Learn the Washington State Laws and Rules!
This is the best class available for students who really want to understand the real estate laws in Washington. The RCW's and the WAC's are the laws and rules used to govern the real estate activities of licensees.
This is ideal for students who want to master the state law portion of the broker exam.
Study Material:
Upon completion of this section, you should be able to perform the following actions:
Welcome to the in-depth exploration of "Agency Relationships." As you embark on this comprehensive journey through one of the most crucial aspects of real estate practice in Washington State, prepare to delve into the nuanced roles and responsibilities of representing buyers and sellers in property transactions. This course section is tailored to ensure that, upon completion, you will have a robust understanding of what it means to navigate the various agency relationships with professionalism, integrity, and legal savvy.
Agency relationships form the backbone of real estate transactions, and grasping these concepts is key to becoming an effective, ethical broker. You will start by defining critical terms such as Seller Agency, Buyer Agency, Implied Agency, Dual Agency, Non-Agency, and Designated Agency. Each has its significance and methodology for the establishment, which you must identify and articulate confidently. As potential conflicts of interest are inherent in any business, the ability to recognize and address such issues professionally is an indispensable skill you will obtain through this course.
Further honing your expertise, we will discuss how relationships with prospective purchasers can evolve into agency agreements, the careful navigation of implied agency, and the stark differences between a client and a customer relationship. The latter is academic and has practical implications regarding fiduciary duties and service levels delivered to those you represent. Understanding these distinctions and applying them according to Washington state laws is paramount for your practice and the protection of consumer rights.
Compliance and ethics are the pillars of a trustworthy real estate practice. This section will teach you about statutory disclosure requirements and the concept of confidentiality and guide you on how and when to share information to guard client interests appropriately. Moreover, you'll explore the financial aspects of agency work, including compensation agreements, and the nuances of affiliations, such as multiple listing associations and their impact on agency disclosure.
Finally, we will discuss professionalism and ethics beyond the codified norms to ensure you meet and surpass the expectations set by the industry and the Department of Licensing. By the end of this course section, you will possess the necessary knowledge to prevent infractions and understand the consequences outlined by regulatory authorities. This will solidify your framework for principled decision-making and service in your forthcoming real estate brokerage career.
Indeed, this rigorous yet rewarding part of the course will challenge you to think critically and act ethically. Engage with this material, understanding that mastery here is beneficial for passing exams and imperative for safeguarding your reputation and the profession in all future dealings. Let's start on this vital section that will undoubtedly shape how you approach your role as a real estate broker in Washington state.
In Washington's real estate context, the distinction between a "client" and a "customer" is pivotal regarding the obligations a broker bears. A "customer" is any individual or entity engaging with a real estate broker without forming an official representational bond, meaning they have not entered into a brokerage services agreement. Such parties to a transaction are, hence, merely customers receiving general services but no fiduciary representation. Conversely, a "client" has formed a contractual agency relationship with a broker.
For instance, let's consider Amy from ABC Realty. She has a brokerage services agreement with the Browns, making them her clients with attendant limited fiduciary duties. However, the Smiths, who visit the Browns' residence during an open house and express a wish to purchase, are advised by Amy, who chooses not to engage in limited dual agency, to independent counsel before signing any contracts. The Smiths remain customers despite Amy's professional guidance because they lack a representational agreement with her.
A fiduciary relationship is when the principal places trust and confidence in the agent acting on their behalf and grants broad responsibilities to the agent. While all of the responsibilities of a fiduciary relationship are not required of brokers in Washington State, they were until 1996 when Washington State passed a law outlining agency relationships. Because it is a written law, the responsibilities are known as statutory responsibilities. The change was designed to be more specific to real estate brokerages. The change is written in RCW 18.86.110:
"The duties under this chapter are statutory duties and not fiduciary duties. This chapter supersedes the fiduciary duties of an agent to a principal under the common law. The common law continues to apply to the parties in all other respects. This chapter does not affect the duties of a broker while engaging in the authorized or unauthorized practice of law as determined by the courts of this state."
The payment for real estate services rendered does not inherently constitute an agency relationship. Take Henry, a buyer's broker who singularly represents a buyer but is compensated by the seller. Although the seller pays Henry, he explicitly represents the buyer's interests.
