Spring House Hunt
Under current rules for VA loans, they cannot pay anything toward realtor fees.
As the market scrambles to prepare for changes in the way most residential real estate is bought and sold, people who served in the military, earning the right to a low-cost Veterans’ Affairs loan, may have to forgo the protection of a real estate agent’s representation.
The main complaint of the class-action lawsuit against the National Association of Realtors, several large brokerages, and many Multiple Listing Service operations was simple: Home sellers don’t want to pay the buyer’s agent commission. The settlement makes it much easier for them to opt out.
VA loans come with two important advantages: Their interest rates are typically about a half of a percentage point lower than the typical 30-year, fixed-rate mortgage. Even better, they allow for no money down on these loans.
But they also prohibit buyers from paying their agents or rolling agent fees into the loan.
From the VA Lenders Handbook: “Fees or commissions charged by a real estate agent or broker in connection with a VA loan may not be charged to or paid by the veteran-purchaser.”
And buyer’s agents probably don’t want to work for free. So if sellers refuse to pay a buyer’s agent commission on a VA loan, they are effectively prohibiting veterans from buying their property.
“I don’t know where all the consumer advocates and veteran advocates are,” said Paul J. Cervone, a Lamacchia Realty agent who specializes in working with veterans. “But they should be screaming from the rooftops, because this is going to absolutely disadvantage VA buyers in the future.”
Cervone said it’s important to recognize that the settlement is still fairly new and isn’t expected to be approved and take effect before July. The parties reached settlement agreements twice before only to have the Department of Justice oppose them.
In March, Kevin Sears, a Massachusetts real estate agent and NAR president, sent a letter to the VA urging them to update their rules: “VA buyers are immediately at a disadvantage, potentially forcing them to forgo professional representation, lose a property in an already limited inventory [situation], choose a different loan product, or exit the market entirely.”
Shant Banosian, a branch manager and loan officer at Guaranteed Rate, said the VA should change its rules because veterans already are at a disadvantage in a competitive real estate market.
“The VA program allows for a zero down payment or a small down payment without the borrower even having to pay PMI [private mortgage insurance], and they have the best rates in the market in my opinion,” he said. “It’s a great loan product, but, unfortunately, most sellers perceive offers with bigger down payments as being stronger. These rule changes are only going to make it harder for veterans to buy homes. And this is a really important group of people. These are people that have gone above and beyond for our country.”
“I don’t know where all the consumer advocates and veteran advocates are, but they should be screaming from the rooftops, because this is going to absolutely disadvantage VA buyers in the future.”
Paul J. Cervone, Lamacchia Realty
According to the Massachusetts attorney general’s website: “State and federal laws prohibit discrimination in the sale and rental of housing by property owners, landlords, property managers, mortgage lenders, and real estate agents. These fair housing laws make it unlawful to discriminate based on: race, color, national origin, gender, gender identity, sexual orientation, disability, ancestry, genetic information, marital status, veteran or active military status, age, familial status (i.e., children), and source of income (i.e., Section 8 voucher).”
Both the secretary of the Massachusetts Department of Veterans Services and the attorney general’s office declined to comment on the proposed settlement.
Cervone said that when he presents a no-money-down veteran’s offer to a homeowner, he tries to emphasize that the things sellers truly care about most are the terms of the deal and the net proceeds of the sale. He said it’s a mistake to discount an offer because of the size of the down payment.
“A VA loan, just like an FHA loan, is what is needed for a lot of first-time home buyers because they’re just starting out and don’t have deep pockets,” Cervone said. “They don’t have an extra $10,000 or more for a down payment. They can’t wrap my fee into the loan. They can’t take a closing-cost contribution from a seller and use that to pay a buyer’s agent. So ultimately, they’re totally disadvantaged. These federal programs are there to help people who need and deserve it, and who is more deserving than somebody who has served in the military?”
Jim Morrison can be reached at [email protected]. Follow him on X @jimmorrison617.
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