The Department of Veterans Affairs (VA) has announced a temporary policy update allowing veterans to pay real estate agent commissions when purchasing a home. This change, effective August 10, 2024, aims to prevent VA buyers from being disadvantaged as new real estate rules take effect later this summer.
Key Updates:
- Effective Date: The policy takes effect on August 10, 2024.
- Previous Rule: Veterans could not pay buyer-agent commissions; sellers had to cover these costs.
- New Rule: Veterans can now pay their buyer’s agent directly, provided the fee is reasonable and customary for the market.
- Seller Option: Sellers can still choose to pay the buyer’s agent commission, which does not count against the VA’s 4% cap on seller concessions.
This change comes in response to a paradigm-shifting lawsuit and resulting settlement by the National Association of Realtors (NAR) in March 2024. The settlement, effective August 17, 2024, could make homebuyers responsible for their Realtor’s commission, potentially up to 3% of the home’s price. This could have posed a significant problem for veteran homebuyers under the old VA rules.
Understanding the New Guidance
The new guidance allows veterans using the VA home loan to pay their real estate agent directly, under certain conditions:
- Direct Payment: Veterans can now pay their buyer’s agent directly in areas where the seller’s agent can’t list the buyer-agent commission on the MLS.
- Loan Restrictions: The agent commission cannot be wrapped into the VA loan.
- Verification: Lenders must verify that veterans have enough cash to cover the agent commission, closing costs, and any down payment.
- Transparency: The buyer’s agent commission must appear on the Closing Disclosure and the sales contract.
- Appraisal Process: The sales contract, including the buyer’s commission charges, is part of the appraisal process and loan documentation.
- Seller Payment: Sellers can still pay the buyer’s agent, but it is not mandatory.
Future Guidance
The VA has labeled this rule change as temporary to address imminent market changes. The Loan Guaranty Program plans to develop permanent guidance about buyer-broker commissions in the coming months as the real estate market stabilizes and new practices emerge.
Given the uncertain impact of the NAR settlement, veterans are encouraged to act quickly while sellers are still paying buyer-agent commissions.