Module 1: The Modern Broker - Scope, Ethics, and Agency
Washington real estate brokers are no longer just transaction facilitators. Significant changes to state law that took effect January 1, 2024, established a new standard. We are now strategic advisors who operate under specific contracts rather than implied consent. We handle complex negotiations and guide financial decisions. To do this, we must first secure our employment in writing.
The End of “Agency by Performance”
The concept of “agency by performance” is no longer valid. In the past, you could establish a legal agency relationship with a buyer simply by performing brokerage tasks. State law ended this practice. Now, a real estate firm must sign a written “brokerage services agreement” with a principal, whether they are a buyer or seller. This must happen before you start providing services, or as soon as reasonably practical afterwards. There is only one exception to this rule. A services agreement is not required when a broker acts as a buyer’s agent strictly for commercial real estate.
You cannot act as a strategic advisor without a contract that defines your role. The law requires this agreement to clearly state the terms of compensation, whether the relationship is exclusive, and if the client consents to limited dual agency. If you start discussing specific property details or financial qualifications with a buyer, you are providing brokerage services. You must secure this written agreement immediately.
Statutory Duties and the Falcon Gap
The services agreement establishes who we represent. State statutes define how we must behave.
Every broker owes specific statutory duties to all parties in a transaction. This applies whether you represent them or not. These duties include the obligation to exercise reasonable skill and care, to deal honestly and in good faith, and to disclose all known material facts that are not obvious to the other party. You must treat the other party with the same level of honesty you give your own client. This standard separates a true professional from a mere opportunist.
The Falcon Properties LLC v. Bowfits 1308 LLC decision in 2020 highlighted the importance of these universal duties. In that case, the court ruled that a seller’s broker did not owe statutory duties to a buyer because there was no written agency relationship with that buyer. This ruling revealed a critical gap in consumer protection. The 2024 statutory changes effectively closed this gap. The law now clarifies that fundamental duties like honesty, good faith, and disclosure are owed to every party. This protects consumers even when they are not your specific client.
