The U.S. Department of Veterans Affairs (VA) has announced a temporary bridge which suspends its prohibition of veterans paying real estate agents when buying homes.
The VA’s decision aims to ensure veterans can compete equally and access professional representation when buying homes, which was jeopardized by a proposed class action settlement.
What Will Change?
The VA’s previous policy stated that veteran buyers using their VA loan benefits “may not, under any circumstances, be charged a brokerage fee or commission for the services” of a real estate professional. This policy could create complications for VA buyers due to practice changes required under NAR’s proposed settlement agreement. The changes prohibit listing brokers or sellers from offering compensation on the MLS and also require MLS participants working with buyers to enter into a written agreement that specifies the amount of compensation the buyer’s representative will receive and how it will be determined. If the seller refuses to offer to pay the buyer agent compensation, then the buyer is responsible for that fee, and that would make veterans unable to take advantage of their VA loan benefit in the purchase of a home under current policy.
Market Implications
As the real estate industry prepares for buyer commission changes, sellers may choose to not offer to pay a buyer’s broker commission. This would leave veteran buyers using VA loans in a difficult position; either they use the VA loan but must represent themselves in the sale, which is unadvised, or they pay the broker and have to go with another type of loan. Either option ends up potentially costing the vet much more money in the transaction.
Anthony Lamacchia, CEO of Lamacchia Companies, explained prior to this change, “Unless the seller pays, there’s no way for the buyer to pay for the broker. That’s going to dissuade people from wanting to use their VA benefit.”
Ensuring Equal Opportunities
VA Deputy Director of Policy Michelle Corridon shared that the ban will be lifted through a temporary rule known as “circular.” This move comes after pressure from the National Association of REALTORS® (NAR), which argued that the old rules disadvantaged veteran buyers due to the required commission changes resulting from the settlement.
Shannon McGahn, NAR’s chief advocacy officer, stated, “NAR launched an all-hands advocacy effort on this issue meeting with VA officials, engaging with law makers, and rallying our industry partners to ensure this prohibition was lifted.”
“Without this change, thousands of veteran buyers could be denied access to professional representation in their pursuit of the American Dream of homeownership… Taking this extra step ensures veterans have the same opportunity as others to compete in a tight housing market.”
Moving Forward
This change, effective August 10th, is valid until rescinded according to the VA Circular 26-24-14 dated June 11, 2024.