(CORE) Current Issues in Washington Residential Real Estate 2026-2027
Washington state's latest laws and legal issues are discussed in this required course.
Course Description
If you're a real estate broker in Washington, then you know that staying up-to-date on the latest industry trends and regulations is crucial to keeping your business running smoothly. That's why the Washington Real Estate Course on Current Issues is required for all brokers renewing their licenses.
Not only will you learn about legal changes and updates that could affect your business, but it will also help you avoid any potential trouble spots that could lead to lawsuits or complaints from customers.
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Forms Review and Updates
Your competence with transaction forms directly fulfills your statutory duty to exercise reasonable skill and care. Using outdated versions or misapplying addenda creates compliance failures. Professionalism is measured by how precisely you use these tools.
Brokerage Services Agreements (BSAs)
You must execute a written Brokerage Services Agreement (BSA) with principals you represent, except for buyers in solely commercial transactions. The law requires this “before, or as soon as reasonably practical after” starting services. This applies to both buyers and sellers. The agreement must clearly state compensation terms, exclusivity, and agency relationships.
Do not delay this until the offer stage; doing so violates legislative standards.
Referral Transparency
Regulatory compliance focuses on compensation transparency. Firms need a written agreement with their principal to receive pay, specifying terms and consent to share compensation. Payment does not determine agency.
You must use a written referral agreement between firms, typically Form 11 for NWMLS members. You must also use the Referral Disclosure (Form 11A), effective July 2025. Use Form 11A to disclose referral fees to your client. Their signature confirms awareness of the financial benefit. Missing this acknowledgment fails to disclose material facts regarding compensation.
Managing Evidence of Funds (Form 22EF)
Distinguish accurately between “non-contingent” and “contingent” funds on the Evidence of Funds Addendum (Form 22EF).
- Non-Contingent Funds: Select only for liquid cash currently in the buyer’s possession (checking or savings) requiring no further action.
- Contingent Funds: Select for funds requiring action to become available, such as selling stocks, retirement withdrawals, or undrawn HELOCs.
Misclassifying funds misrepresents the buyer’s position and risks the earnest money if funds do not liquidate in time.
Information Verification vs. Inspection
The Notice of Termination, Information Verification Period (Form 90Z) handles issues unrelated to physical condition. Use it to terminate based on material discrepancies in listing data like zoning, square footage, or title capacity.
Do not confuse this with the Inspection Contingency (Form 35). Form 90Z verifies information accuracy, not physical repairs.
With these requirements established, you need to understand protocols for documenting buyer financial capacity in various scenarios.
Evidence of Funds protocols center on accurate fund classification, proper documentation, and understanding legal consequences. While a pre-approval letter shows a lender’s willingness to loan, Form 22EF verifies the buyer’s actual capacity to bring necessary cash to the closing table. Misunderstanding this form leads to accidental misrepresentation and transaction failure.
When helping a buyer complete Form 22EF, apply the “Action Required” test to classify funds:
- Non-Contingent (Liquid): US checking or savings accounts ready for immediate wire transfer. No further action is required.
- Contingent (Action Required): Select this option if any step must occur before the money is available:
- Stock Holdings: Even if the value covers the price, the stock must be sold and the trade settled.
- Retirement Accounts: 401(k) or IRA funds require withdrawal applications and processing time.
- Cryptocurrency: Assets must be converted to cash and transferred to a verifiable US bank.
- Gift Funds: If funds are not yet in the buyer’s account, they remain contingent on the donor.
If you question whether funds are non-contingent, mark them contingent.
Your statutory duty to exercise reasonable skill and care includes explaining these definitions so the client avoids false statements. You do not need to investigate your client’s finances, but you strictly cannot be a party to a misrepresentation. If a buyer wants to mark stocks as “Non-Contingent” because they sell instantly, correct them. The requirement to sell makes them contingent. Allowing this misclassification violates the duty to deal honestly and in good faith.
The default timeline grants the buyer 3 days after mutual acceptance to provide evidence. This is typically a letter from a financial institution or a redacted bank statement. When submitting evidence, ensure the name, date, and balance remain visible. Obscure all but the last four digits of the account number. Do not email unredacted statements.
Form 22EF is a disclosure instrument. A buyer who marks “Non-Contingent” while relying on stock sales faces legal exposure if the trade fails. By misrepresenting the status of their funds, they may be in material breach and could lose their earnest money.
With financial verification protocols established, the next phase involves assessing the physical condition of the property through inspection addenda.
Inspection Addenda and Procedures
With financial verification complete, the transaction shifts to physical condition. The Inspection Addendum (Form 35) grants the buyer the right to inspect to their subjective satisfaction. This contingency allows them to negotiate repairs or terminate. How you manage these procedures determines if that right is preserved or waived.
The Inspection Contingency Structure
Form 35 sets an Initial Inspection Period, defaulting to 10 days. If the inspector recommends further evaluation, like a structural engineer, the buyer may extend this timeline. To trigger this extension, strict compliance is required¹:
- Recommendation: The inspector’s written report must explicitly recommend the additional inspection.
- Verification: Do not attach the full report initially. If the seller requests verification, however, you must immediately provide the specific section containing the recommendation. Failure to do so invalidates the extension.
Specialized Addenda
Standard Form 35 is not a catch-all. Specific features require distinct addenda:
- Septic Systems (Form 22S): Standard inspections exclude on-site sewage. Form 22S incorporates strict regulations regarding maintenance and transfer duties².
