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Question: Has the Department of Veterans Affairs (VA) made any changes to its guidelines regarding a borrower’s ability to pay real estate broker commissions?

Answer:

Yes, the VA recently issued Circular 26-24-14, which was effective August 10, 2024 and authorizes VA borrowers to pay compensation to a buyer’s real estate broker or agent.

VA regulations prohibit a veteran from paying for real estate brokerage charges. However, the Circular explains that this temporary allowance is appropriate to ensure veterans remain competitive buyers in the rapidly shifting real estate brokerage market. The Circular indicates that VA will develop a more permanent policy, through a new notice-and-comment rulemaking, as the real estate brokerage market restabilizes and new practices take hold.

VA loan borrowers may now pay reasonable and customary amounts for any buyer-broker charges, including commissions and any other broker-related fees, subject to terms set forth in the Circular. Noteworthy, the Circular requires lenders to collect the buyer-broker representation agreement as VA considers it part of the sales contract. VA expects lenders to upload the agreement as part of the package lenders use when requesting an appraisal. VA also expects lenders to retain the agreement in the loan file.

The VA also published Change 1 to Circular 26-24-14, which clarifies how veteran-paid buyer-broker charges are to be recorded on the Closing Disclosure.