B-160799, OCT. 15, 1970

B-160799, OCT. 15, 1970

REAL ESTATE - CLOSING COSTS DECISION TO ACCOUNTING OFFICER, ADVISING THAT THE SUM ALLOWED EMPLOYEE FOR ADVERTISING EXPENSES AND ATTORNEY FEES IN CONNECTION WITH THE SALE OF HIS RESIDENCE, INCIDENT TO TRANSFER, IS ONLY PARTIALLY REIMBURSABLE. EMPLOYEE, WHO INCIDENT TO TRANSFER SOLD HIS RESIDENCE AT THE OLD STATION, ENTERING AN AGREEMENT WITH THE REAL ESTATE BROKER THAT HE WOULD PAY THE COST OF ADVERTISING (MULTIPLE-LISTING) NOT TO EXCEED ONE HALF OF ONE PERCENT OF SALES PRICE IF SALE IS CONSUMATED, UNDER THE PERTINENT REGULATION, MAY ONLY BE ALLOWED A PORTION OF THE SUM CLAIMED, THE MULTIPLE LISTING FEE PLUS THE NEWSPAPER ADVERTISING, SINCE IT DOES NOT APPEAR THAT THE COST OF SUCH SERVICES WERE PAID IN THE FORM OF THE BROKERS FEE. IN RESPECT TO EXPENSES FOR LEGAL SERVICES ARISING THEREAFTER IN CONNECTION WITH RESELLING OF THE PROPERTY UNDER THE SAME AGREEMENT FOR WARRANTY DEED, SUCH EXPENSES ARE NOT REIMBURSABLE SINCE OTHER EXPENSES WERE ALLOWED ON THE BASIS OF THE PRIOR SALE, AND THERE IS NO AUTHORITY ALLOWING EXPENSES INCURRED IN CONNECTION WITH A SECOND SALE.

TO MR. VLADIMIR OLEYNIK:

WE REFER FURTHER TO YOUR LETTER OF MAY 25, 1970, WITH ENCLOSURES, WHICH REQUESTS OUR DECISION CONCERNING A SUM OF $290.65 ALLOWED TO MR. DEFORREST E. CLINE FOR ADVERTISING EXPENSES AND ATTORNEY FEES FOR SERVICES IN CONNECTION WITH THE SALE OF HIS RESIDENCE NEAR HIS FORMER STATION, CHICAGO, ILLINOIS, INCIDENT TO HIS TRANSFER TO WASHINGTON, D. C., UNDER TRAVEL ORDER NO. OMPER 67-132 DATED AUGUST 12, 1966, AS AMENDED. THE AMOUNT WAS QUESTIONED IN OUR AUDIT BY INFORMAL INQUIRY 68 1, DATED SEPTEMBER 25, 1968.

BUREAU OF THE BUDGET CIRCULAR NO. A-56, SECTION 4.2A, AUTHORIZES ALLOWANCE OF A REAL ESTATE BROKER'S FEE OR COMMISSION NOT IN EXCESS OF RATES GENERALLY CHARGED FOR SELLING SERVICES BY THE BROKER OR BY BROKERS IN THE LOCALITY OF THE OLD OFFICIAL STATION. SECTION 4.2B AUTHORIZES REIMBURSEMENT OF COSTS OF NEWSPAPER, BULLETIN BOARD, MULTIPLE-LISTING SERVICES, OR OTHER ADVERTISING FOR SALE OF THE RESIDENCE AT THE OLD STATION IF SUCH SERVICES WERE NOT PAID BY THE EMPLOYEE IN THE FORM OF A BROKER'S FEE OR COMMISSION.