- Wells (Form 22R): Private wells are excluded from standard inspections. Form 22R governs water quality and quantity testing often required by lenders or health departments.
- Pre-Inspection (Form 35P): In competitive markets, Form 35P allows inspections before offer submission. It defines liability and restoration duties while enabling a cleaner, non-contingent offer.
Inspector Referrals and Anti-Collusion
Your duty of reasonable skill includes assisting clients in selecting inspectors³. You cannot simply steer them to a preferred vendor.
State regulations mandate that every firm maintain a written policy on inspector referrals.
This protects the consumer’s right to choose and prevents collusion. If you refer an inspector with whom you have a familial or business relationship, you must disclose it in writing before the client engages them.
Navigating the Response Timeline (Form 35R)
Once inspections are complete, negotiation happens via the Inspection Response (Form 35R). This form follows a strict timeline where silence has severe consequences⁵:
- Buyer’s Notice: The buyer submits requests (repairs or termination) within the initial period.
- Seller’s Response: The seller responds within the agreed timeline (often 24-48 hours).
- The Waiver Trap: If the seller rejects or counters, the Buyer’s Reply period opens. Form 35 states that buyer inaction here results in waiver of the inspection condition.
Inaction waives the contingency, releasing the seller from repair obligations. You must monitor these deadlines daily to protect your client.
With physical condition assessed, we turn to the strategic nuances of drafting these responses.
Inspection Response Strategies
These strategies focus on timing, disclosure control, and the strict nature of the waiver provisions in Form 35. The inspection contingency operates as a precise procedural sequence. Unlike other contingencies that may require active termination, this workflow contains multiple points where your client can unintentionally waive their rights through simple errors.
The “Waiver by Delivery” Rule
Sharing inspection photos or report pages to justify repair requests is a frequent liability trap. Form 35 establishes the “Waiver by Delivery” rule: providing any portion of the inspection report to the seller without prior written consent deems the contingency waived.
For example,
if you email a photo of a cracked foundation to the listing agent to prove a defect without the seller’s prior written request, you waive your client’s right to disapprove the inspection. The seller can then force the buyer to close without repairs. Never share report data unless the seller explicitly requests it in writing or you are triggering the Additional Inspections clause.
Triggering Additional Inspections
To extend the inspection timeline through the Additional Inspections provision, you must strictly follow the contract. You cannot simply request more time; you must prove the need.
The form mandates that the buyer provide the inspector’s recommendation and notice that the buyer will seek additional inspections. If you submit the notice (Form 35R) without attaching the specific page of the report recommending the specialist, the extension is invalid. The inspection period will expire, and if no other notice is given, the contingency is waived.
The “Silence is Waiver” Provision
Negotiations follow a rigid timeline, specifically during the Buyer’s Reply period. When the seller rejects the buyer’s initial request or proposes an alternative, the buyer must respond within the negotiated timeframe.
Buyer inaction within this window produces an automatic result. The contract states that silence during the reply period results in a waiver of the inspection condition. Consequently, the seller is not obligated to make any repairs, and the buyer accepts the property as-is. You must track this deadline aggressively.
Duty to Present
The fast pace of these response windows involves your statutory duty to present all written communications specifically in a timely manner. Courts have affirmed that a broker’s failure to transmit written notices, such as an inspection response, can constitute a breach of statutory obligations. A delay of even a few hours can consume the client’s response time and potentially harm their position.
Specialized Protocols: Wells and Septic
Standard forms do not cover all systems. For private wells, use the Well Addendum (Form 22R) and its response form (Form 22RN). Unlike the subjective satisfaction standard of Form 35, Form 22R relies on objective metrics: water quality (biological and chemical) and quantity (flow rate). Issues here often involve county health compliance rather than simple repairs.
Inspection contingencies address property condition. The Buyer Brokerage Services Agreement (BBSA) addresses your compensation. Under current agency law, this document is the statutory prerequisite for receiving any fee. Without an executed agreement, you lack the legal foundation to claim compensation. Relying on implied contracts creates unnecessary risk compared to the certainty of a compliant written agreement.
The Mandatory Framework (Form 41)
You must execute a written services agreement with the buyer “before, or as soon as reasonably practical after” commencing brokerage services. Industry best practice interprets this as before showing homes, not at the offer stage. Delaying execution until you draft an offer creates legal ambiguity.
Form 41 establishes three critical financial guardrails:
- The Buyer’s Obligation: The specific compensation amount the buyer owes you, creating direct financial liability.
- The Compensation Cap: Your ceiling. You cannot receive more than this amount. If a seller offers a bonus higher than your BBSA stipulates, you cannot retain the surplus. It must be credited to the buyer or remain with the seller.
- The Term: The agreement defaults to 60 days unless you negotiate otherwise. It does not automatically default to exclusive agency; you must select your option. If the agreement expires while showing homes, you are working without a valid contract.
Instructor
Don Gorman
Don Sr. has been in the real estate business for over 40 years, working as a broker, running real estate offices, and developing property. He's the founder of Realestateschool.org and it's principal instructor. Don Sr. has a teaching degree from the University of Washington and has been teaching real estate for over 35 years.
Details
- Clock Hours: 3
- Format: Text - Printable PDF
Slides - includes video, text & images