Real Estate Agency Law Reforms – Bill Summary

SB 5191/HB 1284 – Real Estate Agency Law Reforms – Summary

2023 Legislative Session

Washington State’s real estate agency law, Chapter 18.86 RCW, has not been updated since its adoption in the 1990s. Existing law does not require certain basic consumer protections, and does not reflect modern industry best practices. This legislation will both protect consumers and avoid litigation seen in other states. Here is a summary of the legislation:

• RCW Chapter 18.86 governs the relationship between real estate brokers and consumers.
• This law has not been substantially revised since it was first enacted in 1997, even though the real estate industry has evolved and changed considerably since that time.
• Consumers, consumer advocates, regulators, and some industry participants have been critical of the real estate industry, citing a lack of transparency and consumer choice. While the Northwest Multiple Listing Service has implemented a number of changes to address these concerns, only statutory changes will ensure consistent, statewide application. 
• During 2022, the real estate industry in Washington reviewed these issues through an extensive process. The proposed legislation is a product of that process that included substantial input from around the state and country, including industry members and consumer advocates.
• The most significant change is the requirement that brokers enter into a written services agreement with a buyer (existing law already requires a written agreement with the seller). Currently, there is no requirement for a written agreement between a buyer and their broker that sets forth the terms of representation and compensation and thus, no requirement to give the buyer the opportunity to negotiate those terms. This requirement does not force a buyer to pay compensation, but it provides transparency about how the buyer broker is compensated (which compensation is traditionally paid by the seller).
• The bill also improves disclosure of the limitations of dual agency and requires consumers to affirmatively agree to such a relationship (rather than passive consent). This ensures that consumers are clearly informed of the limitations that are inherent in this type of relationship.
• The bill reverses a recent Court of Appeals decision (Falcon Properties v. Bowfits, 16 Wn.App. 2d 1 (2020)) that held that the general duties of real estate brokers in RCW 18.86.030 apply only to a broker’s own client – not to the other party in the transaction. For example, under this decision, a broker only owes the duty of honesty and good faith to their own client, but not to the other party involved in the transaction. This is clearly harmful to consumers and in conflict with how the industry has operated since the creation of the agency law in 1997.
• Finally, the bill makes substantial revisions to the “Law of Agency Pamphlet” – which is required to be provided to consumers. The Consumer Federation of America rated Washington’s pamphlet the least consumer friendly in the country – as it consists only of verbatim statutory language. The bill revises the pamphlet to describe the relationship between real estate brokers and consumers and the related requirements in a simple, narrative form so it is understandable to consumers.