B-163299, APRIL 17, 1968, 47 COMP. GEN. 559

B-163299: Apr 17, 1968

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OFFICERS AND EMPLOYEES - TRANSFERS - RELOCATION EXPENSES - HOUSE SALE - BROKER'S FEE THE FACT THAT AS AGREED TO BEFOREHAND A LICENSED BROKER BOUGHT THE RESIDENCE OF A TRANSFERRED EMPLOYEE WHEN DIFFICULTY WAS EXPERIENCED IN DISPOSING OF THE PROPERTY DOES NOT PRECLUDE THE BROKER FROM COLLECTING A COMMISSION. - IS REIMBURSABLE TO THE EMPLOYEE WHOSE SETTLEMENT SHEET REFLECTS HIS PROCEEDS WERE REDUCED BY THE AMOUNT OF THE COMMISSION. OFFICERS AND EMPLOYEES - TRANSFERS - RELOCATION EXPENSES - TITLE INSURANCE THE COST OF TITLE INSURANCE PURCHASED BY A TRANSFERRED CIVILIAN EMPLOYEE IN CONNECTION WITH THE SALE OF HIS RESIDENCE AT HIS OLD DUTY STATION IS A REIMBURSABLE EXPENSE UNDER THE RULE IN 46 COMP.

B-163299, APRIL 17, 1968, 47 COMP. GEN. 559

OFFICERS AND EMPLOYEES - TRANSFERS - RELOCATION EXPENSES - HOUSE SALE - BROKER'S FEE THE FACT THAT AS AGREED TO BEFOREHAND A LICENSED BROKER BOUGHT THE RESIDENCE OF A TRANSFERRED EMPLOYEE WHEN DIFFICULTY WAS EXPERIENCED IN DISPOSING OF THE PROPERTY DOES NOT PRECLUDE THE BROKER FROM COLLECTING A COMMISSION. SECTION 4.2A OF THE BUREAU OF THE BUDGET CIRCULAR NO. A 56 CONTAINING NO RESTRICTION ON THE PAYMENT OF A BROKERAGE FEE WHERE THE BROKER PURCHASES THE RESIDENCE OF A TRANSFERRED EMPLOYEE, ABSENT THE USE OF AN INFLATED VALUE IN SETTING THE SALES PRICE, THE EXPENSE OF THE COMMISSION--- NO GREATER THAN IF THE RESIDENCE HAD BEEN PURCHASED BY A THIRD PARTY--- IS REIMBURSABLE TO THE EMPLOYEE WHOSE SETTLEMENT SHEET REFLECTS HIS PROCEEDS WERE REDUCED BY THE AMOUNT OF THE COMMISSION. OFFICERS AND EMPLOYEES - TRANSFERS - RELOCATION EXPENSES - TITLE INSURANCE THE COST OF TITLE INSURANCE PURCHASED BY A TRANSFERRED CIVILIAN EMPLOYEE IN CONNECTION WITH THE SALE OF HIS RESIDENCE AT HIS OLD DUTY STATION IS A REIMBURSABLE EXPENSE UNDER THE RULE IN 46 COMP. GEN. 884, IF THE INSURANCE IS OF THE TYPE CUSTOMARILY FURNISHED BY THE SELLER TO THE PURCHASER OF A RESIDENCE. THEREFORE, UPON THE DETERMINATION THAT A CUSTOM OF FURNISHING TITLE INSURANCE EXISTS IN THE AREA OF HIS OLD OFFICIAL STATION, AN EMPLOYEE MAY BE REIMBURSED THE COST OF PURCHASING TITLE INSURANCE FOR THE BENEFIT OF THE PURCHASER OF HIS RESIDENCE.

TO JOE C. ELLIOTT, DEPARTMENT OF THE ARMY, APRIL 17, 1968:

THIS REFERS TO YOUR LETTER OF OCTOBER 23, 1967, REFERENCE ORNDC-F, REQUESTING AN ADVANCE DECISION OF OUR OFFICE ON THE RECLAIM VOUCHER OF MR. CHARLES J. ROCHELLE, AN EMPLOYEE OF THE CORPS OF ENGINEERS, DEPARTMENT OF THE ARMY, FOR PAYMENT OF EXPENSES IN CONNECTION WITH A REAL ESTATE TRANSACTION UPON HIS CHANGE OF OFFICIAL STATION FROM DONELSON, TENNESSEE, TO CARTHAGE, TENNESSEE, ON OR ABOUT MAY 22, 1967.

