The U.S. Department of Veterans Affairs announced plans to publish a circular that would address the buyer commission prohibition on VA loans.
The circular, which is planned to be issued by June 12, would address the changes to broker commissions enacted by the National Association of Realtors and leading brokerages in the wake of the Sitzer/Burnett settlement. Commissions are prohibited on VA loan originations, which could make these products less attractive when the changes in the broker commission structure goes into effect.
Michelle Corridon, the VA’s deputy director for policy, announced the department’s plans during the Mortgage Bankers Association’s Secondary and Capital Markets Conference in New York City. Corridon stressed the circular was designed to “bridge the gap” between current policy and the establishment of a new policy regarding commissions.
“That’s the heart of the circular, and then we will start rulemaking, and that’ll be the full set of rulemaking, proposal, comment period,” she said.
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How will you handle buyer agent commissions on (VRM) REO property
Now that homes will appraise for less over the next year, vA buyers should be cautious entering into agreements that might not go thru. Sellers will be reluctant to sell to vets because of everything hinging on appraisals that always come in near the end of a transaction. Vets will be discriminated upon again!
Hi Mike – What does the VA Escape Clause do?
In the event the reasonable value established by VA is less than the contracted purchase price, the VA Escape Clause provides a mechanism for the Veteran buyer to:
negotiate with the seller to reduce the purchase price, or
proceed with the transaction at the contracted price by making a down payment in the amount of the difference, or
exit the transaction without forfeiture of earnest money deposits.
If the Veteran chooses to exit the transaction because the sales price exceeds the reasonable value as established by VA, all earnest money deposits must be returned to the Veteran
So the Veteran is still in control like conventional, FHA, and USDA if they want to proceed and pay down loan not to exceed the appraised value.
Source: https://www.benefits.va.gov/homeloans/escape-clause.asp
The appraisal is done at the beginning of the Loan Application and given to the applicant within a few days after the bank receives it. A lending institution cannot discriminate against a Veteran or anyone because of their race, gender, religion, marital status.
Anyone can have a contingency in the Agreement saying that the price must be at or below the appraised value or must be renegotiated.
Ummm….appraisal at loan application? NOT here in Hawaii. Appraisal is after initial inspection period. Usually after about 12 days into the contract its ordered and performed within the next 7-10 days. Now we are at day 19-22 or so. Halfway through a 45 day conteact. Our VA addendum specifies VA appraisal term negotiations options. However…VA appraisals are brutal and we often need to renegotiate. And it’s true…most sellers put the VA loan on the bottom of the pile. Not warranted, but true.
agree, unfortunately. Last thing we need to do is discriminate against veterans.
As a long time appraiser I can tell you that the appraisal request is rarely communicated at the beginning of the loan process. Case in point, I have an assignment received on May 24th. Contract was executed on May 10. 14 days passed between the loan application and appraisal request. As I stated such a timeline is very common in our experience.
Now, in a perfect world the appraisal request would occur on the date of the loan application. with VAs turn time requirements the CRV is returned much earlier in the loan process.
A VETERAN UTILIZING A VA LOAN CAN NOT PAY FOR A BUYER’S AGENT!!!
I have called the VA regional number and spoken with them, even spoke to a political candidate or two. They should have changed their rules decades ago with the advent of Buyer Agency (representation). To say that veterans do NOT rate an agent puts veterans at a disadvantage. With all the relocations they do and the important missions that they must learn, drill over and over, internalize, put their lives at risk, AND NOW they supposed to learn all about real estate such as flood zones, aircraft zones, lead disclosure, disclosures, structure, electrical concerns, plumbing concerns, home inspections, legal issues and wording all to buy a house!?! Even if they did all that they will now have to learn all about local issues and laws in a new regions, state, city, and all while they are getting their families moved, new schools for kids, new jobs for spouses, and a checking in process with their new unit/base. People using a conventional loan or FHA have the option of using a Buyer’s Agent, but NOT a VA Loan??? Has been this way for decades, NOW the change in commission will force them to bring the subject of the VA Loan not allowing buyers to have an agent represent to light and cause them to look at it. UNBELIEVABLE!!!
A right to a buyer’s agent is not rocket science! If it is possible in all other loans or cash purchases why in the world would someone prohibit it for VETERANS!
Time for a change, let’s provide backup for Veterans and cover their six!
I agree 100%!!!!
Agree 100%, Vets should have the rights to a buyers agent and should be able to pay that agent as a normal cost of business as is an inspection
Veterans (we) should have the option and right to do anything else that the rest of the world can do. PLEASE GET THIS CHANGE IN , ASAP!!!!!!
In a competitive market, there may be a time when a seller will select a buyer who is NOT asking the seller to pay for the buyer’s broker commission. If there is concern for the appraisal meeting the purchase price, and the VA addendum is used, even though it protects the buyer, it may indeed make the seller reluctant to accept the VA buyer.
It is against the law to discriminate against a VA buyer, but in practice, sellers do not understand the 0% down and can decide to take another offer in a multiple offer situation.
I agree, with the changing structure of compensation, the VA needs to change the policy of a VA buyer not paying commission to their agent. It will definitely cause issues with offer acceptance.
Sorry! I am a long time Realtor and Appraiser, (Obviously, with no experience or knowledge of VA procedures).
Q-Isn’t it (usaully) true that an Owner/Seller contracts with a listing broker for a commission payable in the event of a sale?
Q-Isn’t it true that the listing broker, in turn, often offers Reators working with/for a buyer, a share of that commission (often 50%)?
Q-Isn’t it true that the Total Contracted Sale Price on the Closing Statement includes that original contracted commission?
Q-Isnt it true that, for whatever reason, at closing that commission is shown on the sellers side of the closing statement, not, as perhaps it should be as a contracted commission due only to the original listing broker?
Q-Isn’t it that listing broker who has ’employed’ the selling broker to sell their listing, thus pays them accordingly?
Q-Does that raise two other questions?
Q-How then is it claimed that the ‘Owner/Seller is paying the selling broker?
Q-There is no ‘relationship’ between them at all is there?
Q-How then does the VA claim that they will not ‘lend’ funds which go to a selling broker?
Q-They have been doing that every time haven’t they?
Q-Or die VA buyers use only listing brokers?
Just askin’
All could have been resolved if we let the NAR go under and started something new. This will never work and everyone involved in the settlement should face the backlash.