There is a lot of misunderstanding surrounding financing and the NAR settlement. Over the last several months since the news broke, I have had many conversations with agents and clients alike who were concerned about how this will affect buyers obtaining a loan. Since these changes were put into effect yesterday, August 1st, I figured I would take the time to ease some of the apprehension.
Is compensation paid by a seller or listing broker to a buyer broker included in the allowable amount of concessions a buyer can receive?
No. What we previously referred to as real estate agent’s commissions, now known as compensation paid by a seller or listing broker to a buyer broker is not included in the allowable amount of concessions a buyer can receive. FHA, Fannie Mae, and Freddie Mac have all come out and stated that they are excluding compensation fees from the allowable amount of interested party contributions (IPCs).
I thought veterans obtaining a VA loan were prohibited from paying commissions directly?
The Department of Veterans Affairs (VA) announced that it has temporarily lifted the ban on buyers paying for agent representation. This policy will go into effect on 8/10/24. The VA is monitoring the situation and is evaluating the need for a new formal rule regarding this issue.
Can a buyer finance a real estate commission?
No. Under the current structure of the residential mortgage finance system, financing commissions is not something that can be done. Fannie Mae, Freddie Mac, and the FHA do not allow compensation to agents to be added to the balance of a mortgage. Financing a commission would be treated as a personal loan and would add to a buyer's liabilities making it more difficult to qualify for a mortgage.
What does this mean for real estate professionals moving forward?
As someone who is practicing real estate every day, now more than ever it matters who you work with. Selecting a lending partner who actually understands what is going on, is staying informed, and anticipating potential changes (like changes to the pre-qualification and loan state update forms) matters. You need advocates in your corner. Partners who are adjusting their business just as much as you are to make the client and agent experience top tier.
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