With home sale expenses being the costliest component of employee relocation programs, RMC’s are practiced at finding the most efficient and economical manner to handle these transactions for their clients and their employees. Let’s explore one of the programs RMC’s offer to reduce home sale cost – the Buyer Value Option Program (BVO).
What is a BVO?
To put it simply, a BVO is a program offered to relocating employees involved in a home sale that provides considerable tax savings to both the employee and their employer. This is achieved by eliminating the need for a company to reimburse their employees for their home sale expenses, thus saving their employees from paying taxes on those reimbursements (considered taxable income by the IRS). The result not only benefits the employee by removing this tax responsibility, it also meaningfully reduces overall relocation cost for the company.
How Does It Work?
With help from a relocation management company (RMC), a company can turn the costs incurred from an employee’s home sale into a business expense instead of an expense reimbursed to the employee who is then responsible for paying taxes on that reimbursement. Below is the three-step process illustrating how a BVO works:
- The employee selects a relocation certified real estate agent who assists them with finding a buyer for their home.
- After a buyer is found, the RMC buys the home from the employee for the agreed-upon price of the home.
- The RMC sells the home to the buyer for the agreed-upon price, completing the home sale transaction.
How does a BVO save the employee and the employer money?
With the RMC taking on the role of the home seller, all fees associated with the home sale are paid by the RMC (realtor commissions, closing costs, taxes) and are then billed to the company. The company can then deduct these as business expenses on their taxes.
What are other benefits of a BVO?
For the employee, a BVO removes any out-of-pocket expenses associated with their home sale. Removing the burden of these expenses allows the employee quicker access to the financial means needed to initiate a home purchase in their new location. Accelerating the relocation process in this way leads to a more efficient move experience – it’s a win-win for the employee and the employer.
For the company, a BVO does away with the need to “gross up” the expenses of their employee’s home sale cost reimbursement, thus reducing the overall cost of the relocation.
What are the risks of a BVO?
As with any home sale transaction, a BVO does carry the risk of the home sale falling through. Although rare, if it does occur, the home would enter the RMC’s inventory, incurring additional costs for the company if the home ends up selling for a lower price than it was originally listed for, or if there are any expenses necessary to keep the home in optimal selling condition until it finally sells.
Why choose a BVO over other home sale programs?
A BVO is unique in that it saves both the employer and their employee significant money during a relocation, and it increases the likelihood that the relocation process will operate in a more efficient and cost-effective manner.
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