The United States Department of Veterans Affairs will soon release a circular that “bridges the gap” on an agency law that prohibits a VA buyer from paying their real estate agent compensation, a VA official announced on Tuesday.
Michelle Corridon, deputy policy director at the VA, announced at the Mortgage Bankers Association‘s Secondary & Capital Markets Conference in New York that the circular would be issued between now and June 12. The circular would be issued while the agency engaged in a formal rulemaking process.
VA policy states that while a veteran is allowed to use a buyer broker to purchase a home using their VA loan benefit, they “may not under any circumstances, be charged a brokerage fee or commission in connection with the services of such individuals.”
This policy will be a problem for veterans looking to use their VA loan benefit under the terms of the National Association of Realtors’ (NAR) commission lawsuit settlement agreement.
Under the terms of NAR’s settlement agreement, listing brokers will not be allowed to make blanket offers of cooperative compensation to buyer’s agent on the MLS, and buyers will be required to sign a buyer representation agreement outlining how much they will pay their agent for their services.
Despite these changes, the practice of cooperative compensation may still continue, but industry trade groups have voiced concerns that some sellers will choose not to offer any compensation, which will negatively impact many homebuyers and veterans in particular.
In a letter to the VA, the MBA stressed that veteran borrowers will be disadvantaged if they lack the ability to compensate real estate agents.
“While the market’s response to the settlement remains uncertain, one thing is clear: Veteran borrowers will be significantly affected by this ruling,” the letter stated.
In a statement issued on Tuesday, the MBA said that it welcomes this move from the VA.
“As we have stressed previously, failure to act would put VA buyers at a significant disadvantage – especially in today’s tight inventory market,” the statement read.
NAR has also advocated for the VA to change its rule around buyer broker compensation.
“NAR launched an all-hands advocacy effort on this issue, meeting with VA officials, engaging with lawmakers and rallying our industry partners to ensure this prohibition was lifted,” Shannon McGahn, the chief advocacy officer at NAR, said in a statement. “This is also a testament to the thousands of REALTORS® who came to Washington just a few weeks ago with a unified message. Without this change, thousands of veteran buyers could be denied access to professional representation in their pursuit of the American Dream of homeownership. Taking this extra step ensures veterans have the same opportunity as others to compete in a tight housing market. We applaud the VA for recognizing this danger and acting swiftly to protect veterans.”
