VA Loan Changes Help Veterans Compete in Housing Market
The U.S. Department of Veterans Affairs (VA) announced a temporary solution last week to help homebuyers using VA loans.
The change, which goes into effect on Aug. 10, allows homebuyers with VA loans to pay their real estate agents’ fees out of pocket. Previously, that had been prohibited.
The VA made the temporary fix after a settlement was announced in March with the National Association of Realtors (NAR.) If the settlement is approved, sellers may choose not to pay for buyers’ real estate agents. That means that some buyers could have to pick up those costs.
“It will be critical that the VA buyer educate themselves on the new commission structure to negotiate the best terms with the agent,” said New American Funding loan officer Dianne Steffey. About half of her clients use VA loans.
Key changes for veteran homebuyers
By allowing VA borrowers to pay for these costs, it means buyers don’t have to choose between getting a VA loan and working with a real estate agent.
However, it's important to note that these fees cannot be included in the VA loan itself. Borrowers must find another way to pay these costs.
These loans are often popular with active members of the military, veterans, and eligible surviving spouses. That is because VA buyers don’t have to make down payments or pay private mortgage insurance (PMI). The borrowers also typically receive lower mortgage rates than they would get with other loans.
“We always want to put veterans and their families in the best possible position to buy the homes they want,” VA Under Secretary for Benefits Joshua Jacobs said in a statement. "Veterans using VA home loan benefits can now pay reasonable and customary amounts for certain charges—including commissions and other broker-related fees—thus ensuring that they remain competitive in the rapidly changing housing market."
Impact of the NAR lawsuit on VA buyers
This change from the VA is due to the recent lawsuit against NAR. This is expected to change how real estate commissions will be paid.
Sellers will no longer be required to offer compensation to buyer agents through multiple listing service listings beginning on Aug. 17. Instead, buyers will have to negotiate these payments separately.
Buyers can also ask sellers to cover these fees at closing.
The VA’s temporary fix also notes all buyer-broker fees charged to veterans must be reasonable and customary within local markets.
"Competition can be a good thing here,” said Steffey. “It will be critical that the VA buyer educate themselves on the new commission structure to negotiate the best terms with the agent."
VA loans may continue to evolve as the real estate market changes
The full impact of these changes to real estate commissions is not yet certain.
The VA plans to keep an eye on the situation. The agency will make further changes to help veterans achieve homeownership if those adjustments are needed.
"At the end of the day, the fundamentals will remain the same," said New American Funding loan officer Leslie Bergen. "A buyer needs a team of loan officers and real estate agents who are extremely knowledgeable about VA loans. This knowledge is crucial to navigating the current market and securing the best possible outcome for our veterans and their families."
Click here to discover how New American Funding can help you with a VA loan.
Dianne Steffey (NMLS#267658)
Leslie Bergen (NMLS#383352)