New VA Home Loan Policy

The Department of Veterans Affairs (VA) recently announced a temporary policy update allowing veterans to pay real estate agent commissions when purchasing a home. This change became effective August 10, 2024, and aims to prevent veterans from being disadvantaged under new real estate rules.

Background

This change comes in response to a paradigm-shifting lawsuit that resulted in a settlement by several large real estate brokerages and 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 presented a significant problem for veteran homebuyers under the old VA rules.

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.

Understanding the New Guidance

The new policy 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.

Benefits of the New Policy

This policy update provides several benefits for veteran homebuyers:

     ►  Equity: Veterans can now have more equity in their homes by paying the buyer’s agent commission directly.
     ►  Negotiating Power: Veterans can negotiate better terms with their real estate agents, as they are no longer limited to sellers paying the commission.
     ►  Fairness: The new policy levels the playing field for veteran homebuyers, who were previously disadvantaged by the old rule.

Conclusion

The VA’s policy update allowing veterans to pay real estate agent commissions is a positive step that will benefit veteran homebuyers. This change ensures that veterans have access to the same opportunities and benefits as other homebuyers. By providing veterans with more equity, negotiating power, and fairness, the VA is helping them achieve the dream of homeownership.

Please Download my free guide How to Use Your VA Home Loan.