Board of Contract Appeals

                 General Services Administration

                      Washington, D.C. 20405







                              

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                          March 2, 2004

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                         GSBCA 16263-RELO





               In the Matter of KEITH O. BIDDLECOM





     Keith O. Biddlecom, Belton, TX, Claimant.



     David M. England, Assistant General Counsel, Office of General Counsel, Defense

Commissary Agency, Fort Lee, VA, appearing for Department of Defense.



HYATT, Board Judge.



     An earnest money deposit and an option fee paid to the seller do not constitute

reimbursable residence transaction expenses that may be defrayed by the Government in

connection with a transferring employee's purchase of a house at the new duty station. 



                            Background



     Claimant, Keith O. Biddlecom, is a civilian employee of the Defense Commissary

Agency (DeCA).  In 2003, he was transferred from California to Fort Hood, Texas.  Incident

to this transfer, which was effective in April 2003, Mr. Biddlecom purchased a house in

Belton, Texas.  He submitted a claim for reimbursement of various expenses incurred at

closing.  The agency approved reimbursement of most of the expenses claimed, but declined

to reimburse claimant for the amounts of $500 for an earnest money deposit and $50 for an

option fee paid to the seller of the house.   Claimant asks the Board to review the

disallowance of these amounts.  



     In response to Mr. Biddlecom's request for review, DeCA explained that it disallowed

these two fees because the agency has no authority to reimburse these amounts under

applicable regulations.  



                            Discussion

          

     The agency properly concluded that it could not reimburse Mr. Biddlecom for the

amounts in issue here.  The Board has previously explained that earnest money deposits are

generally not reimbursed as real estate transaction expenses incurred incident to transfer. 

This is because 



          the earnest money deposit is simply an advanced partial payment

          toward the total amount that will be due from the purchaser at

          settlement.  This partial payment is applied at settlement as a

          credit against the total amount due from the purchaser.  The

          earnest money is not an expense, nor does it increase the total

          financial obligation of the purchaser.  If claimant had not paid

          the . . . earnest money deposit before settlement, he would have

          had to pay [that amount] . . . at settlement. Claimant is not

          entitled to reimbursement of the earnest money.



Alfred A. Davis, GSBCA 15888-RELO (Sept. 11, 2002).  Here, as in Davis, the purchase

was completed and the earnest money deposit was credited towards the purchase price of the

house.



     The option fee is similarly not eligible for reimbursement as a closing cost.  In Texas,

at the time of entering into a contract to buy a house, the purchaser may pay to the seller of

the house a nominal amount, referred to as an option fee, to preserve, for a short period of

time, the unrestricted right to terminate the contract without forfeiting the earnest money

deposit.  When the sale goes forward, the option fee is generally credited back to the buyer

at closing and applied to the purchase price of the house.  It appears, from the settlement

statement submitted by claimant, that this was the case here.  Thus, this fee, like the earnest

money deposit, may not be refunded by the agency as a reimbursable real estate transaction

expense. 



     The agency properly denied this claim.







                              _______________________________________

                              CATHERINE B. HYATT

                              Board Judge