Washington Real Estate Contracts Guide for Exam Prep

Washington Real Estate Contracts Guide

Washington real estate contracts combine general contract law principles (tested in the national section) with Washington-specific statutory requirements (tested in the state section). This guide focuses on the state-specific elements.

Purchase and Sale Agreements

Washington uses standardized purchase and sale agreement forms developed by the Northwest Multiple Listing Service (NWMLS) and the Washington Realtors association. While the exam does not test specific form numbers the way Wisconsin tests WB forms, you should know:

• A purchase and sale agreement must contain all essential contract elements: offer, acceptance, consideration, legal capacity, and lawful purpose
• Contingencies (financing, inspection, title review) must specify clear timelines for notice and waiver
• The buyer's right to terminate and the earnest money forfeiture rules are governed by contract terms, not statute, unless the parties are in default

Earnest Money in Washington

This is one of the most commonly tested Washington-specific topics:

Who holds it: In Washington, earnest money is typically held by the closing agent (escrow company), not the listing broker. This differs from most other states where the listing broker's trust account holds earnest money.

Release: If there is a dispute over earnest money, neither party can demand release without the other's written consent or a court order. The closing agent holds the funds until resolution.

Forfeiture: If the buyer defaults, the seller may claim the earnest money as liquidated damages if the contract so provides. However, the seller cannot both keep the earnest money AND sue for specific performance — it is generally one or the other.

Deed of Trust Structure

Washington is a deed of trust state, not a mortgage state. In a deed of trust:

• Trustor: The borrower
• Beneficiary: The lender
• Trustee: A neutral third party (often a title company)

The trustee holds the property title as security for the loan. If the borrower defaults, the trustee can conduct a non-judicial foreclosure (Trustee's Sale) under RCW 61.24, which is faster than judicial foreclosure. Washington's non-judicial foreclosure process takes approximately 190 days from the notice of default.

Form 17: Seller Disclosure Statement

Although Form 17 is technically a disclosure document rather than a contract, it interacts with the purchase and sale agreement:

• The seller must deliver Form 17 within 5 business days of the parties signing the purchase agreement
• The buyer has 3 business days after delivery to rescind the purchase agreement without penalty
• If the seller fails to deliver Form 17 on time, the buyer may rescind at any time before closing

Community Property and Contracts

Because Washington is a community property state, both spouses must sign contracts and deeds involving community property. A purchase agreement signed by only one spouse for the sale of community real property is not enforceable against the non-signing spouse.

Exam Focus

Prioritize: earnest money held by closing agent (not broker), the three-day Form 17 rescission window, deed of trust non-judicial foreclosure process, and community property signature requirements. These generate the most state-specific contract questions.