NAR lawsuit settlement threw a wrench into VA loans. A fix is on the way.
The VA said it is encouraging veterans to negotiate the amount to be paid to their buyer-broker, regardless of whether the seller or buyer pays. The Department of Veterans Affairs has implemented a new set of guidelines to help veterans purchase homes in a changing marketplace following a class-action lawsuit settlement that resulted in nearly $1 billion in settlements. The National Association of Realtors and major brokers have agreed to prohibit mandatory "cooperation agreements" in which sellers pay both the selling agent and the buyer agent commission for a sale, in exchange for listing a home on multiple listing services. This means some buyers will have to pay upfront for an agent, and veterans using their Veterans Affairs-guaranteed home loan benefit would not be able to do so under the terms of their financing. However, the Department of Veteran Affairs has announced a temporary local variance for all veterans purchasing homes in areas where settlements are going into effect. The change allows veterans to pay "reasonable" amounts for any buyer-broker charges not included in the loan amount or not paid for upfront by the seller’s commission on the sale of the home.
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The Department of Veterans Affairs has put in place a new set of guidelines to help veterans purchase homes in a changing marketplace.
The class-action lawsuits that rocked the residential real estate industry over the past year have resulted in nearly $1 billion in settlements so far — and also put in place changes that could have hurt veterans’ ability to shop for homes.
The National Association of Realtors and big brokers such as RE/MAX Holdings Inc., Anywhere Real Estate Inc. and Keller Williams Realty Inc. agreed to prohibit mandatory so-called “cooperation agreements,” in which sellers pay both the selling agent and the buyers agent commission for a sale, in exchange for being allowed to list a home on a multiple listing service.
That means, come Aug. 17 — when the NAR has agreed to implement the changes — some buyers will have to pay upfront for an agent, and veterans using their Veterans Affairs-guaranteed home loan benefit would not be able to do so under the terms of that financing.
However, the Department of Veterans Affairs announced June 11 a “temporary local variance” for all veterans purchasing homes in areas where the settlements are going into effect. That allows them to pay "reasonable" amounts for any buyer-broker charges not included in the loan amount or not paid for upfront by the seller’s commission on the sale of the home.
The variance goes into effect Aug. 10, days before the NAR deadline.
The agency said it is encouraging veterans to negotiate the amount to be paid to their buyer-broker, regardless of whether the seller or buyer pays. The variance does not prevent the seller of the home from paying for the veteran's agent as before.
Chris Bird, vice president of mortgage insight at Veterans United Home Loans, said the temporary guideline change allows veterans and military families to keep competing in the housing marketplace.
“These adjustments recognize that, in some instances, military families must be allowed to pay real estate agent fees in order to achieve the American dream of homeownership," Bird said in a statement. "These changes give VA buyers the same flexibility as their conventional counterparts."
The move comes as VA loans have surged again in popularity, as home prices have risen and down payments have become harder for many homeowners to achieve.
VA loans accounted for 5.4% of all residential property loans in the first quarter, according to Attom Data Solutions LLC, up from 4.3% in the fourth quarter of 2023.
The combination of high prices and high interest rates has made VA loans, which require no down payment, as well as FHA loans, which require 3.5% down payments, more attractive, said Marty Green, a principal at law firm Polunsky Beitel Green.
“When the market was white hot, it was hard for FHA and VA loans to compete against conventional loans or cash buyers because it was more uncertain about whether they were going to close,” Green said. “As the market has cooled off, it makes (them) more appealing.”
Meanwhile, the Fannie Mae Home Purchase Sentiment — a gauge of how buyers feel about the housing market — fell to its lowest number since the agency began measuring it in 2010.
In May, just 14% of consumers surveyed by the agency said it was a good time to buy a home, down from 20% in April. Those who said it was a bad time to buy increased to 86%.
Even seller optimism slipped, dropping from 67% who believed it was a good time to sell in April to 64% in May. The growing pessimism comes even as about 20% of those surveyed said their household income was higher than it was a year ago.
The declining sentiments are yet another factor weighing on the housing market, which is fueling an affordability crisis in many metro areas. It's also becoming a flashpoint in the 2024 election.
The median sale price for U.S. homes hit a record $383,725 during the four weeks ending April 21, up more than 5% from a year earlier, according to real estate firm Redfin Corp. (Nasdaq: RDFN). The increase comes even as the supply of homes has gone up, with 10.2% more new listings compared to the same time last year.
The record-high sale price is double what the median price was 10 years ago and up about 50% over the past five years, according to Redfin.
Topik: Lawsuits