ARC offers our clients competitive advantages over other relocation companies when providing Guaranteed Home Buyout services. That’s why we’re one of the leading relocation companies around.
However, let’s first answer the questions: “what is a home buyout program”, “how does it work” and “why do clients offer a guaranteed home buyout to their relocating employees?”
The process is approved by the client company in the company relocation policy. Most commonly the relocation company purchases the home directly from the employee at “fair market value.” Fair market value is normally determined by outside appraisals. Last the home is generally inspected for defects.
Once due diligence has been completed the relocation company purchases the home from the employee.
The reloction company holds the home in “inventory” until the home sells to an outside buyer, allowing the employee to relocate to the new location without having to wait for an outside offer on the open market.
Yes. That is one of the most utilized/needed services for some employees to relocate in a timely fashion.
Commonly known in the relocation industry as a “guaranteed home sale” or a “guaranteed home buyout” the relocation company purchases the home directly from the relocating employee to allow the employee to continue the relocation proceeds without having to wait for an offer on the open market from an outside buyer.
There are three main advantages that company recorgnize when providing a Guaranteed Buyout Offer to employees that are relocating:
1 The Guaranteed Offer expedites the process and allows the employee to relocate to their new destination without having to wait to procure an offer from the open market.
2 A Guaranteed Buyout provides tax protection for both the employee and employer in regard to the realtor commissions and selling / closing costs.
3 It reduces stress by streaming the “escrow process” by dealing with a “professional buyer” vs the a buyer and agent from the general public.
ARC uses its expertise to advise clients on best practices while following all of the IRS and ERC guidelines for relocation home sale programs. Click here to learn more about IRS regulations. Also, we are a guaranteed home buyout vendor for the United States Government under GSA schedule 653-1. Being on schedule 653-1 means our process, technical capabilities and experience have all been screened and approved by the GSA. ARC provides guaranteed home buyout and home sale services for many of the agencies who regulate these services. In turn, our experience, technology and clientele, place us at the forefront of the industry.
The following FAQs were answered by ARC Relocation Consultant Andrew Sumner, with over a decade of experience in assisting companies and transferees execute guaranteed buyout offers.
The below outlines the industry best practices that both clients and transferees should consider and why.
A GBO is the safety net provided by an employer in the event the relocating employee is unable to sell their home over a fixed period of time but is needed at their new location. A GBO is typically accepted after the transferee has marketed their home for sixty or ninety days (depending on the company relocation policy). The reason employers embrace a mandatory marketing time in their company relocation policy is to encourage the transferee to sell their home on the open market to a buyer. The GBO is only reserved in events where the transferee has marketed the home but cannot attract a buyer in time to relocate to their new location.
My job, as the Relocation Counselor, is to administer a client’s relocation policy for the transferring employee and educate them on relocation benefits such as the home sale process. It is important not to rush the employee counseling process. Once the employee reviews their GBO benefits and feels comfortable with the details, I arrange a phone call to personally speak with them. I dedicate up to an hour of my time educating, addressing questions, and easing any concerns. There are many misconceptions and concerns about buyouts, so this allows me the opportunity to separate fact from fiction before beginning the process and put the transferee at ease about the program and process.
Depending on company policy, two relocation appraisals are typically ordered, and if they are within 5% of each other, their average establishes the guaranteed buyout offer price. Some clients may allow a 7% or 10% spread, but 5% is standard in the relocation industry. If the first two appraisals are out of spread, a third appraisal is required (per the ERC guidelines). Then, the two closest usually determine the transferee’s GBO. This is the most common way that the GBO offer amount is determined. This is known as “fair market value” in the relocation industry.
I always inform the transferee that they can provide names of appraisers for consideration. If their appraisers are qualified to complete a relocation appraisal, I have no problem suggesting they use these resources. Although it’s rare for a transferee to provide appraisers for consideration, when this perk is taken advantage of, I have experienced occasions when their appraiser’s bid is lower than those supplied on our list. When this happens, it often makes providing the GBO a much smoother process.
Providing an employee with their guaranteed buyout offer should always be handled delicately by the relocation counselor, especially if the transferee’s home is priced significantly above their GBO. In real estate “over listing” a home is the largest mistake in home marketing. This often renders extended days on market and a lower ultimate sales price. A relocation counselor should know if the GBO will put the transferee in a deficit situation by asking about their mortgage balance during the initial call or seeing the balance noted on their title report. A deficit would require the transferee to send money to the relocation company prior to the acquisition of their home if they were to accept the GBO. This factor can make-or-break a phone call, so the presentation of the GBO to the transferee is vitally important.
Before delivering their GBO, I find it important to reiterate the purpose of a relocation appraisal. Most commonly the appraisers appoint a listing price for the home with an expectation to sell within a 120-day marketing period. It would be ideal for a transferee to sell their home on the open market to a buyer for a price higher than their GBO. However, in the event the transferee is unable to sell their home within 60 days (or 90 days, depending on the client), the GBO is their “fallback”. I also review what is done if an offer arrives that is greater than their GBO. (This ensures that the transferee is aware of all options to attract the highest offer on their home.)
The program’s ultimate objective is to allow the transferee to relocate whether or not an outside offer from the open market is received. The GBO price should be fair, and should reflect what the Relocation Company will ultimately resell the home for after carrying the home in their “inventory”. This is most successful when the client has established GBO requirements. If two Broker Market Analysis (BMA) are completed, many clients mandate that the list price does not exceed 105%. If these requirements exist, then a client can reduce the need to take a home into inventory.