VA Loan Policy Change: Empowering Veteran Buyers to Pay Real Estate Commissions

In a significant policy shift, the U.S. Department of Veterans Affairs (VA) has revised its regulations to allow VA loan recipients to pay real estate agent commissions, a change expected to greatly benefit military buyers in the real estate market. This move eliminates a long-standing hurdle that often put veterans at a disadvantage when purchasing homes. Veterans, active-duty service members, and surviving spouses who use their VA-guaranteed home loan benefit will be allowed to pay certain real estate buyer-broker fees when purchasing a home beginning Aug. 10, 2024.

Previously, VA loan rules prohibited veterans from paying real estate agent commissions out of pocket. This restriction was designed to protect veterans from incurring additional costs, resulting in sellers covering these expenses. In practice, this rule often complicated transactions and limited the bargaining power of VA loan buyers. Sellers, wary of absorbing these extra costs, sometimes preferred offers from buyers using conventional financing.

Under the new policy, VA loan buyers can now pay real estate agent commissions directly. This adjustment aligns VA loans more closely with conventional mortgage practices, giving veterans greater flexibility and competitive standing in the housing market. The change was driven by advocacy from real estate professionals and veteran support organizations who argued that the previous rule inadvertently disadvantaged military buyers and created unnecessary obstacles in real estate transactions.

This change is a direct result of the shifting landscape in real estate commission payments as a result of both private litigation and legal actions by the U.S. Department of Justice. These cases are impacting the historical pattern in residential real estate of sellers paying commissions which include compensation for the agent representing the buyer. By allowing veterans to cover their own agent’s commission, the VA aims to streamline the home-buying process in alignment with shifting practices and to remove potential barriers. This change acknowledges the evolving dynamics of real estate transactions and the need for VA loan policies to reflect these realities.

Looking ahead, this policy shift is expected to significantly benefit veterans and active-duty service members using VA loans. They will now have more negotiation power and flexibility when making offers on properties. Real estate agents will likely be more enthusiastic about working with VA loan buyers, knowing that they can contract with VA buyers for compensation just like any other potential homebuyer.

Overall, the ability for VA loan recipients to pay real estate commissions directly is a welcome change that should enhance the appeal and utility of VA loans in the housing market. This policy adjustment underscores the VA’s commitment to supporting veterans in achieving homeownership and adapting to the needs of modern real estate transactions. This change is likely the first of many which will impact lending practices as the real estate industry adapts to the changing commission payment landscape.