BNUMBER:  B-258932
DATE:  September 19, 1995
TITLE:  James A. Fairley

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Matter of:James A. Fairley

File:     B-258932

Date:     September 19, 1995

DIGEST

1.  A transferred employee sold his residence in the vicinity of his 
old duty station and claims reimbursement for a 6-ï¿½ percent broker's 
commission.  Under 41 C.F.R.  302-6.2(a), real estate broker's fees 
may be paid but not in excess of the rates generally charged in the 
locality.  The Housing and Urban Development office which monitors the 
real estate market in the area of his old duty station informed the 
agency that the customary commission fee in the locality is 6 percent.  
Since the commission generally charged by the real estate brokers 
there does not exceed 6 percent, the employee's reimbursement is 
limited to that percentage.  Raymond L. Hipsher, B-214555, Aug. 28, 
1984; and Gene C. Nicko, B-232313, Jan. 9, 1989.

2.  A transferred employee claims reimbursement for a document 
preparation fee he paid in connection with the purchase of a residence 
in the vicinity of his new duty station.  Since 41 C.F.R.  302-6.2(c) 
(1994) specifically authorizes reimbursement for the cost of preparing 
conveyances and other related instruments, that expense may be 
allowed.  James A. Schampers, 69 Comp. Gen. 573 (1990).

3.  A transferred employee claims reimbursement for an underwriter's 
fee and a tax service fee he paid in connection with the purchase of a 
residence in the vicinity of his new duty station.  Under 41 C.F.R.  
302-6.2(d)(2)(v) (1994), no fee, cost, or expense determined to be 
part of finance charges under the Truth in Lending Act or Regulation Z 
is reimbursable.  Since the claimed expenses are identifiable as being 
lender finance charges incident to the extension of credit, they may 
not be reimbursed.  George C. Souders, B-248457, Sept. 29, 1992.

4.  A transferred employee claims reimbursement for a processing fee 
charged by the lender in connection with the purchase of a residence 
in the vicinity of his new duty station.  If the fee represents part 
of the administrative cost of processing paperwork associated with a 
loan origination fee, this charge may not be paid because the maximum 
amount allowable has already been paid as a loan origination fee.  If 
the fee is not part of the loan origination fee, then it is an 
additional charge by the lender incident to the extension of credit 
and not reimbursable.  William T. Bigby, B-221162, June 10, 1986.

5.  A transferred employee purchased a residence in the vicinity of 
his new duty station and paid for a separate owner's title insurance 
policy in addition to the lender's title insurance policy.  He seeks 
reimbursement for the cost of the owner's policy.  Under 41 C.F.R.  
302-6.2(d)(1)(ix) (1994), the cost of such policy may be reimbursed 
only if it is a prerequisite to financing and required by the lender.  
Since there is nothing in the record to show that the owner's policy 
was required by the lender, the employee may not be reimbursed.  
Eldean K. Minary, B-250724, May 2, 1994.

6.  A transferred employee claims reimbursement for a homeowner's 
association transfer fee in connection with his purchase of a 
residence in the vicinity of his new duty station.  Membership fees in 
cooperatively owned homes or apartments are deemed items of added 
value benefiting the purchaser.  Since such memberships are deemed 
part of the ownership purchase price, a fee charged to transfer or 
acquire that ownership right is also part of the purchase price and 
may not be reimbursed.  Nathaniel E. Green, 61 Comp. Gen. 352 (1982).

DECISION

This decision responds to an appeal by Mr. James A. Fairley from our 
Claims Group's Settlement Z-2869090, June 22, 1994, which disallowed a 
number of real estate related expenses claimed by him for residence 
purchase and sale incident to a permanent change-of-station in October 
1992.  We conclude that of the expenses which were disallowed only the 
document preparation fee incident to his residence purchase may be 
allowed, for the following reasons.

Mr. Fairley, an employee of the Department of Veterans Affairs 
stationed in Biloxi, Mississippi, was transferred to Denver, Colorado, 
effective October 18, 1992.  Incident to that transfer, he sold a 
residence in the Biloxi area and purchased a residence in the Denver 
area.  Some of the expenses incurred for both the sale and the 
purchase were disallowed by the agency and by our Claims Group.  Of 
the expenses disallowed, Mr. Fairley now contends that the following 
expenses should be allowed:

     Sale:   The ï¿½ percent of the 6-ï¿½ percent real estate broker's fee 
             disallowed.  Allowed $9,480, disallowed $790.

     Purchase:Document Preparation Fee - $130
             Tax Service Fee - $60
             Underwriting Fee - $110
             Processing Fee - $100
             Mortgage Title Insurance (Owner's) - $730
             Homeowners Association Transfer Fee - $75

OPINION

Under the provisions of 5 U.S.C.  5724a(a)(4) (1988), and the 
implementing regulations contained in Part 302-6 of the Federal Travel 
Regulation (FTR),[1] transferred employees are entitled to be 
reimbursed for certain real estate expenses in connection with the 
sale and purchase of residences.

RESIDENCE SALES EXPENSE

Section 302-6.2(a) of the FTR[2] authorizes reimbursement for real 
estate broker's fees, "but not in excess of rates generally charged 
for such services . . . in the locality of the old official station," 
and section 302-6.3(c) of the FTR[3] authorizes the use of the local 
or area offices of the Department of Housing and Urban Development 
(HUD) to assist in determining the reasonableness of a real estate 
related expense.  The HUD office in Jackson, Mississippi, determined 
that the customary rate for a broker's commission in the Biloxi area 
is 6 percent.

