The Veteran’s Administration came up with a fair way to ensure that American veterans and active servicepeople get representation when buying their homes.
What did the VA do?
VA loans allow home buyers to include their buyer’s agent’s fee as part of the mortgage. This helps buyers maximize their down payments. Gathering a down payment is hard enough without adding a buyer’s agent fee. VA loans are designed to help servicepeople who do not have large down payments.
Why did the VA make this change?
In 2024, the way that agents get paid changed throughout the country. In a court case, sellers argued that they should not be paying buyer’s agents fees.
- Home buyers should realize that sellers feel like they are paying the fee – since it is deducted from the sale price.
- However, home buyers should also realize that they, as buyers, pay the fee for the seller’s agent as part of the cost of the property.
Because of this court case, the seller’s broker can no longer publicize a set buyer’s agent fee. The buyer’s agent fee is written into the Offer to Purchase a property. This creates a situation where the seller has a say in whether that buyer’s agent fee is included in the buyer’s sale price. The fee within the sale price can be in a mortgage, rather than out-of-pocket for the home buyer.
Why is that bad for buyers?
- Sellers and their agents now have an opportunity to negotiate the buyer’s agent fee. To include the buyer’s agent fee in the sale price (and mortgage), the amount the buyer agent gets paid becomes part of the offer process. It is literally none of their business!
- Home buyers are paying the seller’s agent fee as part of the sale price. Home buyers have no right to know how much that fee is.
Exclusive buyer’s agents, like those in NAEBA, think that it is unfair that home buyers must ask the seller whether they can finance their buyer’s agent fees. Sellers should not be part of any negotiation that involves buyer’s agent fees.
Exclusive buyer’s agents think that conventional mortgages (like FNMA “Fannie Mae”) should allow buyer’s agent fees to be included in their mortgage, like the VA is doing.
- This would end the interference from sellers and their agents.
- It will allow buyers to maximize their down payments.
- It would allow sellers to negotiate about other concessions, such as closing cost credits.
- Expecting home buyers to pay their agents from their savings is an excessive burden, given the cost of housing. It affects moderate-income buyers more than affluent people, which increases inequality in home ownership.
If you are not a veteran, what can you do?
The change that seems fair – conventional mortgage lenders can include reasonable buyer’s agents fees within a mortgage– may still come to pass. In the meantime, these are your alternatives:
- Most sellers are agreeing to include reasonable buyer’s agent fees in the sale price (and therefore, the mortgage). When you hire an exclusive buyer’s agent, ask them how they have been handling the negotiations regarding buyer’s agent’s fees.
- Some lenders, usually smaller local banks, can choose to create mortgages what include the ability to finance the buyer’s agent fee. Your exclusive buyer’s agent may know what banks are doing that.
Exclusive buyer’s agents have been finding that their fees are being included in the sale price, nearly always. However, the current way of doing business disadvantages our clients by requiring that private information – their buyer agent fee – is discussed with sellers.