VA issues temporary fix to allow buyer-paid broker fees

The U.S. Department of Veterans Affairs (VA) on Tuesday issued a temporary fix that will allow homebuyers using VA loans to pay for their real estate agent’s commission — i.e., the buyer-broker fee.

The change, a result of the National Association of Realtors’ (NAR) commission lawsuit settlement agreement, was anticipated late last month and commented on by Michelle Corridon, the deputy policy director at the VA. She said that a circular would be issued while the agency is engaging in a formal rulemaking process.

“Before that settlement takes effect, VA has announced an update to help ensure that Veterans using the VA-guaranteed home loan benefit remain competitive buyers,” Valery P. Behr, program analyst at the department’s Loan Guaranty Service and Veterans Benefits Administration, said in a statement.

“Specifically, eligible Veterans, active duty service members, and surviving spouses who use their VA home loan benefits can pay for certain real estate buyer-broker fees when purchasing a home.”

The circular is effective Aug. 10, 2024, and is valid until rescinded. The VA said it will develop a more permanent policy “as the real estate brokerage market restabilizes and new practices take hold.”

Before the change, the VA policy stated that a veteran “may not, under any circumstances, be charged a brokerage fee or commission in connection with the services of such individuals.”

The limitation would have been problematic since, according to the NAR settlement agreement, listing brokers will not be allowed to make blanket offers of cooperative compensation to a buyer’s agent on an MLS platform. Buyers will also be required to sign a representation agreement outlining the amount they will pay their agent for their services.

According to the VA’s temporary fix, payment to buyer brokers on VA loans will be subject to certain safeguards, such as the requirement that all buyer-broker fees charged to veterans “must be reasonable and customary within local markets.”

The VA also clarified that veterans can still ask sellers to cover these fees. 

“The full impact of the settlement is not yet certain because the real estate market is still adjusting, but there may be an increased expectation that home buyers will pay for their own buyer-broker fees,” Behr said in the statement. “In VA’s program, it has been common practice for sellers to pay for the Veteran’s buyer-broker fees.”  

“Veterans using VA home loan benefits can now pay reasonable and customary amounts for certain charges — including commissions and other broker-related fees — thus ensuring that they remain competitive in the rapidly changing housing market,” Josh Jacobs, the VA’s under secretary for benefits, said in a statement.

Trade groups, which previously voiced concerns that VA borrowers would be disadvantaged amid the NAR settlement, welcomed the changes. 

The Mortgage Bankers Association (MBA) said that for months, it “has pushed the VA to address this prohibition, and it is pleased there is now a temporary measure to address it.”

“We now urge the VA to permanently amend its regulations to allow Veteran borrowers to pay reasonable and customary fees and commissions to retain agents that will represent their interests in the transaction.”

NAR President Kevin Sears said in a statement that the “VA’s home loan guaranty is the only program that explicitly bans buyers from directly paying for professional real estate representation.”

“We applaud the VA for revising this policy and allowing veterans and active-duty service members the same advantages as other buyers in a competitive real estate market,” Sears said.