Mobility Trends: Which is Best? GBO vs. BVO

Home Sale 2

Typically, Home Sale Programs prove to be the highest cost of an average relocation, especially when implementing a Guaranteed Buyout Offer (GBO). When compared to a Buyer Value Option (BVO) program, employers may find they are paying nearly double for a GBO program.

Home Sale Programs are often linked closely with the current real estate market and the U.S. economy. As these variables fluctuate, it is recommended for employers to take a closer look at their current Home Sale Program. When the market is performing poorly a GBO program is a sensible option. On the contrary, when the market is optimal employers may choose to switch to a BVO program to be more cost efficient.

In a situation where cost improvement is needed, Home Sale Programs generally take the hit. This cutback can be a downfall when a company is trying to keep relocation policies competitive. Making the transition from a GBO to a BVO offers a cost savings solution that will allow employers to avoid extra expense without compromising the benefit to relocating employees.

 

GBO vs. BVO Cost Comparison (*Based on a $300,000 home)

 

Guaranteed Buyout (GBO)

$18,000     Real Estate Commission (6%)

$6,000       Closing Costs (2%)

$1,500        (2) Appraisals (1) Inspection

NA               Gross-up Amount/Employer FICA

$16,000      Inventory Carrying Costs (estimated)

_________________________________________

$41,500   Total Cost to Corp per Property  (14% of Home Value)

 

Buyer Value Option (BVO)

$18,000     Real Estate Commission (6%)

$6,000       Closing Costs (2%)

$1,500        (2) Appraisals (1) Inspection

NA               Gross-up Amount/Employer FICA

$0                Inventory Carrying Costs**

_________________________________________

$25,500   Total Cost to Corp per Property (8.5% of Home Value)

**Sale fall-through rate is approximately 3%

 

Benefits of Switching

  • Consistently evaluating Home Sale Programs will keep costs low.
  • Changing the Home Sale Program to reflect the current market could eliminate the need to cut back on other components of the relocation policy.
  • Program adjustment will allow companies to remain competitive without compromising service quality.

 

Are you looking to reevaluate this aspect of your program? Let’s talk! Contact a VERSA consultant

 

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