If you haven’t already heard, January 1, 2024 major changes are coming to the real estate industry. These changes are unavoidable and impact home buyers and home sellers (single family homes, multi-family homes, townhomes and condominiums, vacant land, and manufactured homes) across Washington State and the nation.

The industry changes stem from a recent Missouri court ruling Burnett v. NAR et al “plaintiffs claimed real estate commission rates are too high, buyer brokers are being paid too much and that NAR rules and corporate defendants' practices lead to set pricing” – WaRealtor.org.

While we disagree with the ruling; nonetheless, industry changes are upon us and here is what you need to know.

To start, let’s take a few paragraphs and visit some history on real estate agency and representation.

It used to be any real estate agent in the transaction, regardless if they were working for the seller or buyer, that agent represented the seller. There was no separate buyer agency representation even though it seemed that way. As times changed, it was necessary to separate and clarify representation so both buyer and seller had their own representation protecting their interests.

Homeowners would hire their preferred listing agent and sign a Listing Agreement. The listing agent would then list and advertise the property based on the individual agent’s marketing strategy. A buyer would hire their own buyer’s agent to research properties, show homes, answer questions, and so-forth.

Till now, that is how real estate representation was structured; however, a fundamental part never separated was agent compensation - how real estate agents were paid.

In brief, both the listing agent and buyer’s agent compensation were set, and agreed upon in writing by the home owner and listing agent, in a signed Listing Agreement. Additionally, the listing agent could then offer a cooperating member agent, commonly a buyer’s agent, a portion of the total compensation if, and only if, an agent brought forth a willing and able buyer that closed on the property.

That was the common way a buyer’s agent received compensation. This made it appear, to the public, that the buyer’s agent was working for free which was not the case. The buyer’s agent was just compensated by the seller.

You might be thinking why is this article focusing on homebuyers when the Burnett vs. NAR et al case was brought by sellers?

Very good question. Here’s the thing.

Sellers argued they were unjustly paying a buyer’s agent when a buyer should have to pay for their own representation. Furthermore, sellers continued that they were paying another agent to negotiate against them which impacted their final net proceeds.

Fair enough yet sellers, at least in Washington State, have always had the opportunity to offer a cooperating agent any form of compensation down to zero. It was right in the listing agreement yet all this stems from a lawsuit in Missouri, not Washington.

Now the major changes impacting home buyers in 2024.

Just like sellers, starting January 1, 2024 buyers and their buyer’s agent will be required to have a Buyer’s Agency Agreement signed and on file with their brokerage - Its Washington State Law. Whether you’re a buyer right now and are or aren’t under contract to purchase these changes impact you and expect a new conversation with your agent.

At the Barnett Associates Team, we are already having these conversations with our buyers as well as our sellers.

Also, as a buyer, you should expect to know what services your agent offers. If you felt your agent was lackluster and provided little to no value during your purchase then you may want to rethink the quality and benefit of using that agent.

Since 2019, many agents just opened doors or had their licensed assistant open doors. Also, they’d tell their buyers to visit the open house and we’ll write up an offer if you like the home. Never attending a showing or going over the other steps in the buying process.

It is frustrating, as professional agents, who represent a seller to watch buyer’s agents with no professional skills receive compensation for little to no effort.

As a buyer, please make sure the roles and services are clearly defined before signing any buyer’s agency agreement - click to learn about our buyer representation services.

When 2024 arrives, I see 4 scenarios playing out in the industry. (Likely there is many more.)

Seller’s Will Decide to Continue Offering Buyer Agent Compensation

Sellers may understand the value of contributing to buyer’s agent compensation as they see the benefit to getting their home sold in a timely fashion.

Buyers will Chose to Work Directly with the Listing Agent and be Unrepresented

Buyers may experience an additional cost to purchase (downpayment, closing costs, and broker compensation) and decide to work directly with the listing agent to save money. What a buyer may not know, unless disclosed in writing to both the seller and buyer, is the buyer is either going to be unrepresented (buyer handles their own purchase) or the listing agent becomes a dual agent.

Buyers will Decide to Hire & Compensate Their Own Broker for Services & Representation

Buyers will choose to hire a professional real estate agent as they understand their agent(s) have extensive knowledge regarding the purchasing process and have the industry experience to be current on trends, legal proceedings, and best practices and are worth heir compensation.

Mortgage Lenders may Allow Buyers to Finance Their Agent Commission in a Loan

If mortgage lenders allowed buyers to finance their buyer’s agent commission into a loan that would be very helpful. Buyers then would have the means to hire and pay for the own representation and be more invested in selecting a full-time, professional buyer’s agent.

Again, these changes take effect January 1, 2024.

If you’re still reading, and I hope you are, please comment with your thoughts and if you think this is good for buyers, sellers, the industry. If you plan to buy or sell in the coming year(s) we would love to hear from you.