How much can a company save using a Buyer Value Option (BVO)?

For companies that relocate employees and executives, a properly tailored and administered home sale program can save the company thousands of dollars.

Using a home value of $400,000 for example, a company can save over $16,000 per home sale — which over the life of your program can really add up to a significant cost savings.

Download the white paper to learn more about how Signature Relocation can help you save money with a tax-protected home sale program, such as as the buyer value option (BVO).

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Tax-Protected Relocation Benefits

The Tax Cuts and Jobs Act of 2017 (TCJA), effective January 1, 2018, eliminated the tax-protected status of many relocation-related benefits with one exception. Tax-protected home sale programs were not affected. A properly tailored and administered home sale program can save a company hundreds, if not thousands, of dollars by eliminating taxable reimbursements to employees on the sale of their home.

Benefits of Tax-Protected Home Sales Programs

Tax-protected home sale programs eliminate the need for tax assistance (gross-up) by avoiding taxable reimbursements of real estate commissions and other home sale closing costs. The home sale program creates two separate sale transactions: one where the transferring employee sells their home to a relocation management company (RMC), such as Signature Relocation, and the other where the RMC sells the home to the outside buyer.

With a properly structured program in place, the first transaction takes place without incurring real estate commission or other closing costs — since no costs are incurred the result is no costs are taxable to the transferring employee. All real estate commissions and closing costs are incurred on the second transaction, which are classified as ordinary business expenses to the company because the RMC, Signature, is in the business of buying and selling homes, avoiding the need for W-2 tax reporting and a costly tax gross-up.

Let Signature Relocation show you how to save thousands of dollars on employee & executive relocation using the buyer value option.

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How does buyer value option (BVO) work?

The most common type of tax-protected home sale program is the buyer value option (BVO). The BVO provides a corporation all the tax savings with limited risk. In a BVO, the employee markets their home with the assistance of the RMC, Signature Relocation, and a qualified real estate broker. An independent, third-party buyer is identified during the marketing period, at which time the RMC buys the home from the employee at the price and terms offered by the third-party buyer. The listing agreement between the employee and broker contains an exclusion clause, effectively eliminating the real estate commission and other closing costs. The RMC purchases the employee’s home, signs a sales contract with the third-party buyer at the price and terms agreed upon, and the home is sold to them. Commission and other closing costs become a business expense to the company.

What is a guaranteed buyout (GBO)?

The Guaranteed Buyout (GBO) is another tax protected home sale program. What sets the GBO program apart for a BVO program is that the initial marketing period is shorter — typically 60 to 90 days. Over the course of this marketing period, Signature Relocation arranges for property inspections and the appraisal of the property. Typically, two appraisals are obtained, unless they vary by more than 5% — in which case a third appraisal is obtained.

If a buyer is not found during the marketing period, the RMC buys the house from the employee at price determined by the average of the appraisals. Using a GBO program, while increasing risk, provides the tax savings to the company, and permits your employee to get to their new work location more quickly with limited loss of productivity.

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