Understanding Home Sale Assistance Programs
The Value of Home Sale Assistance Programs
Even under the best of circumstances, selling a home can be time consuming and costly. When your relocating employees need to complete the process quickly—whether in a challenging or booming market—professional home sale assistance is a valuable relocation benefit.
Professional home sale assistance programs can:
- Help you overcome employee reluctance to relocate
- Ensure that the home sells as quickly as possible
- Enable the employee to receive the best price possible for the home
- Provide access to qualified, performance-managed real estate agents and appraisers
- Allow you to benefit from your relocation provider’s economies of scale
- Result in significant tax benefits for your company and your relocating employees
- Reduce temporary living and other relocation expenses
Whether your company is considering a home sale program for the first time, or considering revisiting its benefits, msi can help. We continuously review our home sale programs to ensure that they reflect relocation best practices and that they meet our clients’ current needs.
What Do Your Employees Expect?
Each organization has its own culture, but there are some general elements of employee relocation that apply to all. One of these is that most employees share the company’s overarching goal of accomplishing the relocation as efficiently as possible. When there are variances in expectations, they usually center around the benefits provided. Unfortunately, your desire to control costs and limit benefits (and exceptions) may sometimes conflict with your need to expedite the relocation (or to sell an employee on the idea). That’s where professional guidance becomes essential.
In today’s world, information flows much more freely than in the past, especially online and from employee to employee. Consequently, employees today are more apt to request relocation benefits and exceptions to meet their specialized needs.
Once an employee has committed to relocating, he or she is already thinking ahead to the home in the new destination. The employee wants to sell the home in the departure location as quickly as possible, for an acceptable price, and to settle into the new community. No one relishes the prospect of prolonged temporary housing for months on end, away from family and normal life.
Home Sale Assistance Programs
Direct Reimbursement Program
Direct Reimbursement programs can be an effective option when aligned with professional home marketing assistance programs. A well structured marketing assistance program assists the employee with agent selection and marketing strategies to attract a bona fide buyer. However, the employee has the burden of attending the closing, paying the selling expenses, and submitting for reimbursement of applicable non-recurring selling costs post closing.
The IRS considers the corporation’s reimbursement of real estate-related costs to be regular taxable income for the employee. Given the substantial tax bite, approximately 70 percent of corporations choose to pay the added tax due, eliminating this financial disincentive for the employee to accept the relocation. This reimbursement is known as “gross up”: the company “grosses-up” payments to the employee to account for the added tax burden associated with these income-creating reimbursements.
Unfortunately, the gross-up payments are themselves taxable to the employee, creating a circular, “tax-on-tax” liability. When all taxes, including federal, state, local and the circular “tax on tax” are considered, the gross up costs are significant. When estimating full circular gross up, 56 percent of the underlying reimbursement is typically used. This rapidly becomes a very costly arrangement for companies that relocate more than a handful of employees (see example)…Download