THE MATTER OF ADVERTISING CONCERNS THOSE PARTS OF MR. CLINE'S AGREEMENT WITH THE LISTING BROKER ON OR ABOUT AUGUST 6, 1966, UNDER WHICH THE BROKER AGREED "TO ADVERTISE AND SHOW THE PROPERTY WITHOUT EXPENSE TO ME, AND TO LIST THE SAID PROPERTY WITH THE ASSOCIATES OF THE MULTIPLE LISTING SERVICE ASSOCIATION *** " BUT MR. CLINE AGREED TO THE BROKER'S INSERTION OF THE REQUIREMENT THAT "SELLER TO PAY COST OF ADVERTISING NOT TO EXCEED 1/2 OF 1% OF SALES PRICE, IF SALE IS CONSUMMATED."

UPON OUR REQUEST, THE FEDERAL HOUSING ADMINISTRATION INSURING OFFICE, CHICAGO, ILLINOIS, INFORMED US AS FOLLOWS:

"OUR RESEARCH REVEALS THAT THE CUSTOMARY COMMISSION AMONG REALTORS IS SIX PERCENT AND THAT NO FURTHER CHARGES FOR ADVERTISING AND LISTING ARE MADE. WE ALSO FOUND THAT THE FIRM OF BAIRD AND WARNER IS AN EXCEPTION TO THAT PROCEDURE, AND THAT IT IS CUSTOMARY FOR THAT FIRM TO ADD SOME ADVERTISING COSTS OVER AND ABOVE THE SIX PERCENT FEE. WE NOTICE THAT THIS PROVISION IS INCLUDED IN THE AGREEMENT. WE FOUND NO OTHER FIRMS USING THIS PRACTICE." IN OUR DECISION OF FEBRUARY 27, 1968, B-163253, WE HELD THAT A FEE FOR MULTIPLE-LISTING SERVICES WAS ALLOWABLE IN ADDITION TO THE USUAL 6% EXCLUSIVE CONTRACT COMMISSION CONSIDERED IN THAT CASE. IN THIS CASE, IT NOW APPEARS THAT THE MULTIPLE-LISTING FEE ($20) PLUS THE NEWSPAPER ADVERTISING ($40.65) ARE ALLOWABLE IN ADDITION TO THE SELLING BROKER'S 6% COMMISSION AS BEING "NOT IN EXCESS OF THE RATES GENERALLY CHARGED FOR SUCH SERVICES BY THE BROKER," AS PROVIDED AN SECTION 4.2A, ABOVE. ALSO, IT DOES NOT APPEAR THAT THE COSTS OF SUCH SERVICES WERE PAID IN THE FORM OF THE BROKER'S FEE OR COMMISSION.

A "SALE" WITHIN THE MEANING OF SECTION 4.1 OF CIRCULAR NO. A-56 WAS CONSUMMATED ON SEPTEMBER 8, 1966, BY ARTICLES OF AGREEMENT FOR WARRANTY DEED, THE TERMS OF WHICH DID NOT REQUIRE A SEPARATE SETTLEMENT OF THE FINANCIAL OBLIGATIONS, AND GAVE POSSESSION OF THE PROPERTY TO HENRY H. MOORE AND WIFE, AS BUYERS EFFECTIVE SEPTEMBER 1, 1966. THE ARTICLES OF THAT CONVEYING AGREEMENT ARE, IN PART, AS FOLLOWS:

"11. THE BUYERS SHALL NOT TRANSFER OR ASSIGN THIS AGREEMENT OR INTEREST THEREIN WITHOUT WRITTEN CONSENT OF SELLERS ***

"14. THAT THIS AGREEMENT SHALL NOT *** BE FILED IN THE OFFICE OF RECORDER OF DEEDS OF DU PAGE COUNTY *** .

"15. AND IN CASE OF THE FAILURE OF THE BUYERS TO MAKE ANY OF THE PAYMENTS *** THIS CONTRACT SHALL, AT THE OPTION OF THE SELLERS, BE FORFEITED AND DETERMINED, AND THE BUYERS SHALL FORFEIT ALL PAYMENTS MADE ON THIS CONTRACT.

