Proposed Commission Settlement Could Hurt Veteran Home Buyers

As the market struggles to prepare for changes in the way most residential real estate is bought and sold, individuals who have served in the military and qualify for a low-cost loan from the Department of Veterans Affairs Fighters might have to give up protection of real estate. representation of the agent.

The primary complaint in the class-action lawsuit against the National Association of Realtors, several major brokerages and many Multiple Listing Service operations was simple: Home sellers don’t want to pay the buyer’s agent commission. The settlement makes it much easier for them to opt out.

VA loans have two important advantages: Their interest rates are typically about half a percentage point lower than a typical 30-year fixed-rate mortgage. Best of all, they allow no down payment on these loans.

But they also prohibit buyers from paying their agents or including agent fees in the loan.

From the VA Lenders Handbook: “Fees or commissions charged by a real estate agent or broker in connection with a VA loan cannot be charged or paid by the veteran buyer. »

And buyers agents probably don’t want to work for free. So, if sellers refuse to pay a buyer’s agent’s commission on a VA loan, they are effectively prohibiting veterans from purchasing their property.

“I don’t know where all the consumer and veteran advocates are,” said Paul J. Cervone, an agent with Lamacchia Realty who specializes in working with veterans. “But they should be shouting it from the rooftops, because this is absolutely going to put VA buyers at a disadvantage in the future.”

Cervone said it is important to recognize that the regulation is still relatively new and is not expected to be approved and take effect until July. The parties had already reached settlement agreements twice, but the Justice Department objected.

In March, Kevin Sears, a Massachusetts real estate agent and president of the NAR, sent a letter to the VA urging them to update their rules: “VA buyers are at an immediate disadvantage, potentially forcing them to forgo professional representation, to lose a property in an already limited inventory (situation), choose a different loan product or exit the market altogether.

Shant Banosian, branch manager and loan officer at Garanti Rate, said the VA should change its rules because veterans are already at a disadvantage in a competitive housing market.

“The VA program allows for no down payment or a small down payment without the borrower even having to pay PMI (private mortgage insurance), and they have the best rates on the market in my opinion,” he said. “It’s a great loan product, but unfortunately most sellers perceive deals with higher down payments to be stronger. These rule changes will only make it more difficult for veterans to buy a home. And it’s a really important group of people. These are people who have gone above and beyond for our country.

According to the Massachusetts Attorney General’s website: “State and federal laws prohibit discrimination in the sale and rental of housing by landlords, landlords, property managers, mortgage lenders, and real estate agents. These fair housing laws make it illegal to discriminate based on: race, color, national origin, sex, gender identity, sexual orientation, disability, ancestry, genetic information, marital status, veteran or active military status, age, marital status (i.e., children), and source of income (i.e., credit union Article 8). »

The secretary of the Massachusetts Department of Veterans Services and the attorney general’s office declined to comment on the proposed settlement.

Cervone said that when he presents a no-down veteran’s offer to a homeowner, he tries to emphasize that the things sellers are most interested in are the terms of the transaction and the net proceeds of the sale. He said it was a mistake to reduce an offer because of the amount of the deposit.

“A VA loan, much like an FHA loan, is what many first-time home buyers need because they are just starting out and don’t have deep pockets,” Cervone said. “They don’t have an extra $10,000 or more for a down payment. They can’t include my fees in the loan. They cannot accept a closing cost contribution from a seller and use it to pay a buyer’s agent. So in the end, they are at a total disadvantage. These federal programs are there to help people who need and deserve it, and who is more deserving than someone who served in the military?

Jim Morrison can be contacted at (email protected). Follow him on @jimmorrison617.