MR. ROCHELLE WAS GIVEN PERMANENT CHANGE-OF-STATION ORDERS ON MAY 12, 1967, AND SHORTLY THEREAFTER HE MADE ORAL ARRANGEMENTS WITH MR. MILFORD C. SMITH, SMITH REALTY COMPANY, A LICENSED BROKER, TO SELL HIS RESIDENCE IN HERMITAGE, TENNESSEE, FOR $17,500 WITH THE USUAL 6 PERCENT COMMISSION.

THE RECORD INDICATES THAT MR. SMITH HAD HANDLED THE TRANSACTION IN MARCH 1967 WHEN MR. ROCHELLE AND HIS WIFE ORIGINALLY ACQUIRED THE PROPERTY FOR $17,500. AFTER THE PROPERTY HAD STAYED ON THE MARKET FOR ABOUT 2 MONTHS WITHOUT MOVING, MR. SMITH OFFERED TO BUY IT HIMSELF AND ON JULY 28, 1967, THE PROPERTY WAS CONVEYED TO HIM BY MR. ROCHELLE AND HIS WIFE FOR $17,500. AS A PART OF THE TRANSACTION THE SELLER'SSETTLEMENT PAPERS INDICATE THAT MR. ROCHELLE PAID MR. SMITH 6 PERCENT OF THE PROCEEDS OF THE SALE, $1,050, AS A COMMISSION.

IN VIEW OF MR. SMITH'S POSITION AS AGENT TO MR. ROCHELLE YOU INQUIRE AS TO THE PROPRIETY OF HIS PURCHASING THE PROPERTY FROM THE LATTER AND COLLECTING A COMMISSION THEREFOR. IN THE INDORSEMENT OF THE PER DIEM, TRAVEL AND TRANSPORTATION ALLOWANCE COMMITTEE DOUBT IS ALSO EXPRESSED AS TO THE PROPRIETY OF HAVING PREVIOUSLY ALLOWED AN ITEM OF $112.50 LISTED ON ORN FORM 322 AS A COST OF TITLE EXAMINATION BUT ACTUALLY AS SHOWN IN THE RECORD AN OWNER'S TITLE POLICY IN FAVOR OF THE PURCHASER, MR. SMITH. ORDINARILY WHERE A BROKER EMPLOYED TO SELL PROPERTY BUYS IT FOR HIMSELF HE IS NOT ENTITLED TO A COMMISSION. 12 C.J.S., BROKERS SEC. 71. HOWEVER, THE RULE IS OTHERWISE WHEN THE PARTIES WITH KNOWLEDGE OF THE FACTS AGREE THAT HE MAY HAVE A COMMISSION ON A SALE TO HIMSELF. EDMUNDSON V PHENIX, 178 N.W. 893.

IN THE INSTANT CASE THE FACTS INDICATE THAT MR. ROCHELLE PLACED HIS HOUSE WITH MR. SMITH FOR SALE IN MAY 1967, BUT RETAINED THE RIGHT TO SELL THE RESIDENCE HIMSELF. HE DID NOT PRESS MR. SMITH TO LOCATE A BUYER AS HE HAD NOT FOUND A HOUSE AT HIS NEW DUTY STATION. HE HAD SEVERAL DISCUSSIONS WITH MR. SMITH ABOUT PURCHASING THE PROPERTY AS THE LATTER HAD OTHER RENTAL HOUSES IN THE AREA. THE AGREED SELLING PRICE WAS THE FHA APPRAISAL OF $17,500. MR. SMITH BROUGHT A NUMBER OF POTENTIAL BUYERS TO THE HOUSE. ON JULY 28, 1967, WHEN THE HOUSE HADNOT MOVED MR. SMITH PURCHASED IT FROM THE SELLER IN ACCORDANCE WITH THEIR PRIOR CONVERSATIONS. THE SELLER, WHO WAS A KNOWLEDGEABLE PARTICIPANT IN THE TRANSACTION, ACQUIESCED IN THE PAYMENT OF THE COMMISSION EVEN THOUGH THE BROKER WAS ACTING FOR HIMSELF IN BUYING THE PROPERTY. SEE LETTER OF APRIL 2, 1968, FROM MR. ROCHELLE TO OUR OFFICE.

