There must be another way……….

By

Daniel T. Bloom SCRP

Attention HR Managers: You are confronted with too many open job requisitions and so you are willing to try incentives. Providing incentives can be costly to your department's bottom line. There is a way to reduce the costs of disposing of the properties of your new hires.

In a typical home buy-out process, the corporation obtains two independent fee appraisals. Based on these appraisals, the corporation then extends an offer to purchase the home. If the new hire (or even current employees) accepts the corporation offer, the corporation takes the home into inventory. From the point when the employee vacates the home, the bills start to accumulate. The usual rule of thumb is that the cost of maintaining the home in inventory is equivalent to 1% of the appraised value of the property per month until it is sold.

Recently the relocation industry has introduced a new vehicle, which ultimately reduces your cost of purchasing the property. This vehicle is called a Buyer Value Option or BVO. The BPO process involves the employee putting the home on the market with a real estate broker. Part of the process is for the broker to advise the transferee about what is a reasonable value for the home given the present real estate market. At the time that the employee receives an acceptable offer for the property the contract is reported to the corporation. The agreed on price becomes the value for the home.

Following the receipt of the offer, the transferee will sign a contract of sale for the property with the employer at the offer price. The employer will in turn sign a purchase agreement with the prospective buyer at the same price. Unless the purchase agreement falls through the corporation's only costs are the closing costs on the property on the sale of the home to the ultimate purchaser.

While being slightly risky from a tax perspective, it is still a method for reducing the cost impact of relocations on your program's bottom line.

Daniel Bloom is President of Daniel Bloom & Associates;Inc, a company who specializes in providing custom designed relocation services to corporations nationwide. By going to our website at http://dbaiconsulting.com you are welcome to join our relocation-issues mailing list. Ask your peers about your relocation questions. You can contact Dan Bloom at dan@dbaiconsulting.com or by phone at 727-581-6216.