Washington Agency Law Guide: RCW 18.86 Explained

Washington Agency Law Guide

Washington's agency law is codified in RCW 18.86, the Law of Agency Act. It is the most-tested body of state law on the Washington real estate exam. Understanding its structure — especially how it differs from general agency principles — is essential for passing the state section.

The Foundational Distinction: Client vs. Customer

Washington law draws a clear line between a client (a party who has formed an agency relationship with a broker) and a customer (a party who has not). The duties a broker owes depend on which category the party falls into.

Duties owed to ALL parties (clients and customers): - Reasonable care and skill - Honest and fair dealing - Timely presentation of all written communications - Disclosure of material facts affecting the property

Additional duties owed only to clients: - Loyalty (putting the client's interests first) - Disclosing conflicts of interest - Advising the client to seek expert advice when appropriate - Accounting for all funds received - Confidentiality of client information

This two-tier duty structure means a listing broker who is working with an unrepresented buyer still owes that buyer duties of honesty and material fact disclosure — but not loyalty.

Agency Disclosure Timing

Washington requires written agency disclosure at the first meeting with a party to a prospective transaction. This is earlier than the standard in many states, where disclosure can wait until an offer is written. On the exam, if a question describes an agent meeting a buyer at an open house, the agent must disclose their agency status at that first contact.

Types of Agency in Washington

Seller's Agency: The broker and all affiliated licensees represent the seller.

Buyer's Agency: The broker represents the buyer. A buyer's agent owes full fiduciary duties to the buyer.

Dual Agency: One broker represents both buyer and seller in the same transaction. Requires written, informed consent from both parties. The broker's loyalty duties are limited in dual agency — the broker cannot reveal the seller's minimum price or the buyer's maximum price.

Designated Agency: The firm appoints one licensee to represent the seller and a different licensee to represent the buyer, even though both work for the same brokerage. This resolves the loyalty conflict that dual agency creates.

Earnest Money: A Washington-Specific Rule

Unlike many states where the listing broker holds earnest money in a trust account, Washington transactions typically use an independent closing agent (escrow company) to hold earnest money. This is a frequently tested distinction.

Net Listing Prohibition

Washington specifically prohibits net listings (arrangements where the broker keeps anything above a set seller price as commission). This is tested on the state exam.

Exam Focus

The state exam tests agency disclosure timing, the client vs. customer duty framework, the conditions for dual and designated agency consent, and the prohibited net listing structure. Study these areas in the context of specific fact patterns — the exam presents these as scenario questions, not pure definitions.