New WA law provides transparency for home buyers & renters. Here’s what you need to know

At a time when the housing market is on many people’s minds, a new state law promises to change the relationship between real estate brokers and buyers in Washington.

State Senate Bill 5191, which went into effect at the start of 2024, aims to provide significant protections for consumers in real estate deals. Real estate brokers now need to have a written agreement with buyers ahead of performing any services, or as soon as reasonably possible afterwards.

According to the new law, brokers owe duties to both parties in a purchase – this means that a broker can’t just act on behalf of the seller, but must consider the buyer too.

The bill, which was signed into law in May 2023, classifies tenants under the category of buyers, so its protections extend to renters as well. The new law comes at a time when Washington’s housing market has been increasingly seller-friendly, with the third highest median home price of any state and a 6.6% statewide increase in home prices last year alone.

Transparency for buyers and renters

According to Steven Bender, a professor and associate dean at Seattle University’s law school, the biggest effect the legislation will have on the public is added transparency for buyers.

“For me, the biggest change is around brokers who represent buyers and having more transparency around the compensation for [buyers’] brokers,” Bender said in an interview.

The law requires a written contract between the two. The contract has to include the length of the agreement, how the broker will be paid, and if the deal is exclusive or if the broker is free to work for other clients, among other details. In cases where a broker acts as a dual agent, both the buyer and the seller must enter into a contract with the broker. The exception to this is commercial real estate, where a contract between buyer and broker isn’t required.

Bender said these contracts will give buyers an understanding of their relationship with brokers that they didn’t previously have.

“This transparency is really going to help with an understanding of that, and perhaps point toward innovation in how commissions are paid, by whom, and how much,” Bender said.

More protections for home buyers

The new law also includes a set of responsibilities that brokers have to both parties. Brokers owe both buyer and seller the duty “to exercise reasonable skill and care; to deal honestly and in good faith; to timely present all written offers,” according to the Senate’s bill report. They also have to handle all exchanges of money in a timely manner, and tell both parties, in writing, who they represent and how they’re being paid. A broker can’t hide information from, or deal dishonestly in any other way with, a buyer on the grounds that the broker is only representing the seller.

According to Bender, this part of the law won’t have as big of an effect as the new requirement for written agreements between buyers and brokers.

“It was always assumed that those duties that [brokers] have of competency and honesty are owed to all the parties to the transaction,” Bender said.

SB 5191 also expands the criteria for when a broker is considered an agent of the buyer as well. According to the new law, “a real estate firm or broker who performs real estate brokerage services for a buyer establishes an agency relationship by performing those services.”

Brokers who perform services for buyers and sellers are classified as “limited dual agents,” representing both parties at the same time and therefore limited in their ability to fully advocate for either one. In these cases, brokers have responsibilities towards both parties and can’t negotiate terms favorable for one at the expense of the other.

How will the new law change WA real estate?

The relationship between real estate brokers and their clients has been governed in Washington by a series of laws passed in 1996, and a 2013 amendment to those laws.

This issue was brought to the forefront of state politics in 2020, when the Washington Court of Appeals held in Falcon v. Bowfits that, when representing a seller, a real estate broker working for a seller doesn’t owe the duties of an agent to a buyer.

Bender said the new law comes at a time when courts across the country are re-examining the broker-buyer relationship. In October, a federal jury in Missouri found that several major real estate companies engaged in price-fixing by requiring sellers to pay a set commission that included fees for buyers’ brokers.

The bill was put forward in January of 2023 by the bipartisan group of State Senators Derek Stanford, Perry Dozier, and Chris Gildon, before being adopted by the Senate Committee on Law and Justice, and being approved unanimously by both chambers.