Mr. Fairley asserts that the area of his former residence is in a 
completely different market than the market of the Jackson, 
Mississippi, office of HUD.  As a result, its finding would not 
reflect the market in Biloxi.  His position is that the 6-ï¿½ percent 
broker's fee charged him was consistent with the fees charged in the 
Biloxi area and was well within the FTR guidelines.

We point out that the HUD office in Jackson monitors the real estate 
market in the Biloxi area and that the HUD finding was predicated on 
the Biloxi market, not the Jackson market.  We have consistently held 
that the regulations require that the applicable commission rate is 
the rate generally charged by the real estate brokers in an area, not 
the rate charged by the particular broker used by an employee to sell 
his residence.  If an employee pays a commission greater than that 
usually charged, he cannot be reimbursed for the extra commission.[4]  
Accordingly, our Claims Group's disallowance of the extra sales 
commission is sustained.

RESIDENCE PURCHASE EXPENSES

Document Preparation fee

Under section 302-6.2(c) of the FTR,[5] "costs of preparing 
conveyances, other instruments, and contracts" are specifically 
reimbursable.  While the service performed is only identified on the 
settlement sheet as a document preparation fee, since the cost of 
preparing conveyances and other related instruments is specifically 
authorized, Mr. Fairley may be reimbursed this $130 charge.[6]

Underwriter's fee; Tax service fee; and Processing fee

Section 302-6.2(d)(2)(v) of the FTR,[7] specifies that "no fee, cost, 
charge, or expense determined to be part of the finance charge under 
the Truth in Lending Act . . . and Regulation Z" is reimbursable.  We 
have held that both underwriter's and tax service fees are part of the 
lender's finance charge incident to the extension of credit and not 
reimbursable.[8]  As to the processing fee, its purpose is not 
specifically identified in the letter from the lender, First City 
Financial, dated July 16, 1993, to be different than the expected 
administrative cost of processing paperwork which would be included as 
part of a loan origination fee.  If it is part of the administrative 
cost associated with the process for which a loan origination fee is 
payable, it may not be reimbursed since the maximum amount already has 
been paid as a loan origination fee (1 percent).  If it is not 
considered part of the loan origination fee, then it must be deemed an 
additional charge made by the lender incident to the extension of 
credit and, thus, not reimbursable.[9]  Therefore, none of these three 
fees may be reimbursed to Mr. Fairley.

Mortgage title insurance (Owner's)

Generally, an owner's title insurance policy is insurance obtained by 
an employee for his own protection when purchasing a residence, and is 
reimbursable under limited circumstances.  Section 302-6.2(d)(1)(ix) 
of the FTR,[10] authorizes reimbursement for the cost of such a policy 
only "if it is a prerequisite to financing," or the policy "is 
inseparable from the cost of other insurance which is a prerequisite 
to financing."  We have held that while the purchase of an owner's 
title insurance policy may have been appropriate, the evidence must 
show that purchase of such insurance was required by the lender as a 
prerequisite to obtaining financing, not merely as a matter of 
prudence for the employee's own protection.[11] Since there is nothing 
in the record to show that owner's title insurance was a financing 
prerequisite, Mr. Fairley may not be reimbursed that cost.

Homeowner's association transfer fee

Section 302-6.2(d)(1) of the FTR lists in clauses (i) through (v) 
miscellaneous expense items which are specifically allowed.  In 
addition, clause (vi) of that section permits reimbursement for other 
fees and charges similar in nature to those listed in clauses (i) 
through (v) unless specifically prohibited in section 302-6.2(d)(2) of 
the FTR.  A homeowner's association transfer fee is not listed as a 
reimbursable item under FTR section 302-6.2(d)(1)(i) through (v), nor 
is it similar in nature to those items.  We have held that 
participating memberships in condominium or cooperatively owned homes 
or apartments are regarded as items of added value continuing to 
benefit the purchaser.  As such, memberships are considered a part of 
the purchase price and not part of the cost or expense of 
purchasing.[12]  Therefore, the homeowner's association transfer fee 
may not be reimbursed.

CONCLUSION

The $130 document preparation fee may be reimbursed to Mr. Fairley.  
However, the remaining items under appeal may not be paid and our 
Claims Group's disallowance of those items is sustained.

/s/Seymour Efros
for Robert P. Murphy
General Counsel

1. 41 C.F.R. Part 302-6 (1994).

2. 41 C.F.R.  302-6.2(a) (1994).

3. 41 C.F.R.  302-6.3(c) (1994).

4. Raymond L. Hipsher, B-214555, Aug. 28, 1984, and decisions cited.  
See also Gene C. Nicko, B-232313, Jan. 9, 1989.

5. 41 C.F.R.  302-6.2(c) (1994).

6. James A. Schampers, 69 Comp. Gen. 573 (1990).  See also Kirk 
Anderson, 56 Comp. Gen. 862 (1977).

7. 41 C.F.R.  302-6.2(d)(2)(v) (1994).

8. George C. Souders, B-248457, Sept. 29, 1992, citing to Kenneth R. 
Pedde, B-223797, Apr. 20, 1987. 

9. William T. Bigby, B-221162, June 10, 1986; and Harvey C. 
Varenhorst, B-208479, Mar. 16, 1983.

10. 41 C.F.R.  302-6.2(d)(1)(ix) (1994).

11. Eldean K. Minary, B-250724, May 2, 1994, and decisions cited.

12. Nathaniel E. Green, 61 Comp. Gen. 352, 354 (1982), citing to 
Herbert W. Everett, 60 Comp. Gen. 451 (1981).