Could the NAR settlement be a blessing in disguise for VA buyers?

About five months have passed since the VA announced this workaround. It remains to be seen how long the policy will remain in effect or if the VA will consider other alternatives.

In an emailed statement, a VA spokesperson wrote that the agency is “actively monitoring” the effects of the settlement.

“While temporary guidelines are in place that allow veterans to pay certain real estate agent fees, VA is considering making these changes permanent through a rulemaking process,” the spokesperson wrote. “This approach ensures that veterans remain competitive in the housing market without being disadvantaged by the settlement. The timeline for permanent changes will depend on the results of ongoing reviews and stakeholder feedback.”

Amanda Tucker, chief risk and compliance officer at Mortgage Atlantic Baysaid many in the industry are finding the uncertainty of the situation a bit unsettling.

“We continue to hear questions from brokers and veterans about what ‘temporary’ means and how long it will be in effect,” Tucker said. “If this remains temporary and is reversed at some point – and I don’t think there is any indication that this is happening – what would be the effect? We are all in this environment where we are familiar with what this looks like, so what will happen if that changes?”

While the future remains murky, she said the current situation for VA buyers is in many ways better than it was before the commission lawsuits and the NAR settlement.

“Given the guidance that the VA has issued, we’ve really seen VA product and program transactions run really smoothly,” Tucker said. “Those are not the loan transactions that we are still seeing some confusion about. As a lender, it’s incredibly helpful to have the ability to refer back to those clear guidelines when working with brokers, in terms of documentation required for a transaction.

In addition to resolving issues that would have arisen for VA buyers as a result of the terms of the NAR settlement, Tucker said the VA’s temporary guidelines also improved the situation for VA buyers in states where buyer agency agreements were required prior to NAR business practice. changes.

“There have been times in the past where a veteran signed a buyer agency agreement because it was required in their state, and by the time they get to us, the lender, the veteran has already committed at some level to to compensate their buyer’s agent, so that put us in a space where we either have to work to get the document voided, or it would automatically prevent the veteran from using a VA product,” Tucker said.

“So this guidance has somewhat leveled the playing field for veterans, who now have the opportunity to work with a professional, who they can compensate themselves if they wish. Furthermore, it does not prevent them from considering a home where the seller is unwilling to pay part of the buyer’s compensation.”

Tucker also believes that the discourse surrounding VA loans earlier this year has given the loan product more visibility. This has helped to reduce some of the confusion and lack of understanding about the product.

“I think you’ve really seen Realtors take a deeper dive into VA products and programs,” Tucker said.

Todd Armstrong, a veteran living in San Diego Compass broker who manages the brokerage military divisionshares a similar view.

“There’s definitely a better understanding now,” Armstrong said. “Part of that is also that there is a limited pool of buyers right now, and sellers and their agents have to consider every offer they get, so it is their obligation to educate themselves on the VA process.”

Armstrong said the San Diego market has cooled significantly since the height of the pandemic-induced home-buying frenzy.

“It’s shifted to a buyer’s market or very close to it, but it’s definitely more balanced than it was before,” Armstrong said.

Because of this, Armstrong said most sellers either openly offer to cover buyer agent compensation or are willing to accept offers that ask for buyer agent compensation – as long as they are able to offset the desired sales proceeds.

While the situation is good for now and VA buyers can take advantage of the no down payment benefit of the VA loan, Armstrong is concerned about what could happen in the future as the market warms up again.

“We already have enough trouble getting our offers accepted because we have to compete with cash and conventional mortgages, so I think it will be even more difficult if we negotiate to get the commission covered and others don’t,” Armstrong said. “So even though it may only be a 2% demand, in my opinion it could very well exclude them from other offers.”

With agents reporting that a seller’s willingness to offer (or consider) buyer agent compensation is currently determined by the strength of the market, time will tell how VA buyers fare under warmer market conditions.