How the NAR Commission Settlement effects VA Buyers

Temporary VA Guidance on Real Estate Agent Commissions for Veterans

The VA has issued temporary guidance that now permits Veterans to pay real estate agent commissions when purchasing a home. This update is designed to prevent VA buyers from being disadvantaged in the marketplace, especially as a significant court settlement is set to take effect later this summer.

Under this temporary policy, VA buyers can cover their buyer's agent commission—a cost previously not allowed for Veterans. However, the fee must be reasonable and customary based on the local housing market.

Veterans can also request that sellers pay this commission at closing. Importantly, when a seller covers this fee, it doesn't count against the VA's 4% cap on seller concessions.

This update takes effect on August 10, just a week before the National Association of Realtors' proposed settlement is expected to become effective. The VA's Loan Guaranty Program is planning to introduce permanent guidelines regarding buyer-broker commissions in the coming months.

Impact of NAR Settlement on VA Homebuyers

A recent settlement proposed by the National Association of Realtors (NAR) is set to change the way homebuying works across the country. However, without corresponding updates to the VA home loan program, this shift could place Veterans and military members at a disadvantage.

The proposed settlement would encourage more negotiation between buyers and sellers over real estate commissions. By removing mandatory commission fees from multiple listing services (MLS), the settlement aims to create a more competitive and transparent market.

Challenges for Veterans

One major challenge for Veterans and service members is that the VA home loan program currently prohibits buyers from paying real estate agent commissions.

According to the VA guidelines:

“Fees or commissions charged by a real estate agent or broker in connection with a VA loan may not be charged to or paid by the veteran-purchaser. While use of ‘buyer’ brokers is not precluded, veteran-purchasers may not, under any circumstances, be charged a brokerage fee or commission in connection with the services of such individuals.”

This policy, intended to shield Veterans from extra financial burdens, could inadvertently disadvantage them in the housing market.

The proposed NAR settlement may reduce the willingness of real estate agents to work with VA buyers, potentially limiting housing options for Veterans, particularly in competitive markets. Agents may be more inclined to work with non-VA clients who can cover their commission fees.

Additionally, the upfront cost of paying a buyer’s agent could make homeownership less accessible for some Veterans.

Potential Solutions and Considerations

As the real estate industry prepares for these changes, there is a growing call for solutions that protect Veterans and other vulnerable buyers. This may include legislative or policy adjustments to ensure that VA loan benefits continue to support Veteran homebuyers effectively.

One potential solution is to allow real estate commissions as an allowable fee for VA buyers, providing them with the same flexibility as non-VA buyers.

VA officials have indicated that a temporary fix will be implemented soon, with a formal policy change expected to follow.

The proposed NAR settlement is still awaiting court approval, with potential changes to MLS listings anticipated by mid-August.