Washington state's updated real estate laws maintain that compensation alone does not determine agency. All parties must understand that the agency requires a written services agreement, as outlined in RCW 18.86.080, clarifying the terms, duration, and nature of representation. This distinction is vital in ensuring that all participants in a transaction are clear about who the broker represents and their obligations.
In Washington state, effective January 1, 2024, the law surrounding compensation in real estate transactions has been refined to provide greater clarity on agency relationships. RCW 18.86.080, as updated, states the following:
Firm Compensation Sources: A real estate firm can be compensated by the seller, buyer, a third party, or through compensation sharing between firms in any real estate transaction.
Non-Agency Compensation: Payment of compensation does not establish an agency relationship between the payer and the broker.
Compensation Sharing Agreement: A seller or buyer may consent to share their agent's compensation with another firm.
Multiple Party Compensation: A real estate firm can be compensated by more than one party involved in a real estate transaction.
Compensation and Purchase Price: A firm's compensation can be tied to the transaction's purchase price with no breach of duty to the buyer or seller.
Services Agreement Requirement: A real estate firm must have a written services agreement to receive compensation. This agreement must specify
The compensation terms: amount, sharing consent, and multiple-party compensation consent
For buyers: the firm's obligation to show properties without a compensation offer/agreement
Other relevant agreements between the parties
Commercial Real Estate Exception: Instead of a services agreement, brokers in commercial real estate transactions must disclose compensation sources and amounts in a "Compensation Disclosure" section before the buyer signs any offer.
Broker's Price Opinion and Referrals: A firm can receive compensation for broker price opinions or referrals without a services agreement, provided no real estate services were rendered.
Agency is the relationship between the broker and the principal. The type of agency should be disclosed to the principal as soon as possible. There are various types of agencies, as summarized below.
1. Seller Agency
A seller agency relationship is created when a real estate firm, through its broker, agrees with a seller to represent the seller in the sale of a property. This involves loyalty to the seller, making continuous efforts to sell the property, and not disclosing the seller's confidential information. Full definition, see RCW 18.86.040.
2. Buyer Agency
A buyer agency is established when a real estate firm, through its broker, agrees to represent a buyer seeking to acquire property. This includes duties such as loyalty, making a continuous effort to find a property for the buyer, and maintaining the buyer's confidentiality. Full definition, see RCW 18.86.050.
3. Implied Agency
Generally, implied agency refers to an agency relationship formed by the parties' actions rather than through a written agreement. This type of agency could potentially arise if a broker acts on behalf of a party in such a way that the party reasonably believes the broker is representing them. Washington State has updated its agency laws to ensure all agency relationships between the two parties are clearly defined in writing, eliminating the implied agency.
4. Limited Dual Agency
Limited dual agency occurs when a broker represents the buyer and seller in the same transaction but with limitations. Consent for this relationship must be given in writing by both parties. A limited dual agent can't advocate for one party over the other and must maintain a neutral position, providing services without breaching loyalty to either party. Full definition, see RCW 18.86.060.
5. Non-Agency (Facilitator)
A non-agency relationship, sometimes referred to as a facilitator, transaction broker, or coordinator, is where the broker assists the transaction without representing either party's interests. The role is limited to administrative tasks, and the broker owes no loyalty to either party. This concept is not explicitly detailed in Washington’s updated agency law.
6. Designated (Split) Agency
This concept is not explicitly defined under the terminology used in Washington state law. However, in some jurisdictions, 'designated agency' or 'split agency' allows two different brokers within the same firm to represent the buyer and seller separately in the same transaction. In Washington, when different brokers within a firm represent different parties, the firm's designated broker and any managing broker responsible for both agents act as limited dual agents, provided that written consent from both parties is obtained RCW 18.86.020 and RCW 18.86.060.
