington State (including yours truly) will not be allowed to collect compensation unless they have a signed agency agreement. To this end, the NWMLS has provided a standardized form buyer agency agreement, which they call the “Buyer Brokerage Services Agreement”.

What’s in the new buyer agency agreement

I won’t get into every single aspect of the standard form right now. But, here some highlights, and my thoughts.

60 Day Standard Term

The new law requires that every buyer’s agency agreement have “a default term of 60 days with the option of a longer term.” RCW 18.86.020(b)(ii). By my understanding, this means that the minimum term is 60 days. Shorter terms may be invalid, at least in theory, and it’s unclear what repercussions might flow from this. I suspect that the issue will be clarified in the future. In the meantime, think carefully about how long you’re willing to be tied to a particular agent.

Option for Exclusive or Nonexclusive Agency

The new form presents buyers with the option to agree to either exclusive or nonexclusive agency. I suspect most agents/brokers will insist their buyer clients check the “exclusive” box. For our part, we’re likely to suggest just the opposite. As stated above, we don’t believe in holding clients hostage (beware any agent who tells you that exclusive agency is your only option).

Keep in mind that if you sign an exclusive agreement, you will owe your agent commission the moment you “purchase[] real property located in the Area during the Term”, (aka, closing day). The default definition of “Area” is “unlimited”, by the way.

If you happen to be looking to purchase multiple pieces of real property around the same time, or in different areas, be sure you’re aware what an exclusive agreement means for you. In most cases’ I’d opt for the “non-exclusive” option, to avoid an agent attempting to collect commission for a sale I didn’t hire them to handle and which they had no part in.

Opportunity to Negotiate Commission

This is where things get really spicy. The new standard agreement expressly states that buyers have the right to negotiate commission rates, and that these rates do not have to coincide with the commission (if any) being offered by a seller. Putting this language in such stark and obvious terms in a mandatory contract has the potential to radically alter the way agents and clients determine compensation. Hopefully, it will lead to a wider spread of buyer brokerage services, with different brokers offering different levels of service for different compensation levels. This could give buyers greater control over their financial destiny. Time will tell.

In any event, buyers should be aware that they have the right to negotiate with their agent, regardless whether they sign an agency agreement. You never have to accept a compensation proposal if you don’t want to. If you want to do most of the search and negotiation work yourself, and just have your agent around to facilitate paperwork, you’re certainly welcome to request a commission rate of less than 3% (and then you pocket any difference if the seller is offering more). I wouldn’t recommend you do this, but I want you to know it’s possible.

If you want to discuss what myself and Get Happy at Home offer, and at what rates, we’re always happy to chat!

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Well, that’s that. Thanks for sticking with me! I’d love to link you a copy of the new Buyer Brokerage Services Agreement in it’s entirety. However, the NWMLS does not allow me to do so. If you have questions about the changes to the law, or the new form itself, please do not hesitate to reach out to me and the team directly!

About Ryan

Ryan attended law school at the University of Washington. He obtained his WSBA bar license in 2018 and practiced law in Washington for three years prior to joining Get Happy at Home.

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