What the VA said about the NAR settlement
The Department of Veterans Affairs announced it would temporarily lift its ban on homebuyers directly paying for realtor representation. It is expected that it will announce a formal policy update within the next several weeks.
The VA’s home loan guaranty is the only loan program with this explicit rule which makes veterans uniquely impacted by the NAR settlement ruling.
Who pays for which closing costs with a VA loan?
According to the VA.gov website, the seller must pay these closing costs (sometimes called seller’s concessions):
- Commission for real estate professionals
- Brokerage fee
- Buyer broker fee
- Termite report (unless you’re using a refinancing loan)
As you can see, the NAR settlement is not in sync with the established VA loan guidelines. The VA’s current policy states that veteran buyers who are using their VA loan benefit “may not, under any circumstances, be charged a brokerage fee or commission in connection with the services” of a real estate professional. That policy may create complications for these buyers, considering the practice changes required under NAR’s proposed settlement agreement. The practice changes prohibit listing brokers from making offers of compensation on the MLS. They also require MLS participants working with a buyer to enter into a written buyer agreement with their clients that outlines the amount of compensation the buyer representative will receive and how this amount will be determined.
How did this start?
According to a letter written by The National Association of Realtors and submitted to The Department of Veterans Affairs, “In situations where no offer of compensation is offered from a seller, VA buyers are immediately at a disadvantage, potentially forcing them to forego professional representation, lose a property in an already limited inventory, choose a different loan product or exit the market entirely.”
It is clear how this impacts buyers’ using their VA benefits, who have limited options when the listing broker does not offer compensation to the buyer broker. This could potentially leave veterans without realtor representation or, in some cases, force them to switch to other loan programs. Taking this extra step ensures veterans have the same opportunity as others to compete in a tight housing market.
Reactions to the NAR settlement
“This is a welcome change,” said David Holding, VP of Capital Markets at Mortgage Equity Partners, “since veterans who were obtaining a VA loan were prohibited from paying any part of a realtor commission in the home buying process, it was feared that once the new NAR rule went into effect (requiring buyers to sign a buyer’s agent agreement which outlines the commission they will be due regardless of who pays it) veterans would not have been able to participate in that agreement if they were pursuing a VA loan. Once this temporary relief has been announced veterans will be free to purchase regardless of where the commission is being paid from.”
VA loans help veterans, service members, and eligible surviving spouses become homeowners. The benefit provides no down payment requirement, limited closing costs, a competitive interest rate, does not require PMI, and is a lifetime benefit for Veterans.
This policy change is expected to be officially announced soon.
If you are interested in learning more about a VA loan and if you qualify, contact one of our Connecticut specialized loan officers!
Sources:
HousingWire.com, 2024
The National Association of Realtors
