Brokerage services agreement

Key Takeaways

• A Washington firm must enter into a services agreement with the principal before, or as soon as reasonably practical after, its appointed broker starts rendering real estate brokerage services (RCW 18.86.020(2)(a)).
• The agreement is between the real estate firm and the principal, not between the individual broker and the principal, and it names the broker appointed to represent that principal.
• A buyer's services agreement carries a default term of 60 days with the option of a longer term, and must give the buyer checkbox options for an exclusive or nonexclusive relationship.
• No services agreement is required when a broker performs brokerage services as a buyer's agent solely for commercial real estate (RCW 18.86.020(3)).

What It Means

A brokerage services agreement is the written contract that creates representation between a licensed real estate firm and its client. Washington's agency statute treats brokerage services agreement and services agreement as the same thing, defining it as a written agreement between a real estate firm and principal that appoints a broker to represent the principal as an agent (RCW 18.86.010).

Two details trip students up. First, the contract runs between the firm and the client, not between the individual broker and the client. The firm then appoints one of its brokers to do the work, which is why the agreement survives when that broker leaves. Second, signing it is what creates the Agency Relationship. A shopper who signs becomes a principal owed loyalty and confidentiality, instead of a customer owed only the baseline duties every broker owes everyone in the transaction.

Buyers and sellers both sign one. The seller's version is normally called a Listing Agreement, and the buyer's version is the one Washington firms now put in place at the start of a home search.

How It Works in Washington

Washington did not wait for a national settlement to require this paperwork. Senate Bill 5191 (2023 c 318) rewrote chapter 18.86 RCW and took effect January 1, 2024. Under RCW 18.86.020(2)(a), a firm must enter into a services agreement with the principal before, or as soon as reasonably practical after, its appointed broker commences rendering real estate brokerage services. The older idea that a handshake could carry a buyer through an entire home search is gone.

RCW 18.86.020(2)(b) sets the required contents: the term of the agreement (a 60-day default with a longer option for buyers), the broker appointed as agent, whether the relationship is exclusive or nonexclusive, and separately initialed consent if the principal agrees to Limited Dual Agency. RCW 18.86.080(7) adds the compensation terms. The firm's Designated Broker is responsible for delivering the Real Estate Brokerage in Washington pamphlet as soon as reasonably practical but before the party signs the services agreement (RCW 18.86.030(1)(f) and RCW 18.86.120).

Example

Maria walks into Cascade Realty on March 3 and asks broker Devon to start sending her Tacoma listings. Devon can open the search that day, but Cascade Realty, the firm rather than Devon personally, has to get a signed services agreement in place before or as soon as reasonably practical after he begins. They sign on March 5 for a 90-day term, longer than the 60-day default, with the nonexclusive box checked and Maria's separate initials declining limited dual agency.

The agreement states that Maria will compensate Cascade Realty 2.5 percent of the purchase price and consents to the firm accepting a share of that amount from the listing firm. Maria buys at $520,000. Cascade Realty's fee is 2.5 percent of $520,000, or $13,000. The listing firm agrees to pay $10,400 of it, so Maria owes the remaining $2,600 at closing.

Common Mistakes and Exam Traps

• The services agreement is signed by the real estate firm and the principal. Answer choices naming the individual broker as the contracting party are wrong.
• The Washington deadline is before, or as soon as reasonably practical after, the broker starts rendering services. An answer saying the agreement must always be signed before any service is performed overstates the rule.
• Washington's requirement comes from state law, Senate Bill 5191, effective January 1, 2024, not from the 2024 NAR settlement. The settlement changed MLS practice nationally, but the Washington mandate stands on its own.
• Sixty days is the default term for a buyer's agreement, not a maximum. The parties may agree to a longer term.