NAR Settlement Poses Challenge For VA Buyers

Huge changes to Realtors’ commission structures may disadvantage VA buyers, at least in the short term.

A $418 million settlement announced by the National Association of Realtors last week is set to have sweeping implications for the housing industry in general. If approved by a federal judge, it would undo NAR’s commission structure, which is typically between 5.5% and 6% and split between buyer’s and seller’s agents.

Under the terms of the settlement, moving forward sellers will be expected to negotiate with real estate professionals, and buyers will have to enter into agreements with, and pay for, their own realtors.

For some buyers, this may translate into a cheaper overall experience, depending on what is negotiated for as part of the sale. But this poses a unique problem for veterans, as VA loans limit certain fees that a buyer may pay, including real estate commissions.

Realtor and veteran Jerome Hanson noted that not all sellers will negotiate to pay commission fees for buyers who are vets using VA loans.

“[A]fter July, a VA loan purchaser who runs across a seller that does not offer this compensation might be stuck between a rock and a hard place,” he wrote in a LinkedIn post.

Under the new setup, VA buyers would still be able to purchase a home, but the trick is to discover the simplest way to get their agents paid — if they choose to work with one.

Veterans may decide to only consider homes offering co-op commissions. This could potentially narrow their field of choices but let them avoid awkward discussions with homeowners about who’s paying what.

Buyer’s agents could also outline their fees in their offers, making it part of a seller’s decision about which offer to take.

Of course, veterans can also tackle the market without a real estate agent, though they could become overwhelmed by paperwork and negotiations.

“Many of those purchasers will probably think deeply about going at it unrepresented in order to sidestep the commission,” Hanson wrote.

So for the moment, vets using VA loans face obstacles in the aftermath of the NAR settlement. But nothing is fixed yet, and future rule changes could lift this burden on America’s veterans.

“The industry will be in transition as everyone digests the settlements and market forces begin working,” Marty Green, principal at mortgage law firm Polunsky Beitel Green, told NBC. “We will begin to see some creative buyer’s agent arrangements that may have been harder to get traction on before.”

“Not only does that do a great disservice to the men and women who have so bravely served our country, but it could also lead to potential fair housing violations,” Haley said.

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