(Daniel: Please insert Chapter 10 Beginning Slide 00)
RCW 18.86.020
Agency Relationship
Buyer's Agent
(1) A licensee who performs real estate brokerage services for a buyer is a buyer's agent unless:
The following cannot be a buyer's Agent:
(a) Licensee has entered into a written agency agreement with the seller, in which case the
licensee is a seller's agent;
A licensee cannot be a buyer's agent and seller's agent at the same time under Washington
law. Any licensee working for the seller is NOT a buyer's agent. The licensee can become a
dual agent for the buyer and seller if he/she has written permission from both.
(b) Licensee has entered into a subagency agreement with the seller's agent, in which case the
licensee is a seller's agent;
If a licensee is working for the seller's agent, the licensee is a subagent of the seller and cannot be the
buyer's agent.
Example: A broker in an office is doing an Open House for a team member of the firm that has the
listing. This person is a subagent of the seller. Customers who walk in to look around are potential
buyers. This subagent cannot represent a party who becomes a buyer.
(On the next page please insert Section 10 – 001 & 001A)
1
Buyer's Agent
The following cannot be a buyer's Agent:
(c) Licensee has entered into a written agency agreement with both parties, in which case the
licensee is a dual agent;
A dual agent cannot also be the buyer's agent.
(d) Licensee is the seller or one of the sellers; or
If a licensee is a principal selling his/her own property, the licensee cannot represent the buyer
under Washington law.
(e) Parties agree otherwise in writing after the licensee has complied with RCW 18.86.030(1)(f).
If the parties/principals to a transaction agree that a licensee is not the buyer's agent, the licensee is
not a buyer's agent.
(On the next page please insert Section 10 – 002 & 002A)
2
Firm Listings with Involved Affiliate Brokers
(2) In a transaction in which different licensees affiliated with the same managing broker represent
different parties, the managing broker is a dual agent, and must obtain the written consent of both parties
as required under RCW 18.86.060.
If the managing broker has one broker working with a buyer and another broker working with the
seller under a listing, the managing broker is a dual agent. The managing broker must obtain a dual
agency agreement signed by the seller and the buyer.
In such a case, each licensee shall solely represent the party with whom the licensee has an agency
relationship, unless all parties agree in writing that both licensees are dual agents.
In this situation, the affiliate brokers to the transaction will remain loyal to their client as a seller's
agent and the other as the buyer's agent.
(On the next page please insert Section 10 – 003 & 003A)
3
Seller Becomes a Buyer – Agency Requirements
(3) A licensee may work with a party in separate transactions pursuant to different relationships,
including, but not limited to, representing a party in one transaction and at the same time not
representing that party in a different transaction involving that party, if the licensee complies with this
chapter in establishing the relationships for each transaction.
Case Example: Once the seller's home is sold, the seller is looking to buy the next home in a certain
area of the city. The seller's agent is not necessarily (automatically) a buyer's agent when the seller
will be buying. The seller (now buyer) might work with another licensee.
The seller's agent still could become the seller's buying agent for the new home. The licensee must
comply with all the notification requirements to each possible transaction.
(On the next page please insert Section 10 – 004 & 004A)
4
RCW 18.86.040
Seller's Agent - Duties
(1) Unless additional duties are agreed to in writing signed by a seller's agent, the duties of a seller's
agent are limited to those set forth in RCW 18.86.030 and the following, which may not be waived
except as expressly set forth in (e) of this subsection:
The key word words here are "may not be waived" unless the RCWs specify otherwise.
(a) To be loyal to the seller by taking no action that is adverse or detrimental to the seller's
interest in a transaction;
The licensee for the seller cannot take steps to arrange a sale that is not in the seller's best
interest. In the past some licensees arranged transactions that were in their best interest to
make a sale. Loyalty to the seller's interest is imperative.
(b) To timely disclose to the seller any conflicts of interest;
If a licensee has a conflict of interest, it must be disclosed.
Case Example: The licensee is bringing her father over to possibly buy the house. This must be
disclosed to the seller.
