Entitlement to Real Estate Expenses

An authorized certifying officer for the Department of Housing and Urban Development (HUD) requested information concerning an employee's entitlement to reimbursement for certain real estate expenses. The employee was transferred from her position with the Army to a position with HUD and, as a result, was authorized reimbursement for relocation costs, including the costs for the sale of a residence at the old duty station. It was the employee's entitlement to reimbursement for the costs associated with the sale of her residence that was at issue. Shortly after her transfer, the employee was divorced. The divorce decree called for the proceeds from the sale of the residence to be split. Later an amendment was made to the divorce decree to provide for a $6000 payment to the employee rather than a split of the proceeds from the sale of the house. A real estate firm claimed it was entitled to a commission on the sale of the residence from the employee to her spouse. The employee paid the commission, claimed reimbursement, and was paid that amount by HUD. The certifying officer has asked whether the transfer of the employee's interest to her former husband constituted a sale so as to entitle her to reimbursement for the broker's fee and for real estate expenses. In addition to the broker's fee, the employee had claimed advertising expenses and legal costs. The agency had also already paid these fees. Finally, the certifying officer wanted to know whether the employee was legally obligated to pay the broker's fee. GAO reviewed the applicable regulations and stated that the sale of one's interest in a residence constitutes a residence transaction within the meaning of the U.S. Code; however, the broker's fee may not be reimbursed absent a showing that the employee was legally obligated to make such a payment to the brokerage firm. Also, the employee may be reimbursed for legal and advertising costs but, since she held title to the residence with a person who was not a member of the immediate family at the time of the sale, reimbursement is limited to the extent of her interest in the residence. GAO concluded that, until it is proven that she is legally bound to pay the broker's fee, the employee is obligated to refund the reimbursement.