Veterans on the Central Coast and across the country may soon face an unexpected hurdle on their path to homeownership. A recent shift in the real estate landscape, effective August 10th, now allows veterans, active-duty service members, and eligible survivors to pay commission fees to their own real estate agents. This change, detailed in the Department of Veterans Affairs circular 26-24-14, is part of a broader shake-up in how brokers are compensated. But what does this mean for our military heroes?
For over 80 years, the VA Home Loan program has stood out among other home loan options, providing numerous benefits that protected buyers from bearing the burden of paying their real estate agents’ commissions. This protection was a cornerstone of the program, ensuring that veterans could access homeownership without facing additional financial stress. However, due to a recent class-action settlement involving the National Association of Realtors (NAR), this long-standing benefit is now under threat.
The lawsuit, filed by sellers in Illinois and Missouri, argued that NAR’s practice of requiring agents to list their compensation on the Multiple Listing Service (MLS) inflated commissions and limited buyers’ choices. The settlement, while denying any wrongdoing, requires changes that could fundamentally alter the home-buying experience for veterans. Starting August 17, 2024, agents working with buyers will need to enter into written agreements with their clients, specifying the commission percentage the buyer must pay if the seller’s agent doesn’t cover it. Majority Central Coast real estate companies have already implemented these agreements.
This shift could potentially discourage many of our military heroes from utilizing their VA Home Loan benefits. With the average VA Home Loan in California for 2024 hovering around $620,000, this new policy could add between $15,500 and $18,600 to the cost of buying a home—expenses that veterans weren’t responsible for in the past. Considering that only 17% of eligible veterans have taken advantage of the VA Home Loan program, this additional financial burden could drive that number even lower. The VA has made it clear that unlike the VA Funding Fee, the agent’s commission cannot be rolled into the loan, further complicating the situation.
Despite these challenges, it’s important to remember that veterans and their families should not be discouraged from pursuing homeownership. Veterans still hold significant negotiation power and can request that sellers cover closing costs, including these new commission fees. This change in the VA Home Loan program is currently temporary, with the VA pledging to monitor how it affects real estate transactions. However, there’s a strong possibility that this could become a permanent change in the future.
If you’re a veteran or part of a veteran family interested in learning more about the VA Home Loan program, we offer VA Home Loan classes tailored to both military heroes and real estate agents. Click the link below to get more information and stay informed.
Free – VA Home Loan Class for Veterans & Families – Zoom
About the Author:
Robert Tolan is an Army Combat Veteran, local VA Home Loan Specialist with Pacific Coast Mortgage Group, Founder of Welcome Home Military Heroes, and Vice Chairman with Honor Flight Central Coast. He is also a member of American Legion Post 66 out of San Luis Obispo and Disabled American Veterans Post 82 out of Santa Maria.