B-208287, APR 15, 1983

B-208287, APR 15, 1983

DIGEST: REIMBURSEMENT OF A REAL ESTATE COMMISSION FOR SALE OF A RESIDENCE AT THE OLD DUTY STATION IS LIMITED TO THE GENERAL RATE CUSTOMARILY CHARGED IN THE LOCAL AREA WHEN THE RESIDENCE WAS SOLD. WITHOUT A SURVEY OR OTHER FACTUAL EVIDENCE SHOWING THAT THE GENERAL COMMISSION RATE WAS 7 PERCENT, THE APPROVAL OF THAT RATE, EVEN THOUGH BY AN OFFICIAL AT THE OLD DUTY STATION, DOES NOT REBUT THE PRESUMPTION THAT THE RATE OF 6 PERCENT FURNISHED BY THE DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT WAS THE GENERAL RATE TO BE REIMBURSED. FURTHER, A BONUS OF $1,000, ALTHOUGH PAID TO THE REALTOR TO EXPEDITE THE SALE, EXCEEDED THE GENERAL RATE AND IS DISALLOWED. PARAGRAPHS 2-6.2A, 2-6.3B-C, FTR.

EDWARD M. JONES:

AN AUTHORIZED CERTIFYING OFFICER FOR THE DEPARTMENT OF AGRICULTURE HAS REQUESTED AN ADVANCE DECISION CONCERNING THE REAL ESTATE EXPENSE CLAIM SUBMITTED BY MR. EDWIN M. JONES, JR., AN EMPLOYEE OF THE STATISTICAL REPORTING SERVICE. UNLESS THE ACCOUNTABLE OFFICER HAS EVIDENCE OF A HIGHER REALTOR'S COMMISSION GENERALLY PAID IN THE LOCALITY OF THE HOME SOLD, MR. JONES IS LIMITED TO REIMBURSEMENT OF A 6 PERCENT REAL ESTATE COMMISSION, THE RATE DETERMINED BY THE DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT TO BE THE PREVAILING RATE IN THE LOCAL AREA. FURTHER, MR. JONES IS NOT ENTITLED TO REIMBURSEMENT FOR A $1,000 BONUS HE PAID THE SELLING AGENT TO EXPEDITE THE SALE.

BACKGROUND

MR. JONES TRANSFERRED FROM LOUISVILLE, KENTUCKY, TO RALEIGH, NORTH CAROLINA, ON AUGUST 10, 1981. HE SOLD HIS LOUISVILLE RESIDENCE THROUGH A REALTOR ON JULY 31, 1981. HE PAID A REAL ESTATE COMMISSION OF 7 PERCENT OF THE SALES PRICE AND AN ADDITIONAL $1,000 COMMISSION BONUS TO THE SELLING AGENT.

THE APPROVING OFFICER IN LOUISVILLE ALLOWED REIMBURSEMENT OF THE 7 PERCENT COMMISSION BUT DISALLOWED THE $1,000 BONUS. THE NATIONAL FINANCE CENTER, DEPARTMENT OF AGRICULTURE, CONTACTED THE LOUISVILLE OFFICE OF THE DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT TO DETERMINE THE PREVAILING REAL ESTATE COMMISSION IN THE LOUISVILLE AREA. IT ADVISED THAT 6 PERCENT WAS NORMAL FOR THAT AREA. HOWEVER, SINCE THE NATIONAL FINANCE CENTER BELIEVED THE ADVICE OF THE HOUSING AND URBAN DEVELOPMENT ADMINISTRATION TO BE A GUIDELINE AND NOT A RIGID LIMITATION, IT PERMITTED REIMBURSEMENT OF THE 7-PERCENT COMMISSION THAT THE APPROVING OFFICER DETERMINED WAS NORMAL IN LOUISVILLE.

CONCERNING THE $1,000 COMMISSION BONUS, MR. JONES STATES THAT IT WAS PAID TO INDUCE AGENTS TO INCREASE THE NUMBER OF PROSPECTIVE BUYERS EXAMINING THE RESIDENCE. A LETTER FROM THE REALTOR STATES THAT THE BONUS PROVIDED AN INCENTIVE FOR AGENTS TO SELL THE HOME AT A REASONABLE PRICE IN A TIMELY MANNER WHEN THE REAL ESTATE MARKET WAS DETERIORATING. ALSO, THE EXECUTIVE DIRECTOR, LOUISVILLE BOARD OF REALTORS, WROTE MR. JONES THAT IT HAS BEEN A PRACTICE IN THE LOUISVILLE AREA FOR THE OWNER TO OFFER AN EXTRA BONUS TO THE AGENT WHO BRINGS THE BUYER TO THE HOUSE, PARTICULARLY WITH THE EXISTING SLUGGISH REAL ESTATE MARKET.