(On the next page please insert Section 10 – 005 & 005A)
5
Duties to the Seller
(c) To advise the seller to seek expert advice on matters relating to the transaction that are
beyond the agent's expertise;
Licensee should encourage clients to seek professional help on legal matters, accounting, tax
matters, etc. Licensees should not discuss matters beyond their ability.
(d) Not to disclose any confidential information from or about the seller, except under subpoena
or court order, even after termination of the agency relationship; and
Fiduciary duty of a licensee is to NOT divulge person information about their client.
Case Example: The seller tells his agent that he needs to sell in a hurry due to financial difficulties.
The seller says he will accept a 20% reduction from the listing price. This should not be divulged to
anyone. The licensee should not even say his client is "motivated to sell". This weakens the seller's
position in selling the property
(On the next page please insert Section 10 – 006 & 006A)
6
You Can Go Out and Make a Living
(e) Unless otherwise agreed to in writing after the seller's agent has complied with RCW
18.86.030(1)(f), to make a good faith and continuous effort to find a buyer for the property;
except that a seller's agent is not obligated to seek additional offers to purchase the property
while the property is subject to an existing contract for sale.
If other opportunities arise with customers, you are allowed to develop the customer into a client and
work with them separately.
Case Example: At an open house for the seller, a customer comes in to look around. The customer
buyer says she wants a 4 bedroom house and this one is too small. The seller's agent is allowed to
begin work with this open house customer and turn the customer into a client buyer for other
available homes.
(2)
(a) The showing of properties not owned by the seller to prospective buyers or the listing of
competing properties for sale by a seller's agent does not in and of itself breach the duty of
loyalty to the seller or create a conflict of interest.
The showing of other homes to this buyer is not a case of disloyalty to the seller of the open
house.
(b) The representation of more than one seller by different licensees affiliated with the same
managing broker in competing transactions involving the same buyer does not in and of itself
breach the duty of loyalty to the sellers or create a conflict of interest.
Showing other listed homes to this buyer is not disloyalty to the original seller of the open house.
(On the next page please insert Section 10 – 007 & 007A)
7
RCW 18.86.050
Buyer's Agent - Duties
(1) Unless additional duties are agreed to in writing signed by a buyer's agent, the duties of a buyer's
agent are limited to those set forth in RCW 18.86.030 and the following, which may not be waived
except as expressly set forth in (e) of this subsection:
A licensee for a buyer may not waive the buyer's interests unless expressed otherwise in writing and
signed by the buyer. The licensee must:
(a) To be loyal to the buyer by taking no action that is adverse or detrimental to the buyer's
interest in a transaction;
The goal is to protect the buyer's interest. If there is known information about the property in
question, it must be divulged to the buyer. No misrepresentations or the concealment of
material information.
(b) To timely disclose to the buyer any conflicts of interest;
Case Example: The licensee shows the buyer a home that is owned by her father. She must divulge
this information to the buyer.
(On the next page please insert Section 10 – 008 & 008A)
8
Buyer's Agent - Duties
A licensee for a buyer may not waive the buyer's interests unless expressed otherwise in writing and
signed by the buyer. The licensee must:
(c) To advise the buyer to seek expert advice on matters relating to the transaction that are
beyond the agent's expertise;
Licensee should encourage clients to seek professional help on legal matters, accounting, tax
matters, etc. Licensees should not discuss matters beyond their ability.
(d) Not to disclose any confidential information from or about the buyer, except under subpoena
or court order, even after termination of the agency relationship; and
Information about the buyer that would weaken his/her position in a transaction should not be
divulged.
Case Example: The buyer is from Texas and needs to buy a home within a month in order to get a
reimbursement from his employer regarding closing costs. This should not be divulged.
(On the next page please insert Section 10 – 009 & 009A)
9
You Are Allowed to Earn a Living
(e) Unless otherwise agreed to in writing after the buyer's agent has complied with RCW
18.86.030(1)(f), to make a good faith and continuous effort to find a property for the buyer;
except that a buyer's agent is not obligated to: (i) Seek additional properties to purchase while the
buyer is a party to an existing contract to purchase; or (ii) show properties as to which there is no
written agreement to pay compensation to the buyer's agent.
