NWMLS adds referral fee disclosures to real estate forms

Northwest Multiple Listing Service (NWMLS) has introduced new disclosure requirements aimed at increasing transparency around referral fees in residential real estate transactions across Washington state.

The changes include a new stand-alone Referral Disclosure form and updates to brokerage services agreements.

These additions are intended to inform buyers and sellers when a broker receives or pays a referral fee — often a portion of the overall commission — for connecting a client with another brokerage.

“Buyers and sellers should have complete transparency regarding all fees paid to a real estate brokerage firm, including referral fees paid to another firm,” said Justin Haag, president and CEO of NWMLS.

Referral arrangements are common in the industry, allowing brokers to direct clients to professionals with specialized expertise or familiarity with a specific market. When a transaction closes, the referring firm may receive a share of the commission or a fee.

Previously, these fees were often disclosed at closing — if at all. Washington law requires brokers to disclose referral fees in writing and in advance of client acceptance, according to Washington Administrative Code (WAC) § 4-30-045. 

The new Referral Disclosure form identifies the broker and firm receiving the referral, the broker to whom the client is being referred and the amount of the referral fee.

“Disclosure of referral fees at the outset of the broker’s engagement with a buyer or seller, rather than at the closing… is essential,” Haag said. “Some referral fees can be as much as 50% and may impact a buyer’s or seller’s decision about which broker to engage. Buyers and sellers should have complete information when hiring a broker regarding any fees paid to the firm, including any referral obligation of the firm.”

Brokerage service agreements will also be updated to include a “Referral Fee Disclosure” section, which ensures the fee is disclosed again at the time a buyer or seller formally engages a brokerage.

Together, these forms provide consumers with information about the referral fee at the time the referral is made and again when a buyer or seller negotiates the terms of a brokerage services agreement.

Even if the referring firm fails to make the disclosure at the time the referral is made, the fee will be disclosed to the buyer or seller in the brokerage services agreement, NWMLS said.