Effective January 1, 2024, the statute in Washington that governs real estate brokerage relationships (RCW 18.86) otherwise known as the “Agency Law” – was significantly revised. The revisions modernize the 25-year-old law, provide additional transparency and consumer protections, and acknowledge the importance of buyer representation.

KEY REVISIONS
For decades, real estate brokerage firms were only required to enter into written agency agreements with sellers, not buyers. The Agency Law now requires firms to enter into a written “brokerage services agreement” (agency agreements) with any party the firm represents, both sellers and buyers.

This change is to ensure that buyers (in addition to sellers) clearly understand the terms of the firm’s representation and compensation, much like a listing agreement. The new agreements are called Buyer Brokerage Service Agreements (BBSA) and they are to be initiated in writing prior to or upon rendering real estate brokerage services, such as showing homes.

The services agreement with buyers must include:

• The term of the agreement (with a default term of 60 days and an option for a longer term);
• The name of the broker appointed to be the buyer’s agent;
• Whether the agency relationship is exclusive or non-exclusive;
• Whether the buyer consents to the individual broker representing both the buyer and the seller in the same transaction (referred to as “limited dual agency”);
• Whether the buyer consents to the broker’s designated broker/managing broker’s limited dual agency;
• The amount the firm will be compensated and who will pay the compensation; and
• Any other agreements between the parties.

Clearly communicated expectations between the buyer and their broker are an advantage to the buyer. Every party deserves representation and it has been a long time coming for the law to pay as much attention to buyers as it has to sellers. Having competent representation on both sides of a transaction makes the process go smoother and reduces liability during and after the transaction. After all, everyone deserves competent representation during one of the biggest transactions they will partake in.

These changes are intended to elevate transparency in agency relationships for the consumer and encourage more detailed conversations about representation, compensation, and the overall home buying process with the broker they chose to align with. This will also cause sellers to gain a better understanding of how buyer brokers are compensated.

What a seller chooses to offer a buyer broker could have a positive effect on their return. The only way a buyer can compensate their broker is with liquid cash or negotiating with the seller within the purchase and sale agreement when their BBSA doesn’t match the seller-offered compensation for the buyer broker. If their BBSA matches what the seller is offering in the listing for the buyer broker compensation, then the buyer does not have to rely on the prior.

Compensation offered in a listing that mirrors the BBSA will allow a buyer to solely focus on the offer price of the home as they will not have to calculate the math of the compensation against their down-payment funds, as lending regulations do not allow for broker compensation to be financed. If a buyer has to set aside funds for compensation it would likely reduce their down payment amount which would increase their monthly payment and make them more price sensitive. It will also eliminate the compounding effect of compensation and the offer price being simultaneously negotiated.

I have always run my business in a very detailed fashion and pride myself on having a deep knowledge of the laws and the forms, and these changes are paramount. As an independent contractor affiliated with Windermere Real Estate, the leading company in our region, it is up to me to dig into the research and gain understanding to help guide my clients through these advancements in a compliant and service-oriented fashion. There are even aspects of these new laws that I have been practicing before the changes, as transparency is a cornerstone of my value to my clients.

These are the biggest changes we have seen in our industry in over two decades. Be aware that not all brokers will adapt as quickly or accurately. We are already seeing a gross difference between the informed and not informed; who one chooses to work with matters! If you have any further questions about how these new laws affect you, please reach out. If you are considering a move, I am committed to navigating the process with the utmost compliance and my client’s success at the forefront.

REVISED PAMPHLET: The pamphlet entitled “Real Estate Brokerage in Washington” provides an overview of the revised Agency Law.
REVISED AGENCY LAW: Substitute Senate Bill 5191 sets forth the revised Agency Law in its entirety.

The question that many potential buyers are asking themselves right now is: should I wait for rates to drop before I buy? Higher interest rates have certainly made monthly payments higher and challenged overall affordability, however it is important to consider creative financing options and what the impact on prices will be once rates lower.

Experts predict rates to decrease over the next 12-18 months. In fact, we have seen rates drop half a point over the last 30 days. Currently, the 30-year conventional rate is hovering about 7.5%. We saw a correction in prices when rates jumped by a point and crested 6% in mid-2022. Since Dec 2022, prices found their bottom, and price appreciation started happening again. Year-to-date, the average interest rate has been around 7% and prices have not been in a free fall, they have grown and remain stable.

Just like the correction that happened in 2022, it is safe to say there is a correlation between prices and rates. If the experts are correct and rates fall over the course of the next year or so, we should anticipate prices to increase. That is what hangs in the balance when making the decision of whether to buy now or later. The example to the right shows the effect that price appreciation will have despite rates being lower. It was not that long ago that we were experiencing bidding wars where homes escalated in the double digits. As you can see, the higher price results in a higher payment even with the lower rate.