Once the buyer enters into a real estate transaction, you are not required to go out and still look for
other properties for the buyer to look at.
(2)
(a) The showing of property in which a buyer is interested to other prospective buyers by a
buyer's agent does not in and of itself breach the duty of loyalty to the buyer or create a conflict
of interest.
If the buyer is interested in a specific home, but has not entered into a contract to buy, you
may show other buyers the same home.
(b) The representation of more than one buyer by different licensees affiliated with the same
broker in competing transactions involving the same property does not in and of itself breach the
duty of loyalty to the buyers or create a conflict of interest.
A home listed with your firm (managing broker) allows the firm to have numerous affiliated brokers
showing to the home with multiple buyers.
(On the next page please insert Section 10 – 010 & 010A)
10
RCW 18.86.060
Dual Agent - Duties
(1) Notwithstanding any other provision of this chapter, a licensee may act as a dual agent only with the
written consent of both parties to the transaction after the dual agent has complied with RCW
18.86.030(1)(f), which consent must include a statement of the terms of compensation.
(2) Unless additional duties are agreed to in writing signed by a dual agent, the duties of a dual agent are
limited to those set forth in RCW 18.86.030 and the following, which may not be waived except as
expressly set forth in (e) and (f) of this subsection:
(a) To take no action that is adverse or detrimental to either party's interest in a transaction;
You must protect the interests of the buyer and the seller under the dual agency agreement signed
by both.
(On the next page please insert Section 10 – 011 & 011A)
11
Dual Agent - Duties
You must do the following as a dual agent:
(b) To timely disclose to both parties any conflicts of interest;
In this case, you would have divulged your interest in any property to both the buyer and the
seller.
(c) To advise both parties to seek expert advice on matters relating to the transaction that are
beyond the dual agent's expertise;
Licensee should encourage clients to seek professional help on legal matters, accounting, tax
matters, etc. Licensees should not discuss matters beyond their ability.
(d) Not to disclose any confidential information from or about either party, except under
subpoena or court order, even after termination of the agency relationship;
(On the next page please insert Section 10 – 012 & 012A)
12
Dual Agent - Duties
Your responsibilities as a dual agent:
(e) Unless otherwise agreed to in writing after the dual agent has complied with RCW
18.86.030(1)(f), to make a good faith and continuous effort to find a buyer for the property;
except that a dual agent is not obligated to seek additional offers to purchase the property while
the property is subject to an existing contract for sale; and
If the buyer and seller have entered into a transaction and you are the dual agent, you do not have to
do additional work either party regarding involvement with additional properties.
(f) Unless otherwise agreed to in writing after the dual agent has complied with RCW
18.86.030(1)(f), to make a good faith and continuous effort to find a property for the buyer;
except that a dual agent is not obligated to: (i) Seek additional properties to purchase while the
buyer is a party to an existing contract to purchase; or (ii) show properties as to which there is no
written agreement to pay compensation to the dual agent.
(On the next page please insert Section 10 – 013 & 013A)
13
RCW 18.86.070
Duration of Agency Relationship
(1) The agency relationships set forth in this chapter commence at the time that the licensee undertakes
to provide real estate brokerage services to a principal and continue until the earliest of the following:
You have completed your agency requirements upon:
(a) Completion of performance by the licensee;
When a transaction closes and title has been determined.
(b) Expiration of the term agreed upon by the parties;
When a listing agreement has reached its expiration date.
(c) Termination of the relationship by mutual agreement of the parties; or
If the principal and agent under contract both agree to end the listing agreement.
(d) Termination of the relationship by notice from either party to the other. However, such a
termination does not affect the contractual rights of either party.
If one party to the contract sends a notice of termination notice, the agency relationship is ended.
However, the contractual rights of both parties remain in effect until expiration.
(On the next page please insert Section 10 – 014 & 014A)
14
Agency Termination Requirements.
(2) Except as otherwise agreed to in writing, a licensee owes no further duty after termination of the
agency relationship, other than the duties of:
Once an agency agreement has expired, the obligation of the agent to the principal is ended except for
the following State requirements.