Understanding potential conflicts of interest in real estate agency relationships is essential for licensees. These conflicts may arise when the interests of the parties involved in a transaction are incompatible or when an agent’s duty to one client is compromised by their duty to another client or their own interests. Below, we describe such conflicts for each type of agency relationship based on Washington State Law as described in RCW 18.86:
Seller Agency Conflict of Interest
Seller agents have a duty to represent the interests of the seller exclusively. A conflict of interest can occur when the seller agent has personal interests that may compete with the best interests of the seller, such as a desire to earn a higher commission that might come from a quicker sale rather than holding out for the best price. Another conflict arises when the agent has some relationship with the buyer, whether personal or through another transaction, that might cause the agent to not fully represent the seller’s interest in negotiating the best terms.
Buyer Agency Conflict of Interest
Buyer agents are exclusively committed to the buyer's interests. A conflict of interest could occur if the buyer's agent also represents another buyer interested in the same property, potentially leading to a situation where the agent cannot advocate effectively on both buyers' behalf. Additionally, if the buyer’s agent holds information that could lower the purchasing price but also reduce their commission, they might face a conflict between their duty to the client and their financial interests.
Implied Agency Conflict of Interest
Implied agency relationships may give rise to conflicts, given that they are not explicitly outlined in writing, and clients may have undefined expectations. Since Washington ensures agency relationships are clearly documented, conflicts stemming from implied agencies are mitigated. However, conflicts may still occur when agents unintentionally convey that they represent a party's interests without a formal agreement.
Limited Dual Agency Conflict of Interest
Limited dual agents represent both the buyer and seller in the same transaction. Conflicts are inherent in this relationship as the agent must remain neutral, not disclosing confidential information or working to the detriment of either party. This neutrality can prevent the agent from negotiating the best terms for either party or offering full advocacy, as they cannot favor one party’s interests over the other’s.
Non-Agency (Facilitator) Conflict of Interest
While facilitators do not represent either party, conflicts may arise if the facilitator previously represented one of the parties in a related or prior transaction, as lingering loyalty or confidential information could inadvertently influence the facilitator's neutrality.
Designated (Split) Agency Conflict of Interest
When two agents within the same firm represent the buyer and the seller, the managing broker’s role as a limited dual agent may lead to conflicts. Although individual agents represent only their clients, the managing broker must oversee both transactions without favoring either side. This limitation can cause conflicts when managing competing interests within the firm.
Agents must disclose potential conflicts of interest as they arise and address them to preserve all parties' trust and integrity of the transaction. In some cases, it may be appropriate for an agent to withdraw from a representation to avoid a conflict of interest and ensure fair dealing for all parties involved.
Implied agency in real estate refers to an agency relationship that arises not from a written agreement but from the actions and behaviors of the parties involved. This may occur when a real estate broker takes actions that indicate they are acting on behalf of a person, and that person reasonably believes the broker is working in their best interests.
However, Washington State Law, under RCW 18.86, necessitates that all agency relationships be established and defined in writing. This legal requirement aims to prevent potential misunderstandings and disputes arising from an implied agency. Explicitly, RCW 18.86.030(1)(f) and RCW 18.86.120 emphasize the need for disclosure materials to make clear the nature of the brokerage relationship prior to parties entering into a written agreement.
Despite prior practices, in Washington State, an implied buyers agency cannot be presumed to exist under certain circumstances:
When There is Written Documentation: If a broker has a written agency agreement to represent the seller, they cannot also act as a buyer's agent without express written consent from both parties and establishing a limited dual agency.
Prior Explicit Disclosure: If the broker previously provided the buyer with an agency disclosure form stating that they represent the seller, this negates the understanding that there is an implied agency with the buyer.
After a Written Offer: An implied agency is not applicable once a buyer has signed a written offer, as a prospective transaction only exists when such an offer has been signed.
Clear Communication of Representation: At all points of interaction, the broker must clearly communicate and, if necessary, reaffirm who they are representing in a transaction to avoid ambiguity that could lead to an implied agency.
Commercial Real Estate Exceptions: Specific to commercial real estate as defined by the law, a written services agreement is not required for establishing a buyer’s agency, potentially allowing for a discussion of an implied agency under these parameters.
Aspiring real estate professionals in Washington must understand that the law does not recognize implied agency as valid. They must avoid any conduct construed as representing a client without a formally established and written agency relationship. This legal position safeguards the interests of all parties and aligns real estate practices with clear and accountable standards.
