Because of its large military and veteran population, Hampton Roads’ real estate market has relied on homebuyers who use Veterans Affairs-backed mortgages.
“We’re a big military town and it’s such a wonderful benefit for our veterans — one they truly deserve for doing what they’ve done for our country,” said Kim Georges, president of Hampton Roads Realtors Association.
The VA loans offer a typical zero down payment, low interest rates and minimal closing costs, but they also have strict regulations, including a ban on paying the buyer agent’s commission.
“Up until now, it wasn’t a problem. Sellers would pay the buyer’s broker’s commission,” Georges explained.
But a National Association of Realtors lawsuit settlement that goes into effect Aug. 17 changes the longstanding practice of sellers’ agents covering buyers’ agents’ fees by splitting their commissions, which typically have been 5-6% of the sale price. While selling agents would still be able to offer a cut of their fees, the coming changes will not allow that to be advertised on multiple listing service databases with the idea of promoting negotiation and ensuring buyers wouldn’t be steered to homes based on offers of higher commissions for agents. A final court approval hearing for the settlement is scheduled in November.
The National Association of Realtors, concerned about veteran borrowers potentially forgoing representation in the homebuying process to use VA loans, penned a letter in March to the Department of Veteran Affairs, encouraging it to change its policy on not allowing borrowers to pay for their agents.
Veterans Affairs released a circular on June 11 temporarily allowing veterans using VA home loan benefits to pay for their real estate agent’s commission or fees starting on Aug. 10. The department emphasized sellers can still pay for the veteran’s broker fees and encouraged veterans to negotiate the amount, whether they or the sellers pay for the fees. The charges can’t be included in the loan amount.
“We are fully committed to ensuring that veterans are neither disadvantaged nor overcharged in the home-buying process,” Veterans Affairs press secretary Terrence Hayes said in an email.
The VA will solicit public feedback on a more long-term solution via rulemaking, Hayes said.
With the new system, a buyer can still ask the seller to pay their agent’s commission. And now if the seller doesn’t, veterans or service members using VA loans can still be represented in the buying process without reducing their home choices.
Sandra J. Pennecke, 757-652-5836, sandra.pennecke@pilotonline.com
