Employees who are being relocated typically say the most stressful challenges during the process boil down to two: selling one house and buying another. Many companies attempt to reduce the stress of the first challenge by offering either a guaranteed buyout or buyer value option program.
With the recent downturn in the housing market it seemed as though clients and prospects we spoke to were turning away from traditional home buyout and bvo programs. The risk of sales falling out, high carrying costs and larger than expected losses on sale was simply too great to ignore. The market was a moving target headed in the wrong direction during the early days of the market decline.
It is well known within the relocation industry that a well managed, traditional home sale program, is still more cost effective than a direct reimbursement program or a fixed fee program. This message however was getting lost amongst the negative headlines surrounding the housing market. Some clients were prepared to trade some employee satisfaction for zero risk tolerance. What resulted was a stressed out transferee who became grumpy at the prospect of having to carry their old home for longer periods until a buyer was secured.
Thankfully with the housing market finding a bottom and poised to make a comeback I’ve noticed more clients/prospects question their direct reimbursement programs and contemplate returning to a traditional BVO/home buyout program. The cost of grossing up direct home sale reimbursements can add considerable costs to corporate relocation packages. Tax gross up can increase taxable relocation costs by 45% to 55% or more.
The conversation on switching to a bvo/guaranteed buyout program should get louder as unemployment continues to decline and competition for talent grows. No longer will it be enough to just cover the expense of selling a home, transferees will begin to demand that they be relieved of the burden of their home as soon and quickly as possible.
If you are interested in new solutions for your homeowner transferee population click here or leave a comment. I’m also interested to know whether any of your clients/prospects are considering moving away from direct reimbursement.