facebook twitter instagram linkedin google youtube vimeo tumblr yelp rss email podcast phone blog external search brokercheck brokercheck Play Pause
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?

Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by C.L. Sheldon & Company, LLC ), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. C.L. Sheldon & Company, LLC does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to C.L. Sheldon & Company, LLC website or incorporated herein, and C.L. Sheldon & Company, LLC takes no responsibility therefore. All such information is provided solely for convenience, educational, and informational purposes only and all users thereof should be guided accordingly. Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from C.L. Sheldon & Company, LLC . To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. C.L. Sheldon & Company, LLC is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of the C.L. Sheldon & Company, LLC ’s current written disclosure statement discussing our advisory services and fees is available for review upon request. DISCLAIMER OF TAX ADVICE: Any discussion contained herein cannot be considered to be tax advice. Actual tax advice would require a detailed and careful analysis of the facts and applicable law, which we expect would be time consuming and costly. We have not made and have not been asked to make that type of analysis in connection with any advice given in this blog post. As a result, we are required to advise you that any Federal tax advice rendered in this blog is not intended or written to be used and cannot be used for the purpose of avoiding penalties that may be imposed by the IRS. In the event you would like us to perform the type of analysis that is necessary for us to provide an opinion, that does not require the above disclaimer, as always, please feel free to contact us.