THE CERTIFYING OFFICER ASKS WHETHER REIMBURSEMENT OF THE 7-PERCENT COMMISSION WAS IN ERROR IN VIEW OF THE DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT'S ADVICE THAT THE PREVAILING COMMISSION RATE WAS 6 PERCENT. SHE ALSO ASKS WHETHER THE $1,000 BONUS SHOULD BE CONSIDERED A COMMISSION IN EXCESS OF THE NORMAL PAYMENT, EVEN THOUGH THE REALTOR AND THE LOUISVILLE BOARD OF REALTORS STATE THAT SUCH PAYMENT IS A COMMON PRACTICE IN THE LOUISVILLE AREA.

APPLICABLE LAW

REIMBURSEMENT OF A REAL ESTATE COMMISSION MAY NOT EXCEED RATES "GENERALLY CHARGED FOR SUCH SERVICES BY THE BROKER OR BROKERS IN THE LOCALITY OF THE OLD OFFICIAL STATION." PARAGRAPH 2-6.2A OF THE FEDERAL TRAVEL REGULATIONS, FPMR 101-7 (MAY 1973) (FTR).

WE HAVE CONSISTENTLY HELD THAT THE REGULATIONS LIMIT REIMBURSEMENT FOR REAL ESTATE COMMISSIONS TO THE RATE GENERALLY CHARGED BY REAL ESTATE BROKERS IN THE AREA, NOT THE RATE CHARGED BY THE PARTICULAR BROKER USED BY THE EMPLOYEE TO SELL HIS RESIDENCE. MATTER OF SYMONS, B-188527, JANUARY 26, 1978; MATTER OF FREUNDT, B-181129, AUGUST 19, 1974. THESE PROVISIONS DO NOT ALLOW REIMBURSEMENT FOR SALES COMMISSIONS ABOVE THE GENERAL AREA RATE, EVEN WHERE THE HIGHER COMMISSION RATE WAS NEEDED TO EXPEDITE THE SALE. MATTER OF WESTMORELAND, B-196517, FEBRUARY 19, 1980. CONSISTENT WITH THESE DECISIONS, WE HAVE DISALLOWED BONUSES SHOWING THAT PAYMENT OF SUCH BONUSES WAS THE CUSTOMARY OR SHOWING THAT PAYMENT OF SUCH BONUSES WAS THE CUSTOMARY OR USUAL PRACTICE IN THE AREA OF THE RESIDENCE SOLD. MATTER OF FURBISH, B-197961, AUGUST 25, 1980. MATTER OF KNAEBEL, B-205550, MARCH 11, 1982; MATTER OF REIHSEN, B-205849, JUNE 2, 1982.

APPLICATIONS FOR REIMBURSEMENT OF EXPENSES FOR THE SALE OF A RESIDENCE ARE GENERALLY SENT TO THE EMPLOYEE'S OLD OFFICIAL STATION FOR REVIEW AND APPROVAL "TO DETERMINE WHETHER THE EXPENSES CLAIMED ARE REASONABLE IN AMOUNT AND CUSTOMARILY PAID BY THE SELLER IN THE LOCALITY WHERE THE PROPERTY IS LOCATED." COSTS HIGHER THAN NORMAL ARE TO BE DISALLOWED. FINAL ADMINISTRATIVE APPROVAL OF PAYMENT IS EXECUTED BY AN APPROPRIATE OFFICIAL WHO "MAY ACCEPT AS CONCLUSIVE THE REQUIRED PRIOR APPROVALS COVERING REASONABLENESS AND CUSTOM." BUT THE OFFICIAL MAKING FINAL APPROVAL MUST INDEPENDENTLY DETERMINE, AMONG OTHER THINGS, "WHETHER ALL CONDITIONS AND REQUIREMENTS UNDER WHICH ALLOWANCES HAVE BEEN PAID HAVE BEEN MET." PARAGRAPH 2-6.3B OF THE FTR.

AGENCIES MAY RECEIVE TECHNICAL ASSISTANCE IN DETERMINING THE REASONABLENESS OF REAL ESTATE COSTS FROM THE LOCAL OR AREA OFFICE OF THE DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT SERVING THE AREA WHERE THE EXPENSES ARE INCURRED. THESE OFFICES MAINTAIN AND FURNISH A CURRENT "SCHEDULE OF CLOSING COSTS" APPLICABLE TO THE AREA. IT LISTS CLOSING COSTS TYPICALLY CHARGED FOR PURCHASE AND SALE OF SINGLE FAMILY PROPERTIES IN THE LOCALITY. IN DETERMINING REASONABLENESS OF COSTS AND APPROVING REIMBURSEMENT, "THESE CLOSING COSTS SHOULD BE USED AS GUIDELINES AND NOT AS RIGID LIMITATIONS." PARAGRAPH 2-6.3C OF THE FTR.

