You Know that You Need an Employee Relocation Management Company: What Should You Do Next?

by | Jan 6, 2023 | News | 4 comments

Choosing a new Relocation Management Company (RMC) to manage your global mobility and relocation program can feel like a daunting task. It’s important that you choose an RMC that best fits your workplace culture, employee needs, company budget, and work style. You’re not just buying a service or product; you’re also buying a business partner that is an extension of your company and is representing you in the marketplace. You’re also buying a culture, personalities, and processes. You are hiring a company to manage and/or provide services for the most important asset in your company, your employees. So much of the time spent in a traditional bidding process is before a company even speaks with potential suppliers to learn about the supplier’s mission, values, goals, objectives, vision, hiring standards, and key personnel.

When selecting an RMC, it comes down to two options: Going out to bid (competitive procurement) or selecting a supplier on your own (negotiated sale). In this short article, we’ll discuss the following:

  • What are the pros & cons of going out for bid & what is the most efficient and cost-effective way to go out for bid?
  • Negotiating with a preferred supplier instead of going out for bid.
  • Things to consider.

Pros & cons of going out for bid & what is the most efficient and cost-effective way to go out for bid?

Pros

Encourages competition & allows comparison: You’ll have a greater pool of RMCs to choose from and compare. Having RMCs follow a certain format by each answering the same questions allows you to easily compare answers and rule out any RMCs that don’t meet your requirements.

New service offerings: You might learn about other service offerings that you didn’t think to ask for initially.

Fully vet your options: Creating a Request for Information (RFI) and a Request for Proposal (RFP) lets you choose what you want to learn about the responding suppliers. This helps you fully understand what each RMC has to offer and allows you to ultimately choose the company that best fits your needs.

Cons

Time-consuming & costly: The bidding process can take several months, depending on your internal decision-making processes. For complex global programs with hundreds or thousands of transferees, this process may include:

  1. Procurement issuing suppliers the intent to participate in your RFI document (more about RFIs below).
  2. Developing and releasing RFI questions to RMCs.
  3. Reviewing supplier’s RFI responses which may exceