Mobility Trends: Which is Best? Guaranteed Buyout Offer (GBO) vs. Buyer Value Option (BVO)

Mobility Trends

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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