Relocating? – Which Home Sale Programs Are Right For You.

Each organization has its own culture, but when it comes to relocation, some things seem to apply to all. One of these is that most transferees want to relocate as efficiently as possible and — if they’re homeowners — sell the departure home as quickly as possible, for the best price.

There are several home sale program types that can help them accomplish this, including direct reimbursement, buyer value option, guaranteed buyout (appraised), and guaranteed buyout (amended). As each has its pros and cons, your company’s culture and budget will determine the best option(s) for you.

Most companies today have embraced a tiered benefits philosophy, which provides an appropriate level of assistance for all employees — from college graduates to senior executives. A carefully developed policy, coupled with professional home sale assistance, will allow you to meet your corporate and employee needs while reducing tax burdens and controlling costs. It will also help you attract and retain the best talent, as those who are homeowners consider home sale assistance an essential relocation benefit.

home saleBelow is a snapshot of the four most common home sale programs, and their pros/cons.

Direct Reimbursement: The employee typically selects a broker, markets the home, negotiates the sale, attends the closing, and pays all expenses, which are then reimbursed.

 

Advantage:

  • No risk of inventory to the company

Disadvantages:

  • No tax benefits to the company
  • Potentially significant tax liability for gross up
  • Possibility of a longer relocation process
  • The employee must attend the closing, pay selling expenses, and submit applicable non-recurring selling costs post closing for reimbursement.

Buyer Value Option (BVO): The employee’s counselor helps the employee set the list price and market the home. He/she also requests BMAs to establish value, orders inspections and a title search, and qualifies buyers.

Advantage:

  • Employees need not attend the closing

Disadvantages:

  • Must be carefully structured and managed to meet IRS regulations
  • In depressed markets, the home might not sell during the marketing period, potentially delaying the relocation
  • There is a risk of the sale falling through and the home going into inventory

Guaranteed Offer (Appraised Value): The employee’s counselor orders appraisals, inspections, and a title search, presents an offer to the employee, purchases the home, re-sells it as quickly as possible, and calculates and disburses the employee’s equity.

Advantages:

  • Can allow a relocation to proceed immediately
  • Gets critical employees in place right away
  • Offers tax benefits over direct reimbursement
  • Employees can receive equity early, allowing them to complete the new home purchase
  • Employees need not attend the closing

Disadvantages:

  • Most costly option for companies
  • Average cost of carrying home in inventory is 1.5 percent of the price per month (plus repairs, improvements, loss on sale)
  • Employees might not be happy with the guaranteed offer amount

Guaranteed Offer (Amended) Program: For an amended value sale, the process is similar to a GBO, except that the offer is adjusted to reflect any higher bona-fide offer the employee receives from an outside buyer before accepting the GBO.

Advantages:

  • Provides substantial tax benefit to the company and employee
  • Expedites the relocation process
  • Usually includes ongoing home marketing assistance to facilitate an employee sale
  • Employees can receive equity early, allowing them to complete the new home purchase
  • Employees don’t have to attend the closing

Disadvantages:

  • Must be carefully structured and managed to meet IRS regulations
  • If the home doesn’t sell during the marketing period, it will enter inventory
  • Average cost of carrying a home in inventory is 1.5 percent of the price per month (plus repairs, improvements, and loss on sale)
  • Employees might not be happy with the guaranteed offer amount

 

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