of U.S. Department of Veterans Affairs VA officials will soon issue a notice that will “close the gap” in agency law that prohibits VA buyers from paying commission to real estate agents, VA officials announced Tuesday.
Michelle Corydon, deputy policy director for the VA, Mortgage Bankers AssociationThe notice was announced at the Securities and Exchange Commission’s Secondary Capital Markets Conference in New York, and is expected to be issued between now and June 12. The notice will be issued while the agency conducts its formal rulemaking process.
VA policy states that while veterans are permitted to use a buyer’s broker when purchasing a home using their VA loan benefits, “under no circumstances will they be charged any brokerage fee or commission in connection with the services of such an individual.”
This policy creates problems for veterans seeking VA loan benefits if they: National Association of Realtors (NAR) Commission Litigation Settlement Agreement.
Under the terms of NAR’s settlement agreement, real estate brokers will not be allowed to offer lump sum collaborative compensation to buyer’s agents on the MLS, and buyers will be required to sign a buyer representation agreement that specifies how much they will pay an agent for their services.
Despite these changes, the practice of cooperative indemnification is likely to continue, but industry groups have expressed concern that some sellers will choose not to offer indemnification at all, which will have a particularly negative impact on many homebuyers and veterans.
In its letter to the VA, the MBA stressed that veteran borrowers would be at a disadvantage if they did not have the ability to compensate real estate agents.
“While the market reaction to the settlement remains unclear, one thing is clear: veteran borrowers will be disproportionately affected by this ruling,” the letter said.
In a statement released Tuesday, the MBA said it welcomes the VA’s move.
“As we have emphasized previously, failure to act will put VA buyers at a significant disadvantage, especially in today’s inventory-short market,” the statement said.
NAR is also advocating that the VA change its rules regarding buyer broker compensation.
“NAR launched an all-hands-on-deck advocacy effort on this issue, meeting with VA officials, negotiating with lawmakers and rallying our industry partners to get this ban lifted,” Shannon McGahn, NAR’s chief advocacy officer, said in a statement. “It’s also a testament to the thousands of REALTORS® who came to Washington in the past few weeks with a unified message. Without this change, thousands of veteran buyers could be denied access to expert representation in their pursuit of the American dream of homeownership. This additional step will give veterans an equal opportunity to compete with others in a tough housing market. We applaud the VA for recognizing this danger and acting quickly to protect veterans.”