"17. *** THAT THE BUYERS WILL PAY TO THE SELLERS ALL COSTS AND EXPENSES, INCLUDING ATTORNEY'S FEES, INCURRED BY THE SELLER IN ENFORCING ANY OF THE COVENANTS AND PROVISIONS OF THIS AGREEMENT AND INCURRED IN ANY ACTION BROUGHT BY SELLERS AGAINST THE BUYERS ON ACCOUNT OF THE PROVISIONS HEREOF, AND ALL SUCH COSTS, EXPENSES AND ATTORNEY'S FEES MAY BE INCLUDED IN AND FORM A PART OF ANY JUDGMENT ENTERED IN ANY PROCEEDING BROUGHT BY THE SELLERS AGAINST THE BUYERS ON OR UNDER THIS AGREEMENT.

"18. *** THAT THE REMEDY OF FORFEITURE HEREIN GIVEN TO THE SELLERS SHALL NOT BE EXCLUSIVE OF ANY OTHER REMEDY, BUT THAT THE SELLERS SHALL, IN CASE OF DEFAULT OR BREACH, OR FOR ANY OTHER REASON HEREIN CONTAINED, HAVE EVERY OTHER REMEDY GIVEN BY THIS AGREEMENT AND BY LAW OR EQUITY, AND SHALL HAVE THE RIGHT TO MAINTAIN AND PROSECUTE ANY AND EVERY SUCH REMEDY, CONTEMPORANEOUSLY OR OTHERWISE, WITH THE EXERCISE OF THE RIGHT OF FORFEITURE, OR ANY OTHER RIGHT HEREIN GIVEN.

"20. THE BUYERS SPECIFICALLY AGREE TO PAY THE SELLERS THE SUM OF ONE HUNDRED THIRTY DOLLARS ($130.00), SAID SUM BEING BUYER'S SHARE OF ATTORNEY FEES INCURRED BY THE SELLERS FOR THE PREPARATION OF THIS AGREEMENT."

THE ATTORNEY'S STATEMENT OF ACCOUNT DATED SEPTEMBER 9, 1966, COVERING THE PERIOD FROM AUGUST 26, 1966, THROUGH SEPTEMBER 9, 1966, CHARGED MR. CLINE $260 FOR "CONFERENCES", "TELEPHONE CONVERSATION", AND "PREPARATION OF CONTRACT FOR WARRANTY DEED." WE WILL ASSUME THAT THE "CONFERENCES" AND "TELEPHONE CONVERSATION" WERE CONNECTED WITH THE PREPARATION OF THE CONTRACT. HOWEVER, WE DO NOT BELIEVE THERE IS ANY AUTHORITY FOR ALLOWING MR. CLINE ANY AMOUNT IN EXCESS OF ONE-HALF OF SUCH FEE SINCE UNDER HIS AGREEMENT WITH MR. MOORE, THE LATTER BECAME OBLIGATED TO PAY HALF OF SUCH FEE.

REFERRING TO MR. CLINE'S EXPENSES FOR LEGAL SERVICES ARISING THEREAFTER IN CONNECTION WITH RESELLING THE PROPERTY BY OR IN BEHALF OF MR. MOORE AND WIFE UNDER THE ABOVE AGREEMENT FOR WARRANTY DEED WE HOLD THAT SUCH EXPENSES ARE NOT REIMBURSABLE TO MR. CLINE. SINCE OTHER EXPENSES HAVE BEEN ALLOWED ON THE BASIS THAT A SALE OCCURRED ON SEPTEMBER 8, 1966, THERE IS NO AUTHORITY FOR ALLOWING EXPENSES INCURRED IN CONNECTION WITH A SECOND SALE. MOREOVER, IT WOULD SEEM THAT SUCH ADDITIONAL EXPENSES WERE INCURRED BY HIM IN BEHALF OF MR. MOORE UNDER THE ALTERNATIVE REMEDIES OF THE AGREEMENT.

ACCORDINGLY, OF THE $290.65 QUESTIONED BY THE INFORMAL INQUIRY, MR. CLINE MAY BE RELIEVED FROM LIABILITY ONLY TO THE EXTENT OF $60.65 AS PREVIOUSLY DISCUSSED HEREIN.