If one is able to afford a purchase now with today’s rate, they can refinance when rates go down and save themselves a lot of money on their payment while keeping a fixed price. Additionally, if a buyer can secure a rate buydown, such as a 2-1 buydown, the higher rates can be overcome and a refinance can fix the rate when the rates drop.

Here is an example: let’s say you are shopping for a house and have the same $800,000 budget and a 20% down payment with today’s rate of 7.5%. The monthly principal and interest payment would be $4,475.00. You could do a 2-1 buydown (2-points lower in year one and 1-point lower in year 2) which would have your payment in year one be based on an interest rate of 5.5% with a monthly principal and interest payment of $3,534 – a savings of $841.00 per month. For year two, the monthly principal and interest would be based on 6.5% resulting in a monthly payment of $4.045.00, a $430.00 per month savings. The total savings in monthly payments with the 2-1 buy-down over the two years would be $15,252.00.

The roughly $15,000 in monthly payment savings is paid upfront at closing and in some cases paid by the seller. The buyer still needs to qualify based on the 7.5% interest rate as the payments will convert to the payment based on the 7.5% in year three moving forward. The strategy here is to never have the payment increase to 7.5% because the buyer plans to refinance when rates come down, and will permanently fix their rate below 7.5%. A bonus is that if the entire $15,000 credit has not been used yet, in some cases those funds can be applied towards the refinance.

You see, there are many options to consider when a buyer is balancing rates, prices, payments, and their desire to make a move. I understand that I am in the business of helping people navigate big life changes while ensuring their financial investment is sound. I felt it was an important message to share these examples in case you or someone you know was thinking about making a purchase but was feeling confused or stifled by the current rate environment. If you want to learn more or need a referral to a reputable lender, please reach out. It is always my goal to help keep my clients well-informed and empower strong decisions.

As we approach the Thanksgiving holiday, I want to let you know how grateful I am for YOU! Your friendship, support, and referrals have helped fuel my business and support my family. Thank you!

Real estate is a career that gives me the opportunity to be a meaningful part of my clients’ lives as they navigate important moves that have a great financial impact. I take the responsibility of guiding my clients through this process very seriously and know that when someone places this trust in me that it is a big deal! It is an honor to be a part of your big-picture planning and to help you execute these life changes with care and success.

My Thanksgiving would not be complete without taking a moment to say thank you and that I appreciate you so much! I hope your holiday is filled with happiness, rest, and all the people that are nearest and dearest to your heart.

The video below from Matthew Gardner, Windermere’s Chief Economist, refers to the effects of constricted inventory levels on the national housing market in a higher interest rate environment. Review the localized numbers that I gathered that pertain to King and Snohomish Counties and then check out what he has to say about the national trends.

Overall, inventory has been tight in 2023! Many people made moves in the pandemic-fueled market and are deciding to stay put. They utilized the lower interest rates to secure their long-term home and don’t see a need to move anytime soon. Did you know the average person stays in their home for 10 years?

Others are not completely satisfied with their homes but feel attached to the lower rate and are pushing through the discomfort until rates settle. Some are deciding to come to market because their homes do not fit their lives anymore and some are bucking the rates and getting creative with financing. The buyers working the creative financing route with rate buy-downs will be rewarded when rates lower and prices go up.

Year-to-date new listings in King County are down 30% over 2022 and down 37% in Snohomish County. Closed sales are down 27% over 2022 in King County and down 27% in Snohomish County. Even though there have been fewer new listings year-over-year, the closed sale percentage is tracking more favorably which demonstrates buyer demand. This is why inventory is tight. In August 2023 there were 1.3 months of inventory in King County and 1.1 months in Snohomish County. This illustrates a seller’s market.

Closed sales peaked in 2021 in both counties at 20,132 in King County and 8,663 in Snohomish County. As we venture away from these outlier pandemic years, consumers are wrapping their heads around the changing environment. Year-to-date, King County has had 16,069 closed sales and 5,344 in Snohomish County. Year-to-date, King County is pacing slightly higher than 2019, which was a normal market prior to the pandemic and Snohomish County is lagging behind by just a bit.

The pace of inventory has helped stabilize prices and created price growth since the start of 2023. Buyer demand exists because people’s lives change and we have the Millennial generation out in full force. If your life is leading you to consider a move, please reach out. Please do not rely on the noise in the media, they will lead you astray.

