Can Buyer Agent Commissions Be Charged on a VA Loan? (Real Estate Commission Lawsuit Update)

Can buyer agent commissions be charged on a VA loan? My name is Evan Kaufman, your VA loan originator, here to help explain.

Now, with the recent lawsuits that the National Association of Realtors and some other major brokerages have had, they’ve tried to break up how agents are paid.

Now, no matter where that is all ending – and we’ll see where it all goes – there’s one major concern that we have for VA loans and VA buyers. And that’s the fact that the VA guidebook specifically states that buyers cannot be charged agent commissions.

So, think of it this way – in the past here, if you’re a real estate agent and you’re wondering, well, how has that been?

Well, think of it. If you’ve ever tried to apply a transaction fee charge of some sort, you’ve probably noticed that get knocked down by a lender because it is a non-allowable charge via the VA.

The VA has something that’s called a 1 percent fee rule on us as lenders. We can’t charge more than a total combined 1 percent in fees on a VA loan, unique to the VA loan.

And in a similar way, they have in their guidebook that the buyer cannot be charged agent commissions on a VA loan.

Now, I, first thing this morning, made the phone call to the regional VA office to ask just directly, hey, if this now is really going to affect it – because recently a settlement was reached between the National Association of Realtors and all the plaintiffs that happen to be suing them for an issue in a case, and now it looks like that there might be some changes to the verbiage of how buyer agents are paid.

And we’ll see where that all goes. But the basics of it are, there’s a possibility that buyers are going to have to start paying for their buyer agent commission and/or at least have the language changed to where it goes on their side of the documents at closing.

And that could impact VA loans.

So, calling the VA regional loan center, it was immediately just asking, what are the things that we might be seeing for changes on this?

Because if for some reason, let’s say that historically it has been that the seller is paying a certain commission amount – I like to say maybe like they put up the pot of commissions for the buyer’s agent and the seller agent – and it’s paid out of the seller proceeds.

Well, now all of a sudden, we’re going to say, “hey, part of that pot is paid by the seller. Part of that pot is paid by the buyers.”

That changes just the verbiage to where all of a sudden, the VA goes, oh no, that buyer pot is all of a sudden, a buyer agent commission.

And we’ve specifically said – that that can’t be charged.

Now, in the past, I believe that was there – as I’ve said in past videos – that was there to protect veterans because, the norm has been that it’s paid out of the seller’s side, so they didn’t want to see overcharges on veterans.

Well, now all of a sudden, if there’s a breakup and a change in that language, now the VA has got to potentially change that language.

So, make the phone call.

Regional Loan Center rep was fantastic.

By the way, if you ever got to call your VA Regional Loan Center, the past couple years, since we literally poured billions into the system, the past couple of years, the service has just become a lot better, and if you have bad service, just call right back.

You’re usually going to get someone that’s good. My history, and I call them every week, has been that it’s just gotten better and better.

Point is, the rep was very kind, very nice, but I can immediately tell when I brought up and said, hey, buyer agent commissions.

I know I asked this a few months back when all this started boiling up. Back then they didn’t really know what was going on.

Now they definitely knew. And it sounded like they had already had a few phone calls about it this morning. Immediate response was, “hey, we got till August when we see how all this is sorted, and our policy team is working on it.” So, we talked for a few good minutes.

It’s not like they could say a whole lot because I’m sure they don’t even fully know.

But they did say that the VA is very well aware of it and working to try to make sure that veterans can still have representation.

Now, what exactly does that look like?

Not quite sure.

The one thing that we did discuss – I had to ask the question – is that an actual act of Congress?

Because it’s with the VA loan.

And a lot of those big VA changes are a true act of Congress.

And they said, well, it actually might be.

So, it may mean that we need to see a quick move by Congress to help make this change.

But they’re exploring what their options are, like, hey, that they have control on making their own administrative changes versus having someone else within the federal government make sure that they rule on it.

The deal is they’re aware of it. And I got the comforting feeling that they’re on it to try to help make sure veterans still have representation.

So ideally what that looks like here in the near future is that they help clear up that ultimately on the VA, buyers can pay for their own agent commissions.

If they choose – the key is not forced to, right?

But again, that will allow them to continue to be represented if all of these new changes from the association of realtors come down and ends up being that buyers have to pay for that.

Because the VA loan is the one loan type that has that unique nuance where they are blatantly stating that the buyers cannot pay for real estate agent commissions.

And while I totally know it’s there to protect them from original or older system when sellers were paying for all commissions for the most part, that now that might need to change to make sure that buyers can still have representation.

Because the last thing we want are all of a sudden VA buyers left out in the cold and real estate agents saying, “oh my goodness, this VA loan type is terrible because no one can get paid as the real estate agent and the veterans left to defend for themselves.”

And that’s a very, very dangerous situation to be in.

So, I hope that the VA acts on this quickly to help make sure that veterans are taken care of well and protected still in what they have to pay for versus what they do not have to pay for, which it will be a little unique for them to sort that one out.

Because, think of it this way, the last thing you want, ultimately, are veterans paying a buyer agent commission – but then the seller also paying an agent commission, and all of a sudden people try to take abuse of the whole system, and it ends up getting charged up a whole lot.

That’s a scenario that I talked through with someone.

However, that scenario, if it were true, would be already happening on other loans and other loan types because they do not prevent buyers from paying for agent commissions, so I don’t think that’s likely.

But the reality is, we might need some changes in the verbiage from the VA to make sure that buyers can continue to have buyer agent rep. And I think that’s coming. And I know I can tell you, if you’re curious about it, they’re paying attention to it.

So, any questions on it, please feel free to ask.

We’re going to keep this updated and follow it very closely, because we want to make sure that vets still have their representation when they’re trying to go buy homes.

My name is Evan Kaufman, your VA loan originator. Hope this helps you go out there and win a home with a VA loan. Take care.