B-179414, JAN 25, 1974

B-179414, JAN 25, 1974

INCIDENT TO TRANSFER EMPLOYEE OF VA SOLD HOUSE IN JACKSON, MISSISSIPPI, ASSUMING CLOSING COSTS (SURVEY, RECORDING, NOTARY AND PHOTOGRAPH FEES) AND LEGAL FEES (TITLE OPINION, ABSTRACT AND TITLE INSURANCE). EMPLOYEE MAY NOT BE REIMBURSED THEREFOR UNDER OMB CIR. NO. A-56, SEC 4.2C AND F, SINCE IT IS CUSTOM IN JACKSON AREA FOR PURCHASER TO BEAR THOSE COSTS ON TRANSACTIONS INVOLVING EXISTING PROPERTY. FACT THAT SELLER'S ASSUMPTION OF THOSE ITEMS OF COST MAY NOT BE UNUSUAL DOES NOT RAISE IT TO LEVEL OF CUSTOM. NOR IS PORTION OF TOTAL LEGAL FEE FOR REPRESENTING AND COUNSELING REIMBURSABLE.

TO MR. JOHN B. BYRD:

WE REFER TO THE LETTER DATED JULY 18, 1973, FROM MR. W. H. WITT, LOAN GUARANTY OFFICER, VETERANS ADMINISTRATION CENTER, JACKSON, MISSISSIPPI, PRESENTING ADDITIONAL INFORMATION CONCERNING PORTIONS OF YOUR CLAIM FOR REIMBURSEMENT OF EXPENSES OF THE SALE OF YOUR FORMER RESIDENCE IN JACKSON, MISSISSIPPI, IN CONNECTION WITH YOUR TRANSFER THEREFROM AS AN EMPLOYEE OF THE VETERANS ADMINISTRATION. MR. WITT ALSO REQUESTED RECONSIDERATION OF YOUR CLAIM WHICH WAS PREVIOUSLY DISALLOWED BY SETTLEMENT CERTIFICATE DATED JUNE 4, 1973.

MR. WITT INDICATES HIS CONCURRENCE WITH THE DETERMINATION DISALLOWING REIMBURSEMENT OF THE LOAN ORIGINATION FEE AND THE COST OF TITLE INSURANCE. HOWEVER, HE STATES THE FOLLOWING CONCERNING THOSE PORTIONS OF YOUR CLAIM RELATING TO CLOSING COSTS AND ATTORNEYS FEES:

"*** WE HAVE HAD DIFFICULTY WITH SEVERAL CLAIMS, AND IT IS USUALLY THE ATTORNEY'S FEE THAT CAUSES MOST OF THE TROUBLE. SINCE THE CUSTOM IN CHARGING ATTORNEY FEES IS A FLAT ONE PERCENT OF THE SALES PRICE, IT IS HARDLY REASONABLE TO EXPECT AN ATTORNEY TO BREAK THIS DOWN DOLLARWISE FOR EACH OF THE CATEGORIES LISTED IN THE VA AUTHORIZATION INASMUCH AS HE ADMITTEDLY HAS NOT ARRIVED AT HIS CHARGE ON ANY SUCH BASIS. ANY EFFORT TO DO SO IS PURELY ARBITRARY ON THE ATTORNEY'S PART TO ACCOMMODATE A REQUESTOR, AND IS NOT NECESSARILY TRUE OR REALISTIC.

"I WAS SURPRISED AT THE REMARK IN DR. LAMM'S LETTER OF MARCH 3, 1972, IN REGARD TO SELLER PAYING ALL DISCOUNTS AND CLOSING COSTS. WE PROCESS MORE LOAN APPLICATIONS THAN ANY GOVERNMENT AGENCY IN THE STATE, AND I ASSURE YOU WE HAVE REVIEWED HUNDREDS OF APPLICATIONS IN WHICH THE SELLER AGREED TO PAY ALL CLOSING COSTS. SUCH AN AGREEMENT IN THIS STATE SHOULD NOT BE CONSIDERED AS CASTING A DOUBT ON A CLAIM FOR REIMBURSEMENT. SIMILAR MARKETING PRACTICES EXISTED IN TEXAS DURING THE 15 YEARS I SPENT IN THE LOAN GUARANTY DIVISION IN SAN ANTONIO."

