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Military Finances 201: How Will Changes to Real Estate Agent Fees Affect Veterans? Thumbnail

Military Finances 201: How Will Changes to Real Estate Agent Fees Affect Veterans?

Veterans Benefits Managing Your Finances

By Joseph Brown, PhD, CFP®

For those of you have been following the court cases, a class action lawsuit was recently settled, and the National Association of Realtors (NAR) agreed to change its current agent commission fee rules starting in July of 2024.  

Who pays the Real Estate Agent?

Historically, sellers paid all the agent fees, for both the seller and buyers, typically about 5-6% of the cost to purchase a home. The total amount was split equally among the two agents. As a buyer you would have no input into what the fees would be and typically were not aware that they could negotiated.

What is Changing?

In July of 2024, this will change. Not all the details are out yet, but one thing is clear – as a buyer you will now have to pay your own real estate agent. This is an important fact because as a buyer you will now have to come up with approximately 2-3% of the home cost (it is negotiable so be ready to shop around for the best value) as part of the cash you bring to closing. As of right now you cannot roll that cost into a mortgage. Although that rule may change. 

How Does this Affect the VA Loan?

Even worse for veterans who want to use the VA loan – the VA specifically has a rule that borrowers are not allowed to pay a commission to their real estate agent when buying a home. Because commissions used to be paid by the seller to both agents this historically has not been a problem. But with the new rules it is poised to be a huge issue. The rules on this are contained in VA Pamphlet 26-7 Chapter 8 Topic 3.c. A possible work around will be for the seller to grant a concession to pay the VA loan takers real estate agent but how that would play out in negotiations is yet to be seen.

The VA is currently working with the Department of Justice and real estate groups such as NAR to ensure that Veterans are not overcharged and are not forced into the home buying process unrepresented. As this continues to develop, we will be sure to keep you updated!

Military Finances are Different

The upcoming changes in real estate agent fees may seem daunting, especially for Active or Retired Senior Military Officers or NCOs who plan to use a VA loan. Unlike your civilian counterparts, you are not allowed to pay a commission to your real estate agent when buying a home. This rule, specific to VA loans, could make the home-buying process more challenging. That's why we believe you should work with a financial planner who deals with military-related benefits and special rules every day. If you'd like to find out how we can help you navigate these changes and make the most of your military benefits, use the button below to schedule a free initial consultation.

If you found this article useful, you might like the following blog posts:

Military Finances 301: The 10-Year Real Estate Suspension


Military Finances 301: The Potential Tax Tripwire When You Refinance Your Mortgage


If You Get the VA Funding Fee Refunded, Do You Pay Taxes on It?



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