New VA Rules and NAR Settlement: What Military Home Buyers Need to Know
As an experienced Realtor and Air Force Veteran, I understand the unique challenges veterans face in the home-buying process. Recent developments in the real estate industry, including a significant settlement involving the National Association of Realtors (NAR) and changes implemented by the Department of Veterans Affairs (VA), will impact how homes are bought and sold. Here’s what you need to know.
NAR Settlement and Its Implications
In March 2024, the NAR announced a $418 million settlement to resolve over a dozen antitrust lawsuits alleging that the association’s rules inflated real estate commissions. While NAR admitted no wrongdoing, this settlement represents a major shift in real estate transactions. By mid-August 2024, home sellers will pay smaller commissions, retaining more of their sales proceeds. Buyers, not sellers, will determine how much their agents are paid.
This change stems from a federal class-action antitrust lawsuit, Burnett v. National Association of Realtors et al., where a jury sided with plaintiffs, asserting that NAR and large brokerages conspired to inflate commissions. With the cooperative compensation rule eliminated, sellers will no longer set commissions for buyer's agents in MLS listings. Buyers will now negotiate directly with their agents regarding payment method.
Impact on Real Estate Negotiations
The new rules will undoubtedly complicate negotiations, especially for buyers with limited cash reserves. Buyers and their agents may need to negotiate for sellers to cover the agent fees, integrating these costs into the mortgage.
Wisconsin’s Proactive Approach
As a Realtor, and like many others from the Madison area and the State of Wisconsin, we have always allowed commissions to be negotiated just like anything else. We have also required customer disclosure forms or buyer agency agreements with every transaction. Our state-approved buyer agency agreement includes a mandatory section for commission details. Over 22 states did not require buyers to have any representation or disclosure stating they knew their rights when purchasing a home.
In our opinion, home sellers will still opt to pay buyers' agent commissions. Sellers who do not could find themselves at a competitive disadvantage.
VA’s Temporary Local Variance for Buyer-Broker Charges
In response to the shifting market, the VA has introduced a temporary local variance allowing veterans to pay for certain buyer-broker charges. Historically, VA regulations prevented veterans from covering real estate brokerage fees. However, the Under Secretary for Benefits has authorized this variance to ensure veterans remain competitive buyers.
Here are the key points of the VA’s temporary variance:
- Eligibility: The home must be in an area where listing brokers are prohibited from setting buyer-broker compensation or where such compensation cannot flow through the listing broker.
- Payment Restrictions: Buyer-broker charges cannot be included in the loan amount. Veterans must have sufficient liquid assets to cover these costs.
- Documentation: While an invoice is not required, the total amount paid must be recorded on the Closing Disclosure, and the buyer-broker representation agreement must be included in the loan file.
Encouraging Negotiation
The VA encourages veterans to negotiate the amount paid to their buyer-broker. This temporary variance does not prevent sellers from covering these charges, and such payments are not considered seller concessions.
Effective Date and Further Information
The VA circular is effective starting August 10, 2024, and will go until recinded by the Department of Veteran Affairs.
Conclusion
These changes are designed to foster a more competitive and transparent real estate market. As a veteran and Realtor, I recommend staying informed and shooting us a call, text, or e-mail with any with any questions you have. Just as we previously have done, we will continue to give rebates to veterans when they buy and sell, and our local network of providers that give discounts to veterans continues to get stronger and stronger. Whether you’re buying or selling, understanding these shifts will help you make better decisions and achieve your real estate goals.
John Reuter
Broker/Owner
Integrity Homes
608-669-4226
Real Broker, LLC
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