(a) Accounting for all money and property received during the relationship; and
Any mones or property owed or paid out to the principal must be itemized and sent to the
principal.
(b) Not disclosing confidential information.
As a fiduciary of the principal, you are not divulge any personal information of the principal to any
other party UNLESS under a court order.
(On the next page please insert Section 10 – 015 & 015A)
15
RCW 18.86.080
Compensation
(1) In any real estate transaction, the broker's compensation may be paid by the seller, the buyer, a third
party, or by sharing the compensation between brokers.
Compensation is negotiated in the State of Washington. We will show you the standard compensation
agreement shortly.
(2) An agreement to pay or payment of compensation does not establish an agency relationship between
the party who paid the compensation and the licensee.
Sometimes compensation is paid by a 3rd party such as a parent or a lender in a short sale. Payment
of this compensation does not establish an agency relationship. Only a written agreement can
establish an agency relationship.
(3) A seller may agree that a seller's agent may share with another broker the compensation paid by the
seller.
Compensation is negotiated. The seller can certainly negotiate a payment other managing brokers to
establish an agency relationship.
(4) A buyer may agree that a buyer's agent may share with another broker the compensation paid by the
buyer.
(On the next page please insert Section 10 – 016 & 016A)
16
Compensation
(5) A broker may be compensated by more than one party for real estate brokerage services in a real
estate transaction, if those parties consent in writing at or before the time of signing an offer in the
transaction.
Agency and compensation arrangements must be in writing under the Statute of Frauds.
(6) A buyer's agent or dual agent may receive compensation based on the purchase price without
breaching any duty to the buyer.
Compensation is negotiated.
(7) Nothing contained in this chapter negates the requirement that an agreement authorizing or
employing a licensee to sell or purchase real estate for compensation or a commission be in writing and
signed by the seller or buyer.
This is the requirement under the Statute of Frauds.
(On the next page please insert Section 10 – 017 & 017A)
17
RCW 18.86.120
Pamphlet on the Law of Real Estate Agency - Content
The pamphlet required under RCW 18.86.030(1)(f) shall consist of the entire text of RCW 18.86.010
through 18.86.030 and 18.86.040 through 18.86.110 with a separate cover page. The pamphlet shall be 8
1/2 by 11 inches in size, the text shall be in print no smaller than 10-point type, the cover page shall be
in print no smaller than 12-point type, and the title of the cover page "The Law of Real Estate Agency"
shall be in print no smaller than 18-point type. The cover page shall be in the following form:
If preparing for the State Exam, you are going to need to know the dimension and font requirements.
The Law of Real Estate Agency
This pamphlet describes your legal rights in
dealing with a real estate broker or salesperson.
Please read it carefully before signing any
documents.
The following is only a brief summary of the attached law:
Sec. 1. Definitions. Defines the specific terms used in the law.
Sec. 2. Relationships between Licensees and the Public. States that a licensee who works with a buyer or
tenant represents that buyer or tenant -- unless the licensee is the listing agent, a seller's subagent, a dual
agent, the seller personally or the parties agree otherwise. Also states that in a transaction involving two
different licensees affiliated with the same broker, the broker is a dual agent and each licensee solely
represents his or her client -- unless the parties agree in writing that both licensees are dual agents.
(On the next page please insert Section 10 – 018 & 018A)
18
Disclosure Form (Continued)
Sec. 3. Duties of a Licensee Generally. Prescribes the duties that are owed by all licensees, regardless of
who the licensee represents. Requires disclosure of the licensee's agency relationship in a specific
transaction.
Sec. 4. Duties of a Seller's Agent. Prescribes the additional duties of a licensee representing the seller or
landlord only.
Sec. 5. Duties of a Buyer's Agent. Prescribes the additional duties of a licensee representing the buyer or
tenant only.
Sec. 6. Duties of a Dual Agent. Prescribes the additional duties of a licensee representing both parties in
the same transaction, and requires the written consent of both parties to the licensee acting as a dual
agent.
Sec. 7. Duration of Agency Relationship. Describes when an agency relationship begins and ends.
Provides that the duties of accounting and confidentiality continue after the termination of an agency
relationship.
