Before the mid 1980s one could simply follow the money to understand how the relationship between real estate agents and their clients worked in the state of Washington.  Both the seller's agent and they buyer's agent were paid from the proceeds of a real estate sale.  In fact, there was actually no such thing as a buyer's agent.  Since the seller was paying the fees here, the "buyer's agent" was actually known as a sub-agent of the seller.  The sub-agent was paid by the seller for having found a buyer for the property.  This led to a lopsided situation when it came time to negotiate the purchase of the home.  On one side you had the seller and the two real estate agents and on the other side of the table all by themselves were the buyers.  This led to some really damaging situations for home buyers.  Often they would have revealed much of their negotiating position to the sub-agent during the process of looking at homes.  This information would then be used against them as the sub-agent suddenly turned out to work for the seller when it came time for negotiations.

RCW 18.86 was written by the Washington state legislature in cooperation with the Washington realtors in order to correct this inequality.  While it may have been "natural" for the "buyer's agent" to work for the seller because they got paid by the seller it certainly wasn't good for the real estate industry in the state of Washington.  In every transaction the buyer felt potential animosity and alienation from the real estate agent who was showing them properties.

RCW 18.86 sets up a legal foundation for buyer's agency in Washington.  If you are interested in a fuller explanation of my responsibilities under RCW 18.86 click here.  For our purposes the important change which this new law of agency made came in creating new legal responsibilities for buyer's agents.  They were now responsible to fight for their clients financial interests in a transaction and they could be held accountable if they violated this responsibility.  Now when a buyer sat down at the negotiating table, the table was theoretically even.

However, still run into clients who point out that no matter what the law says it still runs against a real estate agent's own financial self-interests to work for a buyer's best interests in a transaction.  I often find that these clients have difficulty trusting me when I am working for them as a buyer's agent and I won't deny that what they say has some merit but it is a very short sighted perspective which does not take into account the realities of the real estate industry.

A successful real estate practice depends upon referrals.  I get up to 75 percent of my transactions per year from referrals.  I cannot get referrals from clients who feel that I did not serve their interests in a transaction.  That means that if I were to consistently abuse my legal responsibilities and not do my best to serve the financial interests of my clients I would be cutting out the source of seventy-five percent of my future business.  Secondly, if a buyer could prove that I intentionally damaged their financial interests in order to pad my commission I would be liable for damages in court and could easily loose my license to practice real estate in Washington.

Finally let's do the math.  How much influence do I really have on the price of a sale and how does that influence my commission?  Let's look at some numbers on a pretty nice house say 1,000,000 dollars.  (By the way I have yet to sell a million dollar home so that these numbers are way above the temptation I actually face in day to day business.)  In my market a buyer's agent commission on a million dollar home will likely be 2.25 percent.  So in this case I am looking at a gross commission of 22,500 dollars.  Assuming that I haven't yet paid all of my company dues for the year, 40 percent of that will go to the company and I will pay another 5 percent in taxes and fees.  So I am actually going to net about 55 percent of that 22,500.  That works out to $12,375 which is a really great pay day by any standards.  However, how much influence do I really have to boost that commission?  In the Vancouver and Clark County real estate market most clients start their offers about 10 to 20 percent below what they are truly willing to pay.  So if I were to give away the buyer's bargaining position or subtly influence the negotiation toward a higher selling price I would end up padding my commission somewhere between 1,200 to 2,400 bucks.  That is way less than the value of a single referral from a million dollar buyer.  On a more reasonable $300,000 home I would end up padding my commission by a whopping 400 to 800 dollars.  That would be a really shortsighted way of doing business.

So, for all of you who continue to argue that I cannot truly serve as a buyer's agent because I am paid by the seller, rest easy my friends.  My financial interests are much better served by truly helping you, rather than by ripping you off for a couple of hundred dollars.  Not only would it land me in legal hot water but it just doesn't make financial sense.