B-168393, DEC. 12, 1969

B-168393: Dec 12, 1969

Additional Materials:

Contact:

Edda Emmanuelli Perez
(202) 512-2853
EmmanuelliPerezE@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

HOUSE SALE- CLOSING CHARGES SELLER WHO WAS REIMBURSED "BUYER'S CLOSING COSTS" IN CONNECTION WITH SALE OF RESIDENCE INCIDENT TO TRANSFER FOR KANSAS CITY. MUST REPAY AMOUNT RECEIVED AS SUCH COSTS ARE STILL CUSTOMARILY CONSIDERED COSTS OF BUYER AND. EVEN THOUGH PRACTICE IS QUITE COMMON IN AREA. VLADIMIR OLEYNIK: REFERENCE IS MADE TO YOUR LETTER OF NOVEMBER 6. WHO WAS TRANSFERRED FROM KANSAS CITY. LYNN AGREED TO PAY $300 OF THE BUYER'S CLOSING COST WHICH WAS ALLOWABLE BY THE FEDERAL HOUSING ADMINISTRATION (FHA). WAS LATER REIMBURSED THAT AMOUNT BY TRAVEL VOUCHER DATED NOVEMBER 17. WHICH PROVIDES THAT COSTS OF THE TYPE INVOLVED MAY BE REIMBURSED ONLY IF THEY ARE CUSTOMARILY PAID BY THE SELLER IN THE LOCATION WHERE THE TRANSACTION TOOK PLACE.

B-168393, DEC. 12, 1969

OFFICERS AND EMPLOYEES--TRANSFERS--RELOCATION EXPENSES--HOUSE SALE- CLOSING CHARGES SELLER WHO WAS REIMBURSED "BUYER'S CLOSING COSTS" IN CONNECTION WITH SALE OF RESIDENCE INCIDENT TO TRANSFER FOR KANSAS CITY, MO. TO DES MOINES, IOWA, BASED ON FREQUENT PRACTICE OF AREA, MUST REPAY AMOUNT RECEIVED AS SUCH COSTS ARE STILL CUSTOMARILY CONSIDERED COSTS OF BUYER AND, IN VIEW OF SEC. 4.2D OF BUREAU OF BUDGET CIR. NO. A-56 WHICH PROVIDES THAT SUCH COSTS MAY BE REIMBURSED ONLY IF CUSTOMARILY PAID BY SELLER IN LOCATION WHERE TRANSACTION TOOK PLACE, EVEN THOUGH PRACTICE IS QUITE COMMON IN AREA, IT DOES NOT RAISE IT TO STATUS OF CUSTOM AND NO BASIS EXISTS UPON WHICH TO RELIEVE EMPLOYEE OF REQUIREMENT TO REFUND AMOUNT IN QUESTION.

TO MR. VLADIMIR OLEYNIK:

REFERENCE IS MADE TO YOUR LETTER OF NOVEMBER 6, 1969, REQUESTING OUR DECISION AS TO WHETHER MR. PAUL A. LYNN, AN EMPLOYEE OF YOUR AGENCY, MAY BE RELIEVED OF THE REQUIREMENT OF REFUNDING AN AMOUNT OF $300 REPRESENTING REIMBURSEMENT TO HIM OF EXPENSES INCURRED BY HIM IN THE SALE OF HIS RESIDENCE UNDER THE CIRCUMSTANCES STATED BELOW.

MR. LYNN, WHO WAS TRANSFERRED FROM KANSAS CITY, MISSOURI, TO DES MOINES, IOWA, SOLD HIS OLD RESIDENCE. IN THE SALE CONTRACT MR. LYNN AGREED TO PAY $300 OF THE BUYER'S CLOSING COST WHICH WAS ALLOWABLE BY THE FEDERAL HOUSING ADMINISTRATION (FHA), AND WAS LATER REIMBURSED THAT AMOUNT BY TRAVEL VOUCHER DATED NOVEMBER 17, 1967. OUR CIVIL DIVISION SUBSEQUENTLY ISSUED GAO INFORMAL INQUIRY NO. 68-17, DATED FEBRUARY 19, 1969, IN VIEW OF SECTION 4.2D OF BUREAU OF THE BUDGET CIRCULAR NO. A 56, WHICH PROVIDES THAT COSTS OF THE TYPE INVOLVED MAY BE REIMBURSED ONLY IF THEY ARE CUSTOMARILY PAID BY THE SELLER IN THE LOCATION WHERE THE TRANSACTION TOOK PLACE. THE INQUIRY WAS BASED ON OUR DECISIONS B 164181, JULY 22, 1968 AND B-165202, SEPTEMBER 30, 1968 (CITING B 164604, JULY 29, 1968). THE DECISION OF JULY 22, 1968, HOLDS THAT A COMMON PRACTICE OF THE SELLER ASSUMING THE PURCHASER'S CLOSING COST BY CONTRACT DOES NOT RAISE IT TO THE STATUS OF A CUSTOM. THE DECISION OF SEPTEMBER 30, 1968, HOLDS THAT A SELLER WHO ASSUMES THE BUYER'S CLOSING COSTS BECAUSE OF REAL ESTATE MARKET CONDITIONS MAY NOT BE REIMBURSED UNLESS IT APPEARS THAT IT WOULD BE UNUSUAL FOR THE PURCHASER TO PAY HIS OWN CLOSING COSTS.

IN RESPONSE TO YOUR REQUEST FOR INFORMATION AS TO THE LOCAL CUSTOM IN KANSAS CITY THE DIRECTOR OF THE FHA OFFICE AT TOPEKA, KANSAS, ADVISED YOU IN PERTINENT PART AS FOLLOWS: "* * * IN THE ABSENCE OF A CONTRACT PROVISION TO THE CONTRARY, THE EXPENSE OF OBTAINING A MERCHANTABLE TITLE IS CONSIDERED TO BE AN EXPENSE OF THE SELLER AND COSTS INCIDENTAL TO LOAN CLOSING AND RECORDING ARE CONSIDERED COSTS OF THE BUYER.'THE PRACTICE OF THE SELLER TO PAY COSTS NORMALLY ATTRIBUTABLE TO THE BUYER HAS BECOME A FREQUENT PRACTICE. IN THIS EVENT THERE WOULD BE A PROVISION IN THE CONTRACT SO STIPULATING. THE ANTICIPATED BUYER'S CLOSING COSTS ARE A PART OF THE FHA VALUE, BUT THIS IN NO WAY HAS AN EFFECT ON THE AGREED SALES PRICE OR OTHER TERMS OF THE REAL ESTATE CONTRACT AS AGREED TO BY THE PURCHASER AND THE SELLER.'

FROM THE ABOVE IT APPEARS THAT IT IS A FREQUENT PRACTICE FOR THE SELLER TO ASSUME THE BUYER'S CLOSING COST BUT THAT SUCH COSTS ARE STILL CUSTOMARILY CONSIDERED COSTS OF THE BUYER. ACCORDINGLY, THERE IS NO BASIS UPON WHICH TO RELIEVE MR. LYNN OF THE REQUIREMENT TO REFUND THE AMOUNT IN QUESTION.