In recent updates, Fannie Mae and Freddie Mac, two significant players in the federal financial sector, have reiterated their stance on seller payments toward buyer agent commissions, affirming that these payments will remain exempt from limits on seller concessions.
This reaffirmation echoes a similar announcement made by the Federal Housing Administration just last month. This clarification addresses a pressing financing concern that emerged following the proposed commission settlement put forth by the National Association of Realtors (NAR).
So, what does this mean for buyers and sellers? According to the NAR, the crux of the matter remains unchanged, and that's good news for consumers. Collaborating with the Mortgage Bankers Association, the NAR has advocated for the ongoing exclusion of seller or listing agent payments towards buyer agent commissions from limits on interested party contributions (IPCs).
This advocacy aims to support the current industry standard, where most home sellers negotiate the total commission to be paid to the listing agent, who then compensates the buyer's agent. Including buyer agent compensation within IPC limits could have complicated matters, potentially limiting funds available for crucial expenses like closing costs or repairs. Typically, IPCs range between 3% to 6% of the purchase price, depending on the buyer's loan product.
Regarding its connection to the proposed NAR commission settlement, it's important to understand that the settlement doesn't prevent home sellers from paying buyer agent commissions directly. Listing brokers and sellers retain the ability to offer compensation for buyer broker services outside of the Multiple Listing Service (MLS).
Additionally, the NAR has reached out to the Veterans Administration (VA), advocating for VA buyers' ability to compensate their agents and finance the commission. Present regulations only allow sellers to cover this expense, potentially putting veterans at a disadvantage in today's fiercely competitive market. The VA loan, a valuable benefit for veterans, allows for 100% financing without requiring Mortgage Insurance (MI). However, without the freedom to hire, pay, and finance this cost on their own behalf, many veterans may face barriers to realizing the American Dream of homeownership.
Furthermore, as the proposed settlement progresses through the courts, Fannie Mae underscores its commitment to monitoring ongoing real estate agent commission litigation and outcomes, acknowledging their potential implications for the mortgage industry and their policies, sentiments echoed by Freddie Mac.
As the real estate landscape evolves toward a better consumer experience, these clarifications offer stability and assurance to both buyers and sellers navigating the complexities of real estate transactions.
Kevin Wilson is President of Greater Nashville Realtors. A Realtor is a member of the National Association of Realtors who subscribes to its strict code of ethics. You can reach Kevin at 615.390.5065 or kevin@ourhousenashville.com
