As I am sure you have heard on the news, there is a proposed settlement agreement for the NAR (National Association of Realtors) Class Action Lawsuit. It has certainly stirred up plenty of headlines that have been glossy, and in many cases, inaccurate. Many of the reports and headlines have been national and it is important to note that WA state is unique and could have far fewer changes than the rest of the country if the settlement is approved.

The majority of the MLSs (Multiple Listing Services) across the country are owned by NAR and our NWMLS (Northwest Multiple Listing Service) in WA, is not. NWMLS is not included in the settlement agreement as they are not NAR-owned. If the settlement is approved, they can choose to opt in, which is undecided at this point as it will require a vote of their board of directors.

In WA, new laws were enacted in January 1, 2024 that address many aspects that the settlement agreement is proposing. For years, WA brokers and NWMLS have been committed to elevating transparency around broker compensation, resulting in brokers in WA already doing business as many of the new proposals in the settlement agreement suggest. You can refer to the newsletter I published in early February that outlines the new laws that went into place on Jan 1. I am also happy to report that practicing under these new laws has been positive and productive for consumers and brokers alike.

The proposed settlement agreement still needs to be approved by the court. Once that is done, I will report back to explain how it will affect real estate operations in WA state. In the meantime, I also want to report that market activity in Q1 2024 has been positive!

Price growth is up, buyer demand is strong, and inventory remains low. Seller equity is soaring, with home equity in King County averaging 60% and 57.5% in Snohomish County. These figures were reported in December 2023 and don’t account for the price growth we’ve seen in Q1. Interest rates are still hovering around the high 6% and are predicted to come down this year, yet remain volatile and stubborn. Please reach out if you or someone you know would like to learn more. It is always my goal to help keep my clients informed and empower strong decisions.

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.

Last week, my office hosted our 16th Annual Economic Forecast Event featuring Matthew Gardner. Matthew is a sought-after economist focused on the national and local economies and has a deep understanding of the housing market across the country and right in our own backyard. He is an economic advisor for the State of Washington, Governors Council, lectures on real estate economics at the University of Washington, and is found quoted in various media outlets throughout the year as a respected expert. He is certainly a trusted real estate advisor that I look to to stay informed to help educate my clients.

The event was virtual and I have the recording and his PowerPoint in a PDF that I am happy to share with you, please reach out if you would like me to email it to you. So much was shared in his 60-minute presentation that was focused on the national economy and a deep dive into both King and Snohomish Counties, followed by Q & A. I can’t quite cover it all here, but here are some highlights!

1. Inflation levels have dropped from their peak and are now tracking with more normalized levels. This has caused interest rates to start to drop, which is a trend he sees continuing in 2024.

2. The U.S. unemployment rate measured at 3.8% at the end of 2023 and is forecasted to rise ever so slightly and remain under the long-term average of 4.5%. In King and Snohomish Counties the unemployment rate averaged 4% at the end of 2023.

3. There is a major labor gap in both King and Snohomish Counties, with job postings heavily outweighing labor supply. Biotech is the darling of the moment which will balance out the IT side in the overall jobs picture.

4. Interest rates are predicted to gradually decrease throughout 2024 as inflation softens. The Fed will slow-play these reductions to get them right, so they do not have to raise them again.

5. The Tri-County area of Snohomish-King-Pierce Counties had massive organic population growth from 2020-2022, much of which was international vs. domestic.

6. Homeowner equity averages 60% in King County and 57.5% in Snohomish County. According to the median price in King County in December 2023 that is $511,200 and $391,000 in Snohomish County. Homeownership proves to have the strongest impact on household wealth.

7. There will NOT be a bubble in the housing market! Given that prices remained stable in 2023 amongst the highest interest rates we’ve seen in two decades along with inflation at a high, the housing market has proven to be a fortuitous economic marker. Rates and inflation are both improving, which will bode well for home values. Our biggest challenge is the lack of inventory and affordability.

8. Price growth in King and Snohomish Counties was flat year-over-year (2022 to 2023) after massive growth from 2020-2022, which was positive given the correction in prices and rise in interest rates. Prices are forecasted to modestly increase in 2024. Tight inventory and continued buyer demand will drive this growth while interest rates temper.

Please reach out if you would like to learn more and receive the documents and recording. Also, you can count on me to follow the trends, statistics, and rhythm of the market throughout the year. It is my goal to gain knowledge and understanding so I can help keep you informed. This level of service helps empower my clients to make thoughtful, sound decisions when navigating their investments and big life choices.

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.