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)
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$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**
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$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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