Veteran Payment of Real Estate Agent/Broker Fees

Yes, referral fees fall under the same category as finders fees and brokerage commissions. VA regulations specifically list “fees charged by loan brokers, finders or other third parties” as items that cannot be charged to the Veteran as itemized fees. Whether the fee is termed a commission, a finder’s fee, or a referral fee, if it is compensation for a third party’s service in connecting the Veteran with a property or a loan, the Veteran is prohibited from paying it. These costs must be absorbed by the lender (potentially out of the flat fee) or paid by the seller.

No. The prohibition is on the payment of the fee by the Veteran, regardless of the source of funds. Furthermore, VA regulations strictly define what can be included in the loan amount. For a purchase transaction, generally, only the reasonable value of the property and the VA funding fee can be financed. Unallowable fees, such as brokerage commissions, cannot be added to the loan amount. Even in refinancing scenarios where some closing costs can be rolled in, unallowable fees remains prohibited. The goal is to prevent the Veteran from bearing this cost burden.

Real estate brokerages sometimes charge “transaction fees” or “administrative fees” in addition to, or in lieu of, a percentage commission. However, the VA regulation prohibits “fees or commissions” charged by a real estate agent or broker. If such a fee is charged in connection with the services of the agent or broker, it falls under the prohibition. The Veteran cannot pay fees that are essentially brokerage commissions disguised as administrative charges. Any fee charged by a broker or finder that is not an allowable title or recording fee generally cannot be charged to the Veteran.

If a sales contract includes a provision requiring the Veteran-purchaser to pay a real estate commission or brokerage fee, that specific provision would conflict with VA regulations. Because the VA strictly prohibits the Veteran from paying these fees “under any circumstances,” a loan containing such a requirement would likely be ineligible for VA guaranty unless the contract is amended. The lender is responsible for ensuring compliance with all VA regulations, which implies they must ensure the Veteran does not pay prohibited fees at closing. The cost would need to be shifted to the seller or lender to proceed.

The lender is authorized to charge a flat fee of up to one percent of the loan amount to cover their own costs and services that are not reimbursable as itemized fees. The lender’s flat charge is intended to cover overhead, processing, and administrative costs. While the regulation lists items that must be covered by this flat fee (such as processing fees and overhead), the lender is generally free to use the funds from the flat charge as they wish, provided they comply with RESPA. Therefore, a lender could theoretically pay a broker fee out of their own proceeds, but they cannot charge the Veteran an additional fee for it.

Yes, the prohibition extends beyond just real estate agents. VA regulations list specific items that cannot be charged to the Veteran as “itemized fees and charges.” This list expressly includes fees charged by loan brokers, finders, or other third parties, regardless of whether those parties are affiliated with the lender. Consequently, you cannot be charged a separate itemized fee to compensate a loan broker or a finder for locating a property or arranging the loan. These costs are considered unallowable charges for the Veteran borrower and must be covered by the lender or another party.

Since the Veteran borrower is prohibited from paying real estate commissions, these fees must be paid by another party involved in the transaction. VA regulations stipulate that the seller, the lender, or any other party may pay fees and charges on behalf of the borrower. In a typical real estate transaction, the seller pays the real estate commissions for both the listing agent and the buyer’s agent from the proceeds of the sale. If the seller refuses to pay the buyer’s agent commission, the lender may choose to cover the cost, but the Veteran cannot.

The Department of Veterans Affairs has established this rule based on the belief that preventing the Veteran from paying buyer-broker fees does not harm the Veteran’s ability to purchase a home. The VA explicitly notes that information regarding properties available for purchase and various financing options is widely available to the public from a variety of sources. Because this information is accessible without necessarily hiring a paid agent, the VA views the prohibition on charging Veterans for these commissions as a consumer protection measure, ensuring that Veterans maximize their home loan benefits without incurring unnecessary or non-customary costs.

You are allowed to use “buyer” brokers to represent your interests during the home buying process; the VA does not preclude the use of these professionals. However, even if you sign an agreement with a buyer’s agent, you generally cannot be charged a brokerage fee or commission for their services in connection with a VA loan. The regulation states that Veteran-purchasers may not, under any circumstances, be charged these fees. Therefore, if your agent requires compensation, it must be arranged so that the seller, the lender, or another party pays the fee, rather than you.

No, you are strictly prohibited from doing so. VA regulations explicitly state that fees or commissions charged by a real estate agent or broker in connection with a VA loan may not be charged to or paid by the Veteran-purchaser. This rule is absolute and applies regardless of the circumstances of the sale. The VA Home Loan program is designed to protect the Veteran’s financial interests, and shifting the burden of commission payments—which are traditionally the responsibility of the seller in the residential housing market—onto the Veteran borrower is not allowed under federal guidelines.