Agents in Washington must be meticulous in their communications and ensure that their role in any potential transaction is documented clearly, and written. Adherence to these strict documentation practices helps to avert confusion and legal issues concerning agency relationships.
In practice, it’s vital for Washington real estate professionals to maintain clarity and compliance by
Promptly providing agency disclosure pamphlets as prescribed by RCW 18.86.120.
Ensuring that any parties they work with understand these disclosures and the nature of the brokerage relationship.
Avoiding behaviors and communications that could be misinterpreted as establishing an agency relationship without a written agreement.
The "Law of Real Estate Agency" pamphlet is essential for real estate professionals and their clients in Washington State. As potential future licensees, understanding the content and purpose of this pamphlet is critical. The pamphlet provides guidance on the legal rights and duties in agency relationships. It outlines how real estate brokers must conduct business by Washington law, specifically detailing the nature of agency relationships, broker duties, and the process of establishing and terminating these relationships.
Outline of Pamphlet Contents:
Licensing and Supervision of Brokers: Explains the requirement for brokers to be licensed and outlines the responsibility of real estate firms' designated brokers to supervise their associated brokers.
Introduction: Provide an overview of the pamphlet's purpose, which is to summarize the laws related to real estate brokerage relationships and describe the duties of a real estate broker to sellers/landlords and buyers/tenants.
Agency Relationship: Defines an agency relationship, detailing how it functions for sellers and buyers, and introduces the concept of a limited dual agent who represents both parties in a transaction.
Duration of Agency Relationship: Describes when an agency relationship begins, how long it lasts, and the conditions under which it ends.
Written Services Agreement: Outlines the requirements for a written agreement between the firm and the principal, detailing the specifics of the agency relationship.
A Broker's Duties to All Parties: Lists the duties a broker owes to all parties involved in a transaction, including exercising reasonable skill and care, honesty and good faith, and proper disclosure of material facts.
A Broker's Duties to the Buyer or Seller: Specifies the duties a broker owes specifically to their client, whether they are a buyer or a seller, including loyalty, confidentiality, and diligent performance.
Limited Dual Agent Duties: Describes the responsibilities of a limited dual agent and the balance needed to fairly represent both parties without favoring one over the other.
Compensation: Discusses how a firm's compensation in a real estate transaction is determined and outlines the requirements for a written services agreement related to compensation.
Short Sales: Provides important disclosures regarding short sales, emphasizing the responsibilities of sellers and the limitations of debt relief even when a property is sold for less than the amount owed on the mortgage.
The pamphlet concludes by reminding readers of the importance of understanding these broker duties and statutory requirements. Each section in the pamphlet is intended to be informative and to ensure transparency and protection for all parties involved in real estate transactions. As part of your real estate practice, you will deliver the pamphlet to all clients as soon as possible in your professional interactions with them and uphold the standards it sets.
Under the "Licensing and Supervision of Brokers" section, the pamphlet emphasizes the legal prerequisites for brokers to provide real estate services within Washington State. As per chapter 18.85 RCW, every real estate broker and the firm they are affiliated with must hold a valid license. The pivotal role of the designated broker comes into focus, whose duty is to supervise the activities of every broker within the firm. The importance of supervision extends to branch offices, where a branch manager or managing brokers may oversee the services provided.
Additionally, the pamphlet acknowledges the essential role of the Washington State Department of Licensing as the governing body that enforces the regulations and statutes about the conduct of real estate firms and brokers. This body ensures that all brokers operate within the confines of legal and ethical standards prescribed by the state law. Understanding the licensing requirements and supervisory structures is crucial for aspiring real estate professionals. It provides a framework for their operations and the assurance that there is a system in place to uphold professional standards and protect the interests of consumers.
Proceeding to the "Introduction" section, the pamphlet serves as a fundamental guide outlining general practices within real estate brokerage and a high-level synopsis of the laws that regulate brokerage relationships. It crucially delineates the duties that brokers owe to sellers/landlords and buyers/tenants, aiming to sharpen clarity and understanding on these fronts.
