CHANGES IN REAL ESTATE INDUSTRY TO AFFECT VA HOME LOAN BORROWERS
Getting a VA home loan can be a great help, especially for those who don't have the financial capacity to make a full payment for their dream home. This is especially true with the current economic status, where the prices of services and essentials are increasing. However, there was an announcement from Veterans Affairs regarding the changes in the real estate industry that might affect home loan borrowers. This might be good or bad news to those who are planning to borrow from the VA. Recently, the National Association of Realtors has been making headlines regarding settling the buyer-broker compensation. To resolve the issue, NAR settled a class action case. This resulted in a change in the buyer broker fees in real estate transactions, effective on August 17, 2024.
What Is the New Agreement?
To resolve the issue, the National Association of Realtors had agreed to pay $418 million, but this is just the tip of the iceberg. The real concern is that listing agents will no longer be allowed to include their commissions on the Multiple Listing Service (MLS). Before, there was something like a “3% commission to the buyer’s agent” whenever you look for a home. Now, this is being removed. It seems like this is not a big issue. However, this will change everything, even how agents get paid and work with you.Another major change is that those who are planning to buy a house will now be required to come up with a written agreement with the realtors before getting permission to have a house tour. Plus, the agreement must include their own agent’s fee.
Will the Changes in the Real Estate Industry Affect Veterans?
In the past, Veterans who were on VA loans didn't have to worry about paying their real estate agent directly. This is usually handled by the seller. Last June, the VA announced that it would be making an update to make sure that the Vets are getting the most competitive VA-guaranteed home loan benefit. Targeting specific individuals like active duty members, surviving spouses, and eligible Veterans who are using their VA home loan benefits to make a payment for buyer-broker fees whenever they are purchasing a home. Now, this new rule is in effect as of August 10, 2024. The new update from the VA will make sure that its program will still promote access to homeownership. However, this means that with the new rules, all buyers will now need to negotiate the agent's pay. Veterans are probably at a huge disadvantage, especially when making offers. But if you have any questions, the best thing to do is to review the VA Circular 26-24-14: "Temporary Local Variance for Certain Buyer-Broker Charges."
The Effects on Buyers and Sellers
With the new changes in the real estate industry, there are some things that the buyer needs to consider, aside from having a written agreement before they can enter the prospected house. Sellers will have the option to give compensation to the agent. The buyer can also ask the seller to do this. Also, buyers still have the option to accept concessions of up to 4% of the appraised value of the property. On the seller's side, they can offer compensation to buyer brokers. However, this should be fully disclosed and documented. The amount should not be included on the MLS listing, but it can be advertised on other platforms.With these new processes, it is still best for Veterans to consider all of the agents they want to work with. Also, don't forget to negotiate, especially the fees, before signing any contract.
The Pros and Cons of VA Loans
For most people, taking advantage of the VA programs is beneficial, especially when it comes to making a loan. Still, before signing in all the necessary paperwork, you need to understand its pros and cons. One of the pros is that there are no down payments, and no private mortgage insurance. Additionally, it has a high allowable debt-to-income (DTI) ratio, credit flexibility, a better interest rate, no prepayment penalties, offers multiple refinance options, and VA loans are assumable.With these advantages, it seems that it is enticing to take advantage of their program. However, there are some cons that you need to consider. Most borrowers must pay a funding fee, which increases after the first use. Another con is that there is a possibility that the loan could exceed market value. The loan is only for primary residences and not for a second home, and agents and sellers might not be familiar with VA home loan programs. Regardless of its cons, the program that the VA offers is still beneficial. Lastly, it is something to consider, especially now that there are changes in the real estate industry.Suggested reads:
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