I can help you dig into the data and devise a plan that relates to YOUR life. With equity levels astoundingly high (over 50% of homeowners in the U.S. have over 50% equity), moves are being made with great success. For buyers, the rates can be overcome with some creativity, lived with for now, or you can set a benchmark for when you’re ready. If you are curious about how today’s market relates to your goals or want to make a plan for the future, let’s talk! It is always my goal to help keep my clients informed and empower strong decisions.

Were you like me and turned the heat on when the rain came this week?  It’s that time of year when our heating systems need to be attended to, to be properly prepared for the colder months ahead.

Have your air and ventilation systems inspected by the professionals to ensure efficient and healthy airflow. This will also ensure that your systems are running safely and lower your risk of fire.  Note: if you need to purchase or replace any major household appliances, September and October are usually when the latest models are revealed.

There has always been a direct correlation between interest rates and home prices. The rule of thumb has always been when rates go up prices go down, and vice versa. This was temporarily proven true in the summer of 2022 when rates quickly rose by 2% (3.5%-5.5%) over 5 months. It created a price correction in the second half of 2022 as buyers retreated from the market due to affordability. One should note that price acceleration was rapid from May 2020 to May 2022 and in that two-year period prices grew upward of 50% in King and Snohomish Counties. That was an unsustainable pace. In all honesty, this was inflation’s role in the housing market, and increasing the rates was the Fed’s way of getting control.

While there was a correction from May 2022 to January 2023, since then prices have started to grow again despite the rates hovering in the 6-7% range. In fact, the median price is up from the bottom (Jan/Feb 2023) by 13% in King County and 9% in Snohomish County. Further, the median price in July 2023 was even with July 2022 in King County and down by only 2% in Snohomish County. This is a sign of price stabilization. Historically, the impact rising rates have on prices year-over-year is not negative. We are in the midst of proving that same theory.

Believe it or not, the higher rates are keeping prices stable because it is limiting the available inventory for sale. You see, there are plenty of buyers out looking for homes right now, and inventory levels are tight because potential sellers are waiting to make a move because they are holding on to their low rate. Our job market is good, we have people moving to our area and the millennials are out in full force searching for their first homes.

There are two interesting phenomena going on with potential home sellers right now. First, according to ATTOM Data, 68.7% of homeowners have at least 50% equity and only 2.1% have negative equity. This is the number one indicator that we are not in a housing crisis or bubble. Second, according to FHFA, 70% of homeowners with a mortgage have a rate 4% or lower. This is causing people who are no longer happy with where they live to stay a bit longer because they don’t want to give up their payment just yet.

Here’s the deal though, housing is a reflection of life! According to the US Census, 66% of homeowners would like to upgrade to a nicer home with features that better match their lifestyle, and 45% would like to move to a home to better match the changing size of their household. Life changes motivate moves! Many people are waiting out these life changes until rates come down so they can better afford their desired transition. This has put downward pressure on inventory, limiting selection for buyers, hence creating price growth and stabilization.

So, what is going to happen when rates come down? Experts across the board predict that rates will recede as inflation gains control. This will be a gradual process over the next 12-18 months. The biggest indicator will be inflation reaching the 2% year-over-year mark. Once we hit this point, which we are close to, experts predict the Fed will be comfortable easing off the higher rates. This will cause more homes to come to market as the delta between the rate a homeowner currently holds and what they are willing to take on to indulge their desire to move, will become more attainable. Plus, as rates recede it will increase buyer demand.

We find ourselves in a delicate dance with inflation, rates, inventory, and prices. Someone who desires a move has to consider the impact the rates can have on their payment. Many of these buyers are taking the leap and finding creative ways to offset the rate such as ARM financing, rate buy downs, or they are preparing to re-finance their purchase when rates come down. This way they will have secured a good price which is the basis of their loan.

So, do you stay or do you go? According, to the lyrics from the classic song from The Clash, “if I stay there will be trouble, but if I go there will be double.”  This is up to you to decide. Where I can help is to gather the data and help you analyze the market in order to empower you to make the best choice for you and your family. For some, the right time is now and for others, waiting a bit longer will be a good plan.
What I do know, is that when we hit the inflation rate that the Fed is comfortable with and they ease off of rates, the market will tilt. This will be a benefit for some and a challenge for others. In other words, there is not one right answer for everyone and that is where I think I have the opportunity to serve my clients best.

Helping people navigate the ever-changing market is a skill, an art, and a calling. I am here for it and find great satisfaction in helping people make big life decisions that help bring joy, solve problems, and make them money! My job is a huge responsibility and it is an honor to serve my clients. If you or someone you know are wondering about how today’s market conditions affect your goals, please reach out. We can dig into the data, assess your dreams and devise a plan.