Moreover, the pamphlet urges all readers, particularly those not fully conversant with these regulations, to seek further clarification from their broker or the firm?s designated broker. This proactive call holds particular significance for aspiring licensees, impressing upon them the duty to be well-informed and equipped to address any queries regarding brokerage practices and regulatory concerns. By prompting such discourse, the pamphlet reinforces the importance of transparency and awareness in fostering trust and confidence among clients navigating the real estate landscape.
Agency relationships in real estate are vital to the transaction process, as they define the representation and duties of the real estate brokers involved. This section of the "Law of Real Estate Agency" pamphlet is foundational for establishing the nature and scope of representation between brokers and their clients. It stipulates the different agency scenarios in a real estate transaction.
For Sellers: A seller entering an agency relationship with a broker must establish this connection through a written services agreement. The firm representing the seller appoints one or several brokers to serve as the seller's agents. The firm's designated broker and any managing broker with supervisory responsibilities also become agents of the seller under Washington law. They are obligated to manage the agents formally appointed to the principal, ensure all brokerage services meet the required standards, and adhere to the legal obligations laid out in RCW 18.86.
For Buyers: Similarly, a written services agreement is prudent when brokers render services to buyers. Even before the agreement is signed, the act of providing services to the buyer can establish an agency relationship. The firm's designated broker and any responsible managing broker must supervise the agent(s) who works with the buyer.
Limited Dual Agent: In some situations, a broker may be placed in a position to represent both the buyer and seller in the same transaction, known as a limited dual agency. To fulfill this role, the broker must receive the consent of both parties through a written services agreement in two potential scenarios:
These roles and responsibilities must be understood and agreed upon to protect the interests of all parties and ensure that brokers uphold their legal and ethical obligations.
The duration of an agency relationship is a critical aspect of the real estate transaction that affects all parties involved. Under RCW 18.86.070, the agency relationship is legally established from the time a broker undertakes to provide brokerage services and continues until one of the following occurs:
Completion of Performance: The agency relationship concludes once the broker has fulfilled the obligations outlined in the written services agreement, such as the successful purchase, sale, lease, or rental of real property.
Expiration of Term: An agreed-upon duration specific to the written services agreement naturally ends the relationship upon its lapse.
Mutual Agreement: The parties involved can mutually decide to terminate the relationship at any time as long as the buyer, seller, and broker agree in writing.
Notice of Termination: Either party holds the right to terminate the agency relationship by providing notice to the other, notwithstanding the existing contractual rights derived from the agency agreement.
Post-termination, brokers are still required to observe certain ongoing responsibilities, such as accounting for all money and property received during the agency relationship and preserving the confidentiality of any information obtained during that period. This ensures a consistent and continued level of responsibility and trust even after the formal agent-principal relationship has ended.
The written services agreement is a crucial element in forming an agency relationship in Washington State real estate practices. The "Law of Real Estate Agency" section details the requirements for a legally binding contract between the real estate firm and the principal (seller or buyer).
The agreement must be in writing and contain specific elements to ensure clarity and compliance with statutory obligations. The following points are to be included in any written services agreement:
Term of Agreement: The duration or term of the written services agreement must be clearly stated. For buyers, there is a default term of 60 days with an option for an extension. This specificity ensures both parties are aware of the timeline of representation.
Appointment of Broker(s): The agreement should name the broker or brokers appointed as the agent for the principal. This delineation is vital for identifying who is responsible for representing the interests of the seller or buyer and who will be performing the necessary duties in the agency relationship.
Exclusive or Nonexclusive: The services agreement must indicate whether the agency relationship is exclusive, allowing only this firm to represent the principal, or nonexclusive, where the principal may engage multiple firms simultaneously.
Limited Dual Agency Consent: If considering the possibility of a limited dual agency, where the broker represents both buyer and seller in the same transaction, the agreement must contain the principal's explicit consent. The principal must separately initial this to confirm they understand the restrictions placed on a limited dual agent.
Broker's Duties: The agreement outlines the specific duties and obligations the broker owes to the principal, ensuring that the principal is aware of the level of service and loyalty they are entitled to from the broker and the firm.
