New VA Circular 26-24-14: Veteran Home Buyers Paying Real Estate Commissions

Let’s discuss the new VA Circular 26-24-14, which addresses veteran home buyers paying a real estate commission on purchase transactions.

VA issued this circular on Tuesday morning, June 11th, to provide temporary guidance to the industry on buyer-broker charges. This circular introduces a local variance to address buyer-broker compensation in areas where MLS policies or practices affect commission splits.

Key Points of the Circular:

1. Local Variance Requirements:
   • The home the veteran is purchasing is in an area where the MLS prohibits the listing agent from advertising a compensation split, or the buyer-broker compensation cannot be paid through closing.
   • Buyer-broker charges are not included in the loan amount (more on this below).
   • Buyer-broker charges are included in the qualifying ratio or disclosure of liquid assets to pay the commission.
2. Commission Disclosure and Documentation:
   • The charges do not need to be invoiced for closing but must be listed in lines 1 through 3 of section H on the Closing Disclosure.
   • A copy of the buyer-broker agreement must be included in, and uploaded with the appraisal order.
   • The lender must maintain this agreement as part of the sales contract in the loan file.

Given the NAR’s proposed settlement agreement, property listings cannot include a proposed broker split in the listing, effectively allowing the use of the “local variance” nationwide.

Additional Considerations:

1. Negotiation Encouragement:
   • VA still encourages veterans to negotiate the buyer-broker fee, regardless of who pays it.
2. Seller Payment Option:
   • This announcement does not prohibit the seller from paying the buyer-broker charges, as has been standard practice for decades.
3. Seller Payment Treatment:
   • VA will not treat the seller’s payment of the buyer-broker agreement as a seller concession.

Effective Date and Duration:

• This variance is effective for loans closed on or after August 10, 2024, and will remain in effect until formally rescinded.

Additional Clarification:

• Loan Amount Restrictions: Real estate charges cannot be included in the loan amount if the buyer is paying their own fee. If the seller is paying the full fee, the fee isn’t noted on the Closing Disclosure (CD), consistent with past practices.

We will provide more detailed recommendations regarding the buyer/broker agreement in my next segment. Stay tuned for further updates and guidance.