Understanding Buyer-Broker Fees and the New VA Loan Update

As of August 10, 2024, a significant update has been made to VA-guaranteed loans, offering eligible Veterans, active-duty service members, and surviving spouses increased flexibility when purchasing a home. The change allows these individuals to pay for certain real estate buyer-broker fees, an adjustment designed to promote better access to homeownership.

This policy shift is expected to benefit countless individuals who rely on VA loans to achieve their dream of homeownership. Here’s what you need to know about buyer-broker fees and the impact of this recent change.

What Are Buyer-Broker Fees?

Buyer-broker fees are compensation paid to a real estate agent or broker who represents a buyer in a transaction. These fees typically cover services such as:

• Conducting market research and helping identify potential homes.

• Negotiating offers and purchase agreements.

• Managing the complexities of closing.

Traditionally, buyer-broker fees have often been covered by the seller in a real estate transaction. However, this has sometimes created challenges, particularly in competitive markets or situations where sellers are unwilling to cover these costs.

What Has Changed for VA Loan Borrowers?

Under the previous VA loan rules, buyers using a VA-guaranteed loan were prohibited from paying real estate broker fees. These restrictions were meant to minimize upfront costs for Veterans but inadvertently limited their ability to compete in some markets or structure deals flexibly.

The updated policy now allows eligible VA borrowers to pay for certain buyer-broker fees out of pocket. This gives buyers more autonomy and enables them to work with brokers who might not otherwise be compensated by the seller.

Why Was This Change Made?

The Department of Veterans Affairs implemented this adjustment to ensure its home loan program continues to support Veterans and other eligible individuals in accessing homeownership opportunities. By removing restrictions on buyer-broker fees, the VA is helping borrowers:

• Better compete in competitive housing markets.

• Expand their choice of homes by broadening financing options.

• Build equitable relationships with real estate professionals.

This change aligns with the VA’s mission to provide Veterans with the resources they need to secure and sustain homeownership.

How This Affects VA Homebuyers

For VA loan borrowers, the ability to pay buyer-broker fees could mean:

• Greater Negotiation Power: Buyers can now negotiate terms that allow them to work with their preferred real estate agents.

• Improved Market Access: In a competitive market, covering broker fees can make offers more attractive to sellers who no longer need to bear this cost.

• Flexibility in Agent Selection: Borrowers can now work with brokers who may not accept seller-paid compensation.

What to Keep in Mind

While the ability to pay buyer-broker fees is a step forward, it’s important for VA borrowers to carefully budget for these potential costs. Homebuyers should consult with their loan officers and real estate agents to fully understand how this change may impact their financial plans.

Additionally, this update only applies to certain real estate buyer-broker fees. Buyers should clarify which fees are eligible under the updated VA loan guidelines to avoid surprises during the transaction process.

Conclusion

This recent update to VA-guaranteed loans reflects the Department of Veterans Affairs’ commitment to improving homeownership access for those who have served the nation. By allowing eligible buyers to pay buyer-broker fees, the VA is empowering its borrowers with greater flexibility and market competitiveness.

If you’re an eligible Veteran, active-duty service member, or surviving spouse considering a home purchase, now is an excellent time to explore your options with a VA loan. Reach out to a VA-approved lender or a knowledgeable real estate professional to understand how these changes can work in your favor.

For more information, visit the Department of Veterans Affairs website or consult with a real estate expert familiar with VA loan policies.