Duration of Property Showings: For buyer's agreements, there should be clarification on whether the broker will show properties without a compensation arrangement from the seller's side. This provision addresses scenarios where the buyer's broker may not receive a commission on certain property showings.
Other Agreements: Any additional agreements or provisions pertinent to the agency relationship may be included to cater to specific needs or arrangements between the firm and the principal.
A broker in Washington State owes a series of duties to all parties involved in a real estate transaction, which supports the principles of fairness and ethical conduct. These duties apply whether the broker represents the seller, the buyer, both, or neither. Here are these critical duties:
By understanding and meeting these duties, brokers in Washington State not only comply with the law but also maintain trust and confidence in their professional relationships.
In addition to the duties owed to all parties involved in a real estate transaction, a broker is under specific obligations when serving as an agent for the buyer or seller. These duties underscore the importance of the trust placed in the broker by their client and highlight the commitment of the broker to prioritize their client's best interests throughout the transaction process.
For instance, loyalty is a critical aspect of a broker's duties to their client. It involves acting solely in the client's interest, without engaging in any actions that could be considered adverse or detrimental. Loyalty also implies an obligation to steer clear of conflicts of interest and to provide complete and timely disclosure if such conflicts arise.
Confidentiality is another paramount duty, underscored by the broker's responsibility to protect sensitive information about the client. The broker must not disclose confidential information obtained from or about the client unless required by court order or if the client consents to the disclosure in writing.
The duty to provide diligent service means brokers must make a good faith and sustained effort to fulfill the client's objectives, such as finding a property for a buyer or securing a buyer for the seller's property. This entails actively seeking opportunities that align with the client's needs and advocating on their behalf during negotiations until a purchase or sale agreement is finalized unless an alternative arrangement is outlined in writing.
Overall, these designated duties reinforce the serious role brokers play in real estate transactions and the expectation for them to act with integrity, dedication, and discretion.
The responsibilities that fall upon a broker acting as a limited dual agent are characterized by their unique position of representing both the buyer and seller in a single transaction. This dual representation must be established with clear written consent from both parties, reflecting their acknowledgment and acceptance of the broker's dual role.
A limited dual agent must navigate their responsibilities by maintaining a neutral stance, focusing on facilitating transaction progress without fostering any advantage or prejudice towards either party's interests. For example, negotiation support should be impartial, disclosing equal information to each party to ensure fair decision-making, with the notable exception of keeping confidential information secure as per the agency agreement.
Advising both parties to acquire expert advice for transaction-related subjects outside of the agent's range of expertise is not only critical for the clients. decision-making but also safeguards the agent's position within their defined scope of responsibilities. Furthermore, the agent must remain diligent in endeavors to satisfy the needs of both the buyer and seller, such as identifying a property that fulfills the buyer's criteria or actively seeking prospective buyers for the seller's property, up until the desired outcome is achieved.
While the complexity of limited dual agency demands a delicate balance, the overarching principle is to assist both clients effectively without bias, thus maintaining the integrity of the buying and selling process while upholding legal and ethical standards.
As future real estate professionals, it is imperative to fully comprehend the compensation structure within the industry. Section 9 of the "Law of Real Estate Agency" pamphlet delineates the framework of a broker's compensation in real estate transactions, which is a crucial element for both practitioners and clients.
Compensation may come from various sources; it could be paid by the seller, buyer, or a third-party, and can also be shared between different firms involved in the transaction. Key to noting is that an agreement to pay or the act of paying compensation does not, by itself, create an agency relationship between the payer and the broker. Such relationships are defined by mutually agreed-upon contractual terms.
Washington law sets clear standards on the need for a written services agreement before a broker can receive compensation.
Such an agreement ensures transparency and spells out the following essential elements regarding compensation:
The amount of compensation agreed upon.
The basis for compensation (is it based on a flat fee, a percentage of the sale price, or a combination of these, for example).
Consent, terms, and conditions for sharing compensation between firms or agents if applicable.
Confirmation of whether compensation can be collected from more than one party in a real estate transaction.
Earning compensation tied to the purchase price does not breach any duty to either the buyer or seller. This means brokers are entitled to a commission based on the sale price of the property, which does not compromise their obligations to serve their clients' interests earnestly.