IN REGARD TO THE COSTS SUCH AS THE SURVEY, RECORDING, NOTARY AND PHOTOGRAPHY FEES WHICH YOU HAVE CLAIMED, SECTIONS 4.2C AND 4.2F OF OFFICE OF MANAGEMENT AND BUDGET (OMB) CIRCULAR NO. A-56, REVISED AUGUST 17, 1971, PROVIDES THAT CHARGES MADE FOR REQUIRED SERVICES IN SELLING AND PURCHASING RESIDENCES MAY BE REIMBURSABLE IF THEY ARE CUSTOMARILY PAID BY THE SELLER OF A RESIDENCE AT THE OLD OFFICIAL STATION OR IF CUSTOMARILY PAID BY THE PURCHASER OF A RESIDENCE AT THE NEW OFFICIAL STATION, TO THE EXTENT THEY DO NOT EXCEED AMOUNTS CUSTOMARILY CHARGED IN THE LOCALITY OF THE RESIDENCE. WE WERE INFORMALLY ADVISED BY REPRESENTATIVES OF THE HOUSING AND URBAN DEVELOPMENT (HUD) OFFICE, JACKSON, MISSISSIPPI, THAT THE COST BURDEN OF CLOSING AND OTHER EXPENSES MAY BE SHIFTED BETWEEN SELLER AND PURCHASER IN THE JACKSON AREA. HOWEVER, WE ARE INFORMED THAT IT IS CUSTOMARY IN REAL ESTATE TRANSACTIONS INVOLVING EXISTING HOUSES FOR THE PURCHASER TO BEAR THOSE EXPENSES. THE FACT THAT THE PRACTICE OF A SELLER ASSUMING A BUYER'S CLOSING COSTS BY CONTRACT IS NOT UNCOMMON DOES NOT RAISE IT TO THE STATUS OF A CUSTOM. B-164181, JULY 22, 1968, B-175939, JUNE 19, 1972, AND B-175041, MARCH 30, 1972. WE THUS FIND NO BASIS FOR REIMBURSEMENT OF THE ITEMS IN THE NATURE OF CLOSING EXPENSES WHICH YOU HAVE CLAIMED.

WHILE WE RECOGNIZE THAT ATTORNEYS FEES ARE NOT UNCOMMONLY BASED UPON A PERCENTAGE OF THE SALES PRICE OF THE RESIDENCE INVOLVED, SECTION 4.2C OF OMB CIRCULAR NO. A-56 DOES NOT AUTHORIZE REIMBURSEMENT UPON SUCH A BASIS. RATHER, IT PROVIDES:

"C. LEGAL AND RELATED COSTS. TO THE EXTENT SUCH COSTS HAVE NOT BEEN INCLUDED IN BROKERS' OR SIMILAR SERVICES FOR WHICH REIMBURSEMENT IS CLAIMED UNDER OTHER CATEGORIES, THE FOLLOWING EXPENSES ARE REIMBURSABLE WITH RESPECT TO THE SALE AND PURCHASE OF RESIDENCES IF THEY ARE CUSTOMARILY PAID BY THE SELLER OF A RESIDENCE AT THE OLD OFFICIAL STATION OR IF CUSTOMARILY PAID BY THE PURCHASER OF A RESIDENCE AT THE NEW OFFICIAL STATION, TO THE EXTENT THEY DO NOT EXCEED AMOUNTS CUSTOMARILY CHARGED IN THE LOCALITY OF THE RESIDENCE; COSTS OF (1) SEARCHING TITLE, PREPARING ABSTRACT, AND LEGAL FEES FOR A TITLE OPINION, OR (2) WHERE CUSTOMARILY FURNISHED BY THE SELLER, THE COST OF A TITLE INSURANCE POLICY; COSTS OF PREPARING CONVEYANCES, OTHER INSTRUMENTS, AND CONTRACTS; RELATED NOTARY FEES AND RECORDING FEES; COSTS OF MAKING SURVEYS, PREPARING DRAWINGS OR PLATS WHEN REQUIRED FOR LEGAL OR FINANCING PURPOSES; AND SIMILAR EXPENSES. COSTS OF LITIGATION ARE NOT REIMBURSABLE."

YOUR ATTORNEYS FOR THE REAL ESTATE TRANSACTION INVOLVED HAVE PROVIDED THE FOLLOWING BREAKDOWN OF THE FEE CHARGED:

1. TITLE OPINION $250

2. ABSTRACT AND TITLE INSURANCE 100

3. ADVICE AND REPRESENTATION 200

$550

UNDER THE ABOVE REGULATION, THE SPECIFIED LEGAL EXPENSES ARE REIMBURSABLE ONLY INSOFAR AS THEY ARE CUSTOMARILY PAID BY THE SELLER OF A RESIDENCE AT THE OLD OFFICIAL STATION OR THE PURCHASER OF A RESIDENCE AT THE NEW OFFICIAL STATION. IN NO EVENT, HOWEVER, WOULD THE THIRD ITEMS OF LEGAL EXPENSE CLAIMED - THAT FOR REPRESENTING AND COUNSELING IN CONNECTION WITH THE REAL ESTATE TRANSACTION - BE REIMBURSABLE. 48 COMP. GEN. 469 (1969).

IN REGARD TO THE OTHER TWO ITEMS OF LEGAL EXPENSE - THOSE FOR A TITLE OPINION, ABSTRACT AND TITLE INSURANCE, SUBSECTION 4.2C, ABOVE, PREDICATES A SELLER'S ENTITLEMENT TO PAYMENT OF EITHER BUT NOT BOTH OF THOSE ITEMS UPON ITS BEING CUSTOMARY IN THE AREA FOR THE SELLER TO PAY SUCH COSTS. ARE ADVISED BY THE HUD AREA OFFICE THAT WITH RESPECT TO SALES OF EXISTING HOUSING, IT IS CUSTOMARY FOR THE PURCHASER TO OBTAIN A TITLE OPINION AND/OR TITLE INSURANCE. THUS, NOTWITHSTANDING THAT AN ITEMIZATION OF THE LEGAL SERVICES FURNISHED HAS BEEN PROVIDED FOR THE RECORD, NO PORTION OF THAT FEE IS REIMBURSABLE.

IN VIEW OF THE ABOVE THE DISALLOWANCE OF YOUR CLAIM IS SUSTAINED.