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Changes to Federal Employee Relocation Expense Reimbursements

The General Services Administration (GSA) is poised to implement modifications to its regulations regarding reimbursement for federal employees’ relocation-related expenses. This adjustment comes in the wake of significant changes in the real estate industry, specifically regarding how commissions for real estate agents are handled.

In May 2023, the National Association of Realtors resolved several lawsuits from home sellers who claimed that the traditional practice of requiring sellers to solely cover agents’ commissions— subsequently split between buying and selling agents—was a violation of antitrust laws. These lawsuits led the association to agree to a substantial settlement of $418 million and a commitment to eliminate the shared commission model in future transactions.

Effective August 17, 2024, home buyers are now required to negotiate the contract and commission with their real estate agent at the beginning of the process. Although sellers retain the option to pay the commission for the buyer’s agent, this cost must now be explicitly negotiated between the buyer and seller.

In an upcoming notice to be published in the Federal Register, the GSA announced a pivotal update to the Federal Travel Regulation, particularly regarding the reimbursement of home purchase expenses during employee relocations. Previously, GSA regulations did not allow for the reimbursement of fees or commissions related to a home purchase at an employee’s new duty station.

The GSA explained, “As a result of changes to the residential real estate industry that went into effect on August 17, 2024, homebuyers now sign an agreement with their agent specifying the amount or rate of compensation the agent will receive, or how this amount will be determined.” This means that although sellers can still provide compensation to the buyer’s agent, such arrangements must be negotiated separately, potentially placing the burden of that commission on the buyer in certain scenarios.

To adapt to these changes in the cost structure of real estate transactions, the GSA will temporarily waive its prohibition against reimbursing federal employees for their buyer’s agent commission incurred during home purchases linked to their relocation. This waiver will take effect retroactively from August 17, 2024.

GSA further stated, “This notification is effective upon the date of signature and retroactively applies to buyer broker fees/real estate commissions incurred by an employee on and after August 17, 2024, in connection with the purchase of a residence at the new official station incident to their relocation.” This policy will remain active until it is canceled or replaced by subsequent regulations.

Source
www.govexec.com