When it comes to commercial real estate, a broker may alternatively disclose in writing the compensation source and amount to the buyer before an offer is signed. This disclosure should be clear and separate, labeled as "Compensation Disclosure," satisfying the stipulation of informed consent by all involved parties.
Section 10 of the pamphlet tackles the complexities of short sales, an area of growing relevance in the real estate landscape. A short sale occurs when the sale proceeds are less than the amount owed on the property's mortgage or other encumbrances. The pamphlet highlights the crucial role of the real estate firm in representing the seller in a short sale. Ensuring that the seller is well aware that a successful short sale does not automatically absolve them from paying any remaining debt or costs associated with the closing of such a sale.
The firm must appropriately inform the seller in writing that the consent from the mortgagee or beneficiary to accept less than the owed amount does not imply forgiveness of any outstanding deficit unless stated explicitly. This acknowledgment serves to protect sellers from future financial surprises and reinforces the imperative that brokers uphold their responsibilities to provide complete and candid disclosure to their clients.
In conclusion, the compensation model and short sale disclosures are essential facets of real estate transactions, covered in the pamphlet, that necessitate meticulous understanding and application by professionals within the industry. As a real estate licensee, following these guidelines will ensure fidelity to both the law and the interests of the clients served.
As a real estate licensee in Washington state, there are specific services and actions you can provide and perform that will establish an agency relationship with a prospective purchaser. Previously, this may happen when a broker would perform duties as a broker and there would be an agency relationship created through the actions of the parties. However, with an update to real estate agency law, all relationships need to be defined in writing and include the required items, such as compensation, disclosure, etc.
According to RCW 18.86.020 Agency relationship, a broker performing brokerage services for a buyer will be characterized as a buyer's agent unless a separate agreement delineates a different arrangement. To formalize this relationship, brokers use a:
Brokerage Services Agreement: Entering into a written services agreement with the prospective buyer specifying the term, whether the agency relationship is exclusive or non-exclusive, the appointment of the agent, consent for the limited dual agency, and terms of compensation.
When providing services to a prospective purchaser, the licensee must ensure:
Record-keeping: Proper documentation and record maintenance following RCW 18.86.080 Compensation and related WAC provisions.
Comprehending the legal intricacies of agency relationships is paramount for your professional practice. Two crucial legal concepts, vicarious liability, and imputed knowledge, shape the contours of these relationships and their implications for brokers and clients alike. This chapter provides a detailed examination of these terms and furnishes examples to clarify their application within the restricted context of agency relationships as seen in Title 18, Chapter 18.86 of the Revised Code of Washington (RCW).
Vicarious Liability Defined
In the realm of real estate agency, vicarious liability refers to the legal responsibility one party may hold for the actions or omissions of another party within the scope of their agency relationship. Under RCW 18.86.090, vicarious liability is significantly limited. For a principal (e.g., a seller or buyer) to be held vicariously liable for the acts of their agent (e.g., a real estate broker), the principal must either have a) participated in, or authorized the wrongful act or b) benefited from the act and be the subject of a court finding that the claimant would probably be unable to enforce a judgment against the agent.
Example of Vicarious Liability
Imagine a situation where a real estate broker, acting as an agent for a seller, makes a negligent misrepresentation regarding the condition of a property. If the seller did not authorize or participate in making this misrepresentation and did not benefit from it, the seller cannot be vicariously held liable for the agent's actions. Conversely, if the seller directed the broker to conceal information about a defect, vicarious liability could be attributed to the seller for the agent's actions.
Imputed Knowledge Defined
Imputed knowledge relates to the notion that, within an agency relationship, the knowledge of an agent is legally considered the knowledge of the principal. However, under RCW 18.86.100, Washington State law explicitly rejects the automatic imputation of knowledge from agent to principal unless expressly agreed otherwise in writing.
Example of Imputed Knowledge
Suppose a real estate broker becomes aware of a geological instability on a property they're listing for a seller. Unless specified by a written agreement, the seller is not deemed to have this knowledge. This limitation of imputed knowledge prevents holding principals responsible for information they did not personally know but was known by their agent.