ALTHOUGH THE INFORMATION FROM THE DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT ON THE COSTS DOES NOT ESTABLISH AN INFLEXIBLE RATE, WE HAVE REPEATEDLY HELD THAT THE INFORMATION CREATES A REBUTTABLE PRESUMPTION AS TO THE PREVAILING BROKERAGE COMMISSION RATE IN THE LOCAL AREA. MATTER OF GROESCHEN, B-186741, NOVEMBER 30, 1976; KNAEBEL, CITED ABOVE. THE PRESUMPTION MAY BE OVERCOME BY A SURVEY OF THE REAL ESTATE BROKERS IN THE AREA SHOWING A HIGHER TYPICAL RATE. B-173091, JUNE 22, 1971; B-174022, DECEMBER 28, 1971; AND B-174625, JANUARY 17, 1972. THESE DECISIONS STATE, HOWEVER, THAT WITHOUT SUCH EVIDENCE THE PRESUMPTION CREATED BY THE DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT'S SCHEDULE OF CLOSING COSTS IS CONTROLLING. COMPARE SYMONS, CITED ABOVE.

CONCLUSIONS

IN THE PRESENT CASE, THE LOCAL APPROVING OFFICIAL AT THE OLD DUTY STATION AUTHORIZED A 7-PERCENT COMMISSION RATE IN LOUISVILLE, EVEN THOUGH THE LOUISVILLE OFFICE OF THE DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT REPORTED A PREVAILING RATE OF ONLY 6 PERCENT. WE HAVE NO INDICATION IN OUR RECORDS THAT THE 6-PERCENT RATE WAS OTHER THAN AN ACCURATE GENERAL AVERAGE IN EFFECT WHEN MR. JONES SOLD HIS HOME ON JULY 31, 1981. FURTHER, THERE IS NOTHING IN THE RECORD TO SUGGEST THAT THE LOCAL APPROVING OFFICIAL BASED HIS DETERMINATION OF A 7-PERCENT PREVAILING RATE ON A SURVEY OR OTHER FACTUAL INFORMATION CURRENT WHEN THE HOUSE WAS SOLD.

ALTHOUGH THE FINAL APPROVING OFFICIAL MAY ACCEPT THE OLD OFFICIAL STATION'S DETERMINATION OF THE GENERAL AVERAGE RATE AS CONCLUSIVE UNDER PARAGRAPH 2-6.3B OF THE FTR, HE MAY DO SO ONLY IF HE HAS INDEPENDENTLY DETERMINED THAT THE OLD OFFICIAL STATION HAS COMPLIED WITH "ALL CONDITIONS AND REQUIREMENTS" FOR REIMBURSEMENT. THE CONDITIONS INCLUDE THE NECESSITY OF THE OLD OFFICIAL STATION BASING ITS DETERMINATION ON A CURRENT SURVEY OF REAL ESTATE COMMISSION RATES OR OTHER FACTUAL EVIDENCE REBUTTING THE PRESUMPTION THAT THE DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT'S LOCAL OFFICE WAS CORRECT.

THEREFORE, UNLESS THERE WAS A CURRENT SURVEY OR OTHER EVIDENCE SHOWING THAT THE 7-PERCENT COMMISSION RATE PAID BY MR. JONES WAS THE GENERAL AVERAGE WHEN THE HOME WAS SOLD, THE PROPER RATE FOR REIMBURSEMENT MUST BE CONSIDERED TO HAVE BEEN 6 PERCENT AND COLLECTION ACTION MUST BE TAKEN FOR THE OVERPAYMENT. WE LACK SUFFICIENT INFORMATION TO ISSUE A DEFINITIVE DECISION ON THE QUESTION. IN RESOLVING THE MATTER, THE FINAL APPROVING OFFICIAL SHOULD ASCERTAIN WHETHER THE OLD OFFICIAL STATION'S 7-PERCENT DETERMINATION WAS SUPPORTED BY A CURRENT SURVEY OR OTHER FACTUAL EVIDENCE. SEE MATTER OF REAL ESTATE EXPENSES, 54 COMP.GEN.827 (1975).

SINCE THE $1,000 BONUS PAID TO THE REALTOR TO EXPEDITE THE SALE EXCEEDED THE PREVAILING COMMISSION RATE IN THE LOUISVILLE AREA, IT MUST BE DISALLOWED.