Buyer Agency In Washington DC
DC BUYER AGENCY
HIRING A BUYER AGENT FOR DC REAL ESTATE
The rules related to engaging an agent have changed for buyers and brokers. Outlined on this page are revised NAR and Greater Capital Area Association of Realtors and MLS rules, and how they affect buyers and broker compensation.
Agency
WHAT IS BUYER AGENCY?
Buyer agency, or buyer brokerage, is the contractual relationship between a real estate brokerage and a home buyer.
The buyer is represented by a designated agent of the buyer’s choice affiliated with the contracted brokerage. The Buyer Agency Agreement outlines the terms and conditions of the Parties’ duties and responsibilities, as well as timelines and payment of compensation. Buyer Agency was created to balance agent representation in real estate. Prior to the early 1990’s, all brokers represented sellers. Even agents who appeared to be working with buyers were actually functioning as sub-agents of sellers, owing no duties of confidentiality or loyalty to the buyer.
WHEN DO I NEED AN AGENCY AGREEMENT?
Before the NAR settlement of 2024, buyers had more freedom to choose when they could hire an agent or tour properties without an agreement.
But those days are over. Under the terms of the 2024 NAR settlement, agents are required to have a signed agreement before performing any substantive work on behalf of a buyer, including touring homes. Agency agreements outline the duties and responsibilities of both parties, and contain clear disclosures regarding payment of buyer broker compensation. Buyers and agents negotiate the amount of compensation the buyer is responsible and document it in the agency agreement, which is a binding contract between the broker and buyer.
WHAT IT MEANS FOR YOU
Home buyers should begin the home search process by researching the market, assessing their buying power + transaction costs with a local mortgage lender, then interviewing buyer agents.
Buyers do not need a signed agreement to visit an open house, where they may ask hosting agents questions about their services. Agents hosting open houses may not perform any services for buyers without a signed agency agreement, which includes engaging in a detailed discussion of the property, offering advice on the market, offers, etc.
MLS AND NAR ROLES
The National Association of Realtors (NAR) created the MLS during the early 1960’s primarily to facilitate unilateral offers of compensation by listing brokers to other broker participants within that MLS. After the practice was eliminated in 2024 under terms of a settlement between NAR and various class action lawsuits, MLS is a essentially just a for-profit database of listings, and a rule enforcing arm for NAR.
Both entities are struggling to remain relevant and fighting accusations of monopolistic control. As of mid-2024, there are approximately 517 MLS systems in the U.S., most of which are owned by REALTOR® associations, multiple associations in a regional MLS territory, or they are broker-owned. Calls for decoupling of MLS, associations and NAR are increasing.
As digital platforms like Zillow filter the listings consumers can see based on their profit funnels, and brokerages opt increasingly for off-market listings to protect sellers, calls for an independent, national MLS have also increased.
New Rules
RULES YOU'LL NEED TO KNOW FOR 2025
1. Cooperating compensation is banned from MLS. No posting of offers of broker compensation may be included on MLS listings.
2. Written agreements must be signed before touring homes listed by MLS participants. Exceptions are open houses (may require a disclaimer or disclosure to be acknowledged) or showings via the listing agent (possible disclaimer/disclosure requirement).
3. Buyer broker compensation rate and brokerage fees must be disclosed. Broker compensation is negotiable between the parties.
4. Buyers are responsible for payment of buyer broker compensation, must agree to responsibility in the agency agreement, and should not rely on potential agreements of cooperating compensation with sellers.
5. Buyer broker compensation is limited to the amount agreed upon in the Buyer Agency Agreement.
6. As was always the case, buyer agents cannot advertise that their services are “free.” They were never free.
7. Sellers must approve of any cooperating compensation offered to a buyer broker by a listing broker on behalf of the seller.
8. Brokers and Agents must disclose that broker compensation is not set by law, or by GCAAR or NAR, and are fully negotiable.
9. Off-MLS cooperating compensation and/or buyer concessions are allowed.
Author | Realtor
Skilled Realtor® Susan Isaacs is a 20 year residential real estate + new construction veteran. Expert in buyer + seller representation, investor representation, new homes, relocation and exchanges. Licensed in the Washington DC & Virginia since 2008.
Agency. Advocacy. Authenticity.
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Compass is the #1 U.S. real estate brokerage + a real estate technology leader.
Broker Compensation
HOW BROKER COMPENSATION WORKS NOW
1. Sellers will complete a form in their listing package disclosing the amount of buyer (cooperating) broker compensation, if any, they will offer. Agents representing buyers may request this information prior to writing an offer. Buyer broker compensation is paid directly to the broker at closing as a debit on the Seller’s ALTA statement.
2. Sellers are also able to offer buyer broker compensation off-MLS, or offer concessions (such as a general closing cost credit) on-MLS.
3. Broker agreements and addendums to sales contracts will confirm any/all agreements relating to buyer broker compensation.
4. Buyers may pay broker compensation as part of their closing costs at settlement. If the buyer seeks a closing cost concession in lieu of an offer of buyer broker compensation from the seller, the buyer broker fee is shown as a debit on the buyer’s ALTA statement, and the seller concession is shown as a credit.
5. The title company may request a copy of the Buyer Agency Agreement during the transaction processing period to confirm broker compensation responsibility.
6. Broker compensation paid via seller cooperation may not be in excess of the amount stated in the buyer agency agreement.
7. Some buyer agents may require a retainer before providing services. Retainers are held by the brokerage and are non-refundable. Retainers are credited to the buyer broker compensation due at closing.
8. Broker compensation rates haven’t changed much since 1939, and aren’t expected to undergo a dramatic change now. Individual brokerages set their own base rates. Compensation rates are not set by law, NAR, or GCAAR.
9. Most brokerages will continue to charge a brokerage fee.
Step-By-Step
PRACTICAL APPLICATION
I UNDERSTAND THE THEORY, BUT HOW DOES THIS WORK IRL?
Any new policy is a bit confusing and this is no exception. Buyers and agents alike are acclimating to revised practices and compensation methods.
New legal actions may further impact agency and compensation, but for now, we have a working system for real estate in Washington DC that provides greater clarity on compensation.
‘In real life’, those thinking about purchasing a home in Washington DC will still review online listings. But when a search becomes serious, it’s time to meet with a skilled real estate agent. Accurate information and experienced human perspective is required to make a decision on one of the largest purchases of your lifetime.
In Steps To A DC Home Purchase, I outline the plan that will make your home search more efficient, effective, and beneficial to you.