One of the most important considerations for an employee who is relocating, is their ability to sell their current home in their current location within a fairly short period of time. If optimally facilitated, this will enable the employee to purchase a new home in the new location fairly quickly.
While many companies offer home sale assistance as a relocation benefit for their employees, there are a few different home sale programs currently in existence. However, the one that is the most favorable in terms of tax implications as recognized by IRS is the AVO (Amended Value Option) program.
The AVO program allows the employee to market the property for a set timeframe in hopes of finding a buyer to purchase the property. If the employee is successful in finding a buyer, the property is then acquired by a Relocation Management Company (RMC), that in turn sells the property to the ultimate buyer. Thus, this involves two distinct real estate transactions.
In the first transaction, the employee sells the home to the RMC, and in the second transaction, the RMC sells the home to the ultimate buyer.
BUT, a truly successful relocation home sale, also requires an effective marketing strategy, and the careful orchestration between all of the parties involved in the process. This hinges greatly on the selection of the real estate brokerage firm and the relocation qualifications and experience of the agent who will be listing the property.
Why Agent Selection is Important
While it is critical for the listing agent to have the local market knowledge and expertise needed to list a property in a specific area or neighborhood, it is even more critical for that agent to be well-versed in the relocation home sale process. Understanding the process requires intensive training, typically provided by the Relocation Department of the real estate brokerage firm.
Additionally, it is considered best practice for RMCs to work with those real estate firms that have a full-time, dedicated Relocation Director who oversees the entire process and communicates as necessary with the employee, the RMC, and the listing agent.Since relocation home sales are much different than traditional real estate transactions, the agent needs to be intimately familiar with all of the additional required paperwork that typically accompanies this type of transaction, as well as understanding and complying with the rigid procedures that must be followed to the letter.
Pricing the property appropriately is another key element to the successful relocation home sale.
One of the most useful tools in the relocation home sale process is the Broker’s Market Analysis (BMA). The BMA is a diligent analysis of the subject property’s condition, competition, and future marketability. The broker uses the BMA to evaluate the location and condition of the subject property against current market conditions, looking at both competing listings in the subject property’s neighborhood, as well as comparable properties that have sold in that neighborhood in the last six months. Based on this analysis, the broker is asked to estimate the subject property’s most likely sales price.
Since relocating employees typically have a relatively short timeframe in which to sell the property, the broker should determine the most likely sales price based on a low number of days on the market.
Marketing strategies can vary quite dramatically from agent-to-agent. Some agents might prefer more traditional means of marketing their listings, while others might take a more modern, creative approach to generate interest in the property.
Since relocation listings are often meant to move quickly, the marketing strategy might include a combination of both a more traditional approach, using email marketing and broker and public open houses, as well as the use of social media platforms to create a buzz about the property and try to entice potential buyers into wanting see the home.
We always recommend that the employee discuss the agent’s marketing strategy to make sure that it aligns with what they have in mind, and that they feel comfortable with the methods being utilized.
Negotiation and the Chain of Communication
Once an offer is received on the property, the real work begins. Thus, it is imperative that the Relocation Department and the listing agent have all of the appropriate instructions and requirements for how the contract should be written, presented and negotiated long before an offer is received. This mitigates the potential for any errors, or the possibility of any missing information that could needlessly slow down the process.
Since relocation real estate transactions are much different from traditional real estate transactions, the idea of managing the expectations of all of the parties is also a key component to the process.
Oftentimes, the agent representing the buyer of the property might not have the same level of experience and knowledge about the relocation home sale process as the listing agent. As such, it is often necessary for the listing agent to fully explain the intricacies of the process to the buyer’s agent, so that the buyers will be more comfortable with any aspects that might be unfamiliar to them.
This could include additional paperwork and property inspection reports, as well as some noticeable differences in the home sale purchase contract. For example, on a relocation home sale purchase contract, the RMC is typically listed as the owner of the property instead of the homeowner/employee.
In a relocation transaction, it could also take a little longer than expected before the contract gets signed and executed by all parties. This can be a little frustrating for both the buyer and the buyer’s agent if they aren’t aware of the protocol that is required for this type of transaction.
So, regardless of the many nuances involved in a relocation home sale transaction, professional expertise from those managing the process is the real key to success.
Would you like more about relocation home sale programs? If so, please contact VERSA anytime. We are always here to assist you!