Key Takeaways
- Commissions are negotiable between the parties - there are no fixed rates in Washington
- Brokers can only receive compensation through their licensed firm, never directly from clients
- Commission disputes do not prevent closings; escrow disburses per instructions or holds disputed amounts
- Brokers may share commissions with out-of-state licensees properly licensed in their state
- Referral fees to unlicensed persons are prohibited except in limited circumstances
Commission and Compensation in Washington
Understanding how real estate commissions work in Washington is essential for license law compliance.
Commission Basics
Negotiability
All real estate commissions are negotiable. There is no:
- Standard commission rate
- Minimum commission
- Maximum commission
- Rate set by DOL or any association
Antitrust Warning: Discussing or agreeing on commission rates with competing firms is illegal price-fixing. Each firm sets its own rates independently.
When Commission is Earned
A broker typically earns a commission when:
- They produce a ready, willing, and able buyer, OR
- As specified in the listing/buyer agency agreement
However, commission terms are defined by the written agreements between the parties.
Payment of Compensation
Flow of Commission
Commissions must flow through proper channels:
| From | To | Permitted? |
|---|---|---|
| Client | Licensed Firm | Yes |
| Firm | Affiliated Broker | Yes |
| Client | Broker directly | NO |
| Other Firm | Broker directly | NO |
The Cardinal Rule
Brokers can ONLY receive compensation from their firm.
A broker cannot:
- Accept payment directly from a buyer or seller
- Accept payment from another firm
- Accept payment from another firm's broker
- Receive commission without firm involvement
Commission Sharing and Referrals
Sharing with Cooperating Firms
Firms may share commissions with:
- Other Washington licensed firms
- Out-of-state firms licensed in their state
- Their affiliated brokers per their agreement
Referral Fees
Permitted referrals:
- Firm to firm (licensed parties)
- For referring clients who complete transactions
- Must be disclosed to all parties
Prohibited referrals:
- Paying unlicensed persons for referrals
- Kickbacks or undisclosed compensation
- Fees to unlicensed "finders"
Exception: Certain referral payments may be permissible in limited circumstances - consult DOL guidance.
Commission Disputes
Between Firms
If two firms dispute who earned a commission:
- The dispute does NOT delay closing
- Escrow disburses per written instructions
- Firms resolve the dispute separately
- May require arbitration or litigation
Earnest Money Disputes
If buyer and seller dispute earnest money:
- Escrow holder holds funds until dispute is resolved
- May file interpleader action to deposit funds with court
- Court then determines rightful recipient
Important Commission Rules
| Rule | Explanation |
|---|---|
| Net listing | Strongly discouraged in Washington |
| Commission from both parties | Only with full disclosure and consent |
| Referral to service providers | Cannot receive undisclosed compensation |
| Finder's fees to unlicensed | Generally prohibited |
Anti-Kickback and RESPA
Federal RESPA rules also apply:
- No kickbacks for settlement service referrals
- No unearned fees
- Required disclosures for affiliated business arrangements
A Washington real estate broker may receive commission payment from:
Which statement about real estate commissions in Washington is TRUE?
When buyers and sellers have a dispute over earnest money, the escrow holder should: