Key Updates on VA Loans Following the NAR Commission Settlement

Introduction

Understanding recent changes to VA loan policies is crucial for staying competitive in the real estate market. Here’s a breakdown of the latest updates following the NAR settlement.

VA’s Temporary Variance for Commissions

The Department of Veterans Affairs (VA) has announced a temporary lift on the ban preventing homebuyers using VA financing from paying their real estate agent’s commission. This change ensures veterans remain competitive buyers, effective August 10, 2024.

Key Points:

1. Direct Payment Allowed: Veterans can now directly pay customary amounts for buyer brokerage charges (including commissions and any other broker-related fees).
2. Loan Amount Exclusion: These payments cannot be financed into the loan amount.

Asset Consideration: Payments are considered when evaluating the veteran’s liquid assets for closing.

3. Required Documentation: Ensure the total amount paid is recorded in the loan file and include the buyer-broker agreement in the sales contract.

Veterans may pay their buyer agent/broker’s commissions and fees, subject to the following:

1. The subject property is in an area where:
   1. Listing brokers are prohibited from setting the buyer’s agent/broker compensation through multiple listing postings; or
   2. Buyer’s agent/broker compensation cannot be established by or flow through the listing broker.
2. Buyer commissions/broker fees can NOT be financed into the loan amount.
3. Buyer commissions/broker fees paid by the veteran are considered in determining whether the veteran has sufficient liquid assets to close the loan.
4. The following documentation is obtained and retained in the loan file:
   1. The total amount paid by the veteran is recorded in Lines 1 through 3 of the Section H (“Other”) on the CD, and
   2. Buyer-broker representation agreement to be part of the sales contract and uploaded both when requesting an appraisal and when the loan file is delivered.

NOTE: Any direct seller payments of buyer real estate commissions or fees will continue to NOT be treated as a seller concession.

Background on the NAR Settlement

The National Association of Realtors (NAR) settlement impacts how buyer agents are compensated. The VA’s previous policy prohibited veterans from paying these fees, which placed them at a disadvantage. The new temporary variance addresses this issue, ensuring veterans can compete fairly in the housing market.

Impact on Real Estate Agents

This policy adjustment is a significant step toward providing veterans with equal opportunities in real estate transactions. By allowing direct payment of commissions, veterans can benefit from professional representation without facing previous restrictions.

Benefits for Veteran Homebuyers:

Professional Representation: Veteran homebuyers can now pay for real estate agent services directly, ensuring they have expert guidance throughout the buying process and access to all available homes for sale.
Competitive Edge: This change allows veterans to compete on equal footing with other buyers.
No Loan Impact: Commissions and fees paid to agents are not financed into the loan amount, keeping the loan terms favorable.

Conclusion

Staying informed about these changes ensures you can effectively assist your veteran clients. For more details, refer to the VA’s circular and keep an eye out for further updates.

Further Reading

For detailed information, visit the NAR Settlement FAQs, HousingWire, and the official circular published on VA’s website (VA Circular 26-24-14).

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