WITH RESPECT TO THE PAYMENT OF A BROKER'S FEE SECTION 4.2A OF BUREAU OF THE BUDGET CIRCULAR NO. A-56 PROVIDES AS FOLLOWS:

BROKER'S FEES AND REAL ESTATE COMMISSION. A BROKER'S FEE OR REAL ESTATE COMMISSION PAID BY THE EMPLOYEE FOR SERVICES IN SELLING HIS RESIDENCE IS REIMBURSABLE BUT NOT IN EXCESS OF RATES GENERALLY CHARGED FOR SUCH SERVICES BY THE BROKER OR BY BROKERS IN THE LOCALITY OF THE OLD OFFICIAL STATION. NO SUCH FEE OR COMMISSION IS REIMBURSABLE IN CONNECTION WITH THE PURCHASE OF A HOME AT THE NEW OFFICIAL STATION.

THERE IS NO EXPRESS RESTRICTION IN THE FOREGOING REGULATION UPON PAYMENT OF A BROKERAGE FEE TO A BROKER WHO PURCHASES THE RESIDENCE HIMSELF. HAS IN EFFECT SECURED A PURCHASER FOR THE BUYER AND THE COSTS OF THE COMMISSION TO THE GOVERNMENT WOULD BE THE SAME WHETHER THE BROKER OR A THIRD PARTY BOUGHT THE PROPERTY. THE SELLER'S SETTLEMENT SHEET INDICATES THAT HIS PROCEEDS WERE REDUCED BY THE AMOUNT OF THE COMMISSION. THERE IS NO INDICATION OF AN INFLATED VALUE BEING USED IN SETTING THE SALES PRICE OF $17,500. ON THE BASIS OF THE FACTS OF THIS CASE THE COMMISSION WOULD APPEAR TO BE AN EXPENSE BORNE BY THE SELLER THAT WOULD BE REIMBURSABLE UNDER THE REGULATIONS.

WITH RESPECT TO THE SECOND QUESTION RAISED BY THE PER DIEM, TRAVEL AND TRANSPORTATION ALLOWANCE COMMITTEE IN ITS INDORSEMENT OF JANUARY 11, 1968, ON YOUR LETTER REGARDING THE PROPRIETY OF REIMBURSING MR. ROCHELLE $112.50 FOR THE EXURNSE OF PRUCHASING A TITLE POLICY (INCLOSURE 4, ITEM 6I), SEE OUR DECISION OF JUNE 27, 1967, 46 COMP. GEN. 884. IN THAT CASE WE HELD THAT THE COST OF TITLE INSURANCE PURCHASED BY A TRANSFERRED EMPLOYEE IN CONNECTION WITH THE SALE OF HIS RESIDENCE IS REIMBURSABLE UNDER THE CITED LAW AND REGULATION IF TITLE INSURANCE OF THE TYPE INVOLVED IS CUSTOMARILY FURNISHED BY THE SELLER FOR THE BENEFIT OF THE PURCHASER OF A RESIDENCE IN THE AREA OF THE OLD OFFICIAL STATION. IF YOU FIND THAT SUCH A CUSTOM EXISTS IN THE AREA THEN NO FURTHER ACTION NEED BE TAKEN REGARDING THIS ITEM. IF YOU DISCOVER THAT SUCH A CUSTOM DOES NOT EXIST IN THE AREA THEN YOU SHOULD TAKE APPROPRIATE STEPS TO COLLECT BACK THE $112.50 AS AN OVERPAYMENT.

THE VOUCHER AND ACCOMPANYING PAPERS THAT ARE RETURNED HEREWITH MAY BE PROCESSED FOR PAYMENT IN ACCORDANCE WITH THE FOREGOING.