The Evolving Landscape of Washington Agency Law (RCW 18.86)

As of January 1, 2024, amendments to Washington's Agency Law, codified under RCW 18.86 (“Agency Law”), came into effect, altering the laws governing real estate broker and consumer relationships that had been in place since 1996 . The changes modernize existing regulations and promote additional safeguards and transparency for both buyers and sellers (known as “Principals” under the changes). The amendments focus on enhanced transparency, consumer protection, and recognize the evolving nature of real estate transactions. This post discusses some of the high-level changes to the Agency Law in Washington. 

Brokerage Services Agreement:

Under the changes, it is now a requirement for brokers to engage in a written agreement with their principal (i.e., the Buyer or Seller that has an agency relationship with the broker) known as the “Broker Services Agreement”. The previous version of RCW 18.86 did not contain such a requirement or definition of a Broker Services Agreement. A broker must enter into the brokerage service agreement “as soon as reasonably practical after...[commencing] rendering real estate brokerage services.” The broker services agreement delineates the terms of representation and compensation, affording buyers and sellers the opportunity to actively negotiate these terms with their brokers.

Duties owed by Brokers:

RCW 18.86.030 now states that brokers owe the duties listed therein to all parties in the transaction. This is a significant departure from the prior treatment that the duties were only owed to the party the broker was providing real estate broker services to, i.e., typically either the buyer or seller. The duties owed by brokers are largely unchanged, except that brokers now owe additional duties to disclose to all parties (i) any terms of compensation for the broker offered or received by a broker or firm representing another party; (ii) who the broker represents; and (iii) whether the broker is serving as a limited dual agent.

Dual Agency Restrictions:

Dual agency, where a single agent represents both the buyer and the seller in a real estate transaction, faces greater limitations under the revised RCW 18.86. The amendments replace the term “Dual Agency” with “Limited Dual Agency” and introduces stricter rules governing limited dual agency situations, emphasizing the need for informed consent from all parties involved. A critical change to RCW 18.86.060 clarifies that where a transaction involves different brokers within the same brokerage firm, that firm’s designated broker and any managing brokers supervising brokers on both sides of the deal will be considered limited dual agents (and therefore subject to all applicable restrictions and disclosures).  The changes highlight that an abundance of caution, care and transparency is necessary for any limited dual agency situations.   

Updated Law of Real Estate Agency Pamphlet:

The changes in RCW 18.86 require the broker to provide their principal and all parties in a transaction an updated Law of Real Estate Agency Pamphlet, “as soon as reasonably practical, but before the party signs a services agreement,” and must receive written acknowledgement of receipt when provided. The pamphlet has been revised to include the above-described updates to relevant law (including a description of exclusive and non-exclusive agency), and to describe the legal duties and obligations of the parties to a real estate transaction in terms more readily understandable to a common reader.  Brokers must also provide the new pamphlet to any party not represented by a broker “before the party signs an offer or as soon as reasonably practical,” and must obtain written acknowledgement of receipt of the pamphlet when provided to such parties.

The recent changes to Washington's Agency Law (RCW 18.86) mark a significant step toward enhancing transparency, strengthening consumer protection, and adapting to the evolving dynamics of real estate transactions. Real estate professionals must familiarize themselves with the updated legal landscape, embracing the new disclosure requirements, navigating dual agency restrictions, and understanding the framework for designated agency. By staying informed, brokers can ensure compliance and effectively represent their clients in this evolving environment.