(On the next page please insert Section 10 – 019 & 019A)
19
Disclosure Form (Continued)
Sec. 8. Compensation. Allows brokers to share compensation with cooperating brokers. States that
payment of compensation does not necessarily establish an agency relationship. Allows brokers to
receive compensation from more than one party in a transaction with the parties' consent.
Sec. 9. Vicarious Liability. Eliminates the common law liability of a party for the conduct of the party's
agent or subagent, unless the agent or subagent is insolvent. Also limits the liability of a broker for the
conduct of a subagent associated with a different broker.
Sec. 10. Imputed Knowledge and Notice. Eliminates the common law rule that notice to or knowledge
of an agent constitutes notice to or knowledge of the principal.
Sec. 11. Interpretation. This law replaces the fiduciary duties owed by an agent to a principal under the
common law, to the extent that it conflicts with the common law.
(On the next page please insert Section 10 – 020 & 020A)
20
Representation Contract
Compensation to licensees as well as the agency relationships with a buyer is negotiated and put into
writing. Below is a copy of the NWMLS Form 41A which meets this requirement. We thank the
Northwest Multiple Listing Service for allowing us to utilize their form.
This is an example of establishing a buyer's agency and arranging for the commission scale desired by
the managing/designated broker of a firm.
Note - This form establishes an agency relationship between Bill Swanson, the buyer, and Able Realty
Inc. as well as an Able Realty affiliated agent Linda Smith. It does not form an agency relationship with
anyone else in the Able Realty office.
However, representatives of Able Realty such as subagents, affiliated agents, and branch managing
brokers come under the heading of broker Able Realty.
21
With the buyer signing this agreement the buyer is agreeing that he has received the law of real estate
agency pamphlet.
(On the next page please insert Section 10 – 021 & 021A)
Line 2 of this form establishes the exclusive or nonexclusive agency relationship with a buyer. In this
case the buyer only granted a nonexclusive agency relationship.
Line 3 establishes the area parameters that the buyer is willing to look at. In this example the buyer is
interested in a specific subdivision as well as an area about 77th Ave. If this is left blank the agent is free
to show all properties throughout the entire area.
Line 4 clarifies the possibility of establishing a dual agency if the agent shows properties that are listed
with Able Realty.
Line 5 established an expiration date of October 1, 2010.
Line 6 clarifies that Able Realty and its affiliates will not do investigative work regarding any property
that is shown. Buyer is responsible for doing investigative work on properties.
22
(On the next page please insert Section 10 – 022 & 022A)
Line 7 states that the buyer should inspect the property and seek the services of a professional inspector.
Line 8 sets the parameter for the amount of commission paid by the buyer to the managing broker. In
this example the managing broker simply wants a guarantee of a 3 1/2 percent commission. If the seller
provides this amount the buyer would not have to pay any compensation
Line a and b stipulates that if the buyer purchases a shown house by the broker within six months of the
expiration date a commission is due.
(On the next page please insert Section 10 – 023 & 023A)
23
Line c clarifies that the broker will not receive a double commission. Any commission paid by the seller
shall offset any agreed-upon commission or fee that the buyer owes the broker.
Line 9 stipulates the regulations required for Veterans Administration guaranteed loans for veterans
seeking a VA loan.. A buyer who is a veteran under this program does not have to pay any fees to the
broker. All fees under the VA regulations have to be paid by the seller.
Line 10 deals with the possibility of discovering a home that is under financial distress. It states that the
broker will not help the buyer set up a distressed homeowner program allowing the seller to remain
within the house beyond 20 days and the buyer conveying the home back to the seller at a later date.
Such distressed home programs have presented many problems and equity scam action by buyers.
24
(On the next page please insert Section 10 – 024 & 024A)
Line 11 is the standard provision placed within pretty much all contracts and not just real estate. The
contract states that the cost of the prevailing/winning party in a lawsuit such as the court costs and
reasonable attorney fees (whatever that is) shall be paid by the losing party.
Line 12 is utilized to list any other agreements that were established by the broker and the buyer. In this
particular case there are no additional agreements.
(On the next page please insert Section 10 – 025 & 025A)
25
26