October 2, 2024
Updated Forms: 20, 21, 23, 25, and 28
The Purchase and Sale Agreements have been overhauled to make buyer brokerage compensation more transparent and negotiable:
Dual Fields for Compensation: Page one now includes both the "Seller’s Offer" and the "Amount to be Paid by Seller." Both fields must be completed in every buyer's offer.
Disclosure Compliance: The "Seller’s Offer" field fulfills the disclosure requirement per RCW 18.86.030(1)(g)(ii), ensuring buyers are aware of any compensation offered by the seller.
Negotiable Compensation: The "Amount to be Paid by Seller" represents the negotiated compensation, which may differ from the Seller's Offer.
Streamlined Process: Checkboxes for "Pay as Offered" and "Other - See Addendum" have been removed. If the Seller's Offer exceeds the negotiated amount, buyers can request a credit for the difference using the newly revised Form 41C.
What This Means for Brokers: These changes facilitate clearer communication and negotiation regarding compensation, ensuring all parties have a mutual understanding from the outset.
The Buyer Brokerage Services Agreement has been updated to reflect a more client-focused approach:
Specific Compensation Agreement: Section 5 emphasizes that the buyer brokerage firm cannot receive more compensation than what is agreed upon in Form 41 or any subsequent amendments. The compensation is based on the services provided, not on the seller's offer.
Flexibility with FSBO Transactions: There's now an option for buyers and brokers to negotiate different compensation when dealing with unrepresented sellers (For Sale By Owner).
Simplified Seller Compensation Offer: Section 6 clarifies that any Seller's Offer will be detailed in the purchase agreement. Buyers can request that the seller pay the buyer broker compensation, but they are responsible for any amount not covered by the seller.
Eliminating Advance Consent: Section 7 removes the buyer's advance consent to any compensation sharing between firms, promoting transparency.
Updated Compensation Terms: The "Showings, Listings, VA Financing" provisions have been merged into Section 7, with notable changes:
VA Financing Flexibility: Acknowledges that VA regulations may require seller-paid compensation, reflecting recent VA policy updates effective August 10, 2024.
No Filtering Based on Compensation: Brokers must present all listings to buyers, regardless of the Seller's Offer, ensuring unbiased service.
Removal of Irrelevant Provisions: The "Showing Properties" clause has been deleted since buyers agree to cover any compensation not paid by sellers.
Why This Matters: These revisions prioritize the buyer's interests, ensuring they receive comprehensive service and clarity regarding brokerage compensation.
The Addendum for Buyer Credit has been streamlined:
Sole Focus on Buyer Credit: Form 41C is now exclusively used to request credits for the buyer, removing previous sections related to compensation adjustments.
Requesting Credits: Buyers can request a credit if the Seller's Offer exceeds the buyer brokerage compensation. This credit is subject to lender approval, with options on how to handle any disallowed amounts.
Impact on Transactions: This change simplifies the process for buyers to receive credits, making negotiations smoother and more straightforward.
The Escalation Addendum now provides clearer calculations:
Adjusted "Net Price" Definition: The Net Price will account for any credits to the buyer or seller, including closing costs, concessions, and broker compensation.
Accurate Purchase Price Calculations: These adjustments ensure the escalated purchase price reflects the true financial terms of the offer.
Benefit to Brokers: Enhanced clarity in the escalation process helps prevent disputes and ensures all parties have a clear understanding of the financial implications.
Optional Fields: The fields for Buyer Brokerage Compensation, Compensation Type, and Tail Provision are now optional unless the seller offers a specific amount of compensation.
Increased Character Limit: The Buyer Brokerage Compensation field now accommodates entries like "Request in Offer" and additional details.
What Brokers Should Do: Review and adjust your listing input processes to align with these updates, ensuring accurate and complete listings.
Rule 101 (Compensation): Now clarifies that a seller's compensation offer can be:
Rule 104 (Additional Compensation for Buyer Brokerage Firm): Provisions related to bonuses and soliciting higher compensation have been deleted, reflecting the new forms' framework.
Clean-Up and Modernization:
Key Takeaway: Staying informed about rule changes ensures compliance and smooth transaction processes.
Use Updated Forms: Begin using the new forms for any agreements entered into on or after August 15, 2024.
Review Pending Transactions: Transactions pending before this date don't require amendments.
Assess Existing Agreements: While not mandatory under NWMLS rules, consider updating Buyer Brokerage Services Agreements to the new Form 41 to align with industry best practices and recent settlements.
Educate Your Team: Ensure all agents and staff are aware of these changes to maintain compliance and provide the best service to clients.
Understanding these updates is crucial for your future career. Comprehensive knowledge of current forms and regulations sets the foundation for effective practice in Washington's real estate market. Consider enrolling in courses that cover these changes in detail.
At RealEstateSchool.org, we provide up-to-date education for both aspiring and experienced real estate professionals. Our courses cover the latest NWMLS form revisions, ensuring you're well-prepared to navigate the evolving landscape.