What Is a Sunset Clause? [Definition, Pros, and Cons]

When the housing market is unsteady, many organizations and employees that are relocating have to deal with negative equity positions and their homes being on the market for a long time. When a sunset clause is attached to a buyer value option program (BVO), the risks of having the house on the market for too long are better managed. 

The use of the BVO program is well known in the relocation business. It is basically just a well-structured and revised value transaction without there being an initial appraisal of the home. 

When using the buyer value option program, it is known that the employer intends on purchasing the employee’s home once the employee has tested the housing market and has received an offer on the house. In a BVO with a sunset clause, the buyout will occur even if the employee cannot get a buyer during the time their company has set for them to market their home.

What is a Sunset Clause? 

The purpose of a “sunset law” is typically to enable lawmakers to approve a law when government action is required for a limited period of time or when the long-term consequences of the law in question are difficult to predict. A law with a sunset clause usually can get votes because lawmakers are usually okay with making a temporary administration rather than a permanent one, due to special circumstances. 

With buyer value options, the principle is similar, although the application is different. 

Buyer Value Option and Home Appraisal

How Does a Buyer Value Option Relate to a Sunset Clause?

A sunset clause, or a sunset provision, is a contract in a regulation that will automatically expire on a specific date. A good sunset clause example is if the sunset clause date is reached, the sunset clause will provide an automatic appeal of the entire law. A sunset clause can be added to a BVO program. It sets a certain amount of time for the home to be put on the market before any appraisals are ordered and are bought out from the company. 

A sunset clause can be added to a BVO program and will set a specific amount of time for the home to be on the market before ordering any appraisals and continuing without a company buyout. A sunset clause will provide a guaranteed offer if the home does not sell after a certain amount of time of it being on the market. 

When a sunset clause is added into a BVO program, it becomes similar to a delayed guaranteed buyout (GBO). With a GBO, the appraisals get delayed or ordered after the home has been on the market for a certain amount of time set from the sunset clause, or sunset period, as opposed to the appraisals needing to be ordered right away. 

The marketing period can vary anywhere from 30 days to 240 days. However, most will choose a marketing period between 120 and 180 days. 

What is a Delayed Guaranteed Buyout?

Instead of appraisals being ordered right away, the guaranteed buyout option allows appraisals to be delayed and ordered after the home has been on the market for a certain amount of time chosen with the sunset clause. The marketing period is usually between 120 and 180 days. 

From here, everything will proceed like an amended value program (AVO), which is when the outside buyer offers the employee who is being transferred a higher price than what is listed and confirmed by the office relocation company. The main goal of the AVO program is to help the employee sell their home as quickly as possible for the best price they can get.

Home Appraiser Buyer Value Option

Why is a Sunset Clause or BVO Useful?

A sunset clause and BVO program are helpful to your employees for many reasons. It can be challenging moving to a new state. A sunset clause and a BVO program can help your employees overcome their reluctance to relocate, enable your employees to focus on productivity, help your employees receive the best possible price they can, and help your employees reduce stress for themselves and their families.

Using a sunset clause and a BVO program can be helpful to you as well. It can offer significant tax benefits to your company, promote overall cost control, and can increase productivity for you as well.  

Final Thoughts

Now that you understand how a sunset clause and a buyer value option program work, you will be prepared when you are planning your big move. If you or your business are considering relocating or are going to relocate in the future. Contact ARC Relocation to help make your move stress-free and simple.