VA Home Loan Policy Change Helps Veteran Homebuyers
In the first quarter of 2024, a class action lawsuit settlement affected how certain real estate fees were handled in real estate transactions. The National Association of Realtors settled a lawsuit over real estate broker fees, but the terms of that settlement can be confusing for borrowers and sellers alike.
Many changes to real estate broker fees are the result of that settlement, including the end of “automatic” broker compensation for residential real estate transactions.
Under the new guidelines, each commission must be negotiated individually. VA borrowers have traditionally not paid real estate agent fees (see below) but that will change under the new guidelines,.
That means big changes to how broker fees are set and negotiated, and the VA Home Loan program is directly affected by these changes, as we’ll examine below.
Related: VA Home Loan Guide
VA Loan Rules on Real Estate Broker Fees
In the past, VA loan rules stipulated that the veteran could not pay real estate broker fees. That was a common feature of VA mortgages (the seller traditionally paid them), but now that feature is overridden by a temporary VA circular (listed as “valid until rescinded” on the official site) authorizing the veteran to pay for real estate broker fees.
According to its official site, the Department of Veterans Affairs “has determined this temporary variance is appropriate to ensure Veterans remain competitive buyers in the rapidly shifting real estate brokerage market.”
The VA issued a press release about this issue but failed to mention that the program is temporary until the very end of the release.
The current VA policy’s temporary nature is a critical feature of this change. The VA wants to make a permanent version at some point, but that is not available at press time.
Further Changes Coming?
The issues forcing the publication of the VA circular to alter home loan policy to address the NAR settlement are likely subject to change going forward. Policymakers remain (at press time) in a wait-and-see mode as the housing market adapts to the new rules.
Those new rules include prohibiting publishing broker fees on real estate listings and what one consulting agency called “decoupling” broker commissions. In the past, those fees were split between the buyer’s real estate agent and the borrower’s agent. In addition, the fees must be negotiated individually.
The VA press release states, “The full impact of the settlement is uncertain because the real estate market is still adjusting, but there may be an increased expectation that home buyers will pay for their own buyer-broker fees.” In VA’s program, it has been common practice for sellers to pay for the Veteran’s buyer-broker fees.
What the VA Wants You to Know
The VA official site states that the new rules are meant specifically to make VA home loan borrowers more competitive when shopping for a home.
“Veterans using VA home loan benefits can still negotiate and may now pay for their real estate professional’s commission (i.e., the buyer-broker fee), subject to certain safeguards…”
Furthermore, VA borrowers should feel empowered to “negotiate buyer-broker fees with their real estate professional” noting that you can still ask the seller to pay the broker fee.
Related: VA Home Loan Guide
About the author
Editor-in-Chief Joe Wallace is a 13-year veteran of the United States Air Force and a former reporter/editor for Air Force Television News and the Pentagon Channel. His freelance work includes contract work for Motorola, VALoans.com, and Credit Karma. He is co-founder of Dim Art House in Springfield, Illinois, and spends his non-writing time as an abstract painter, independent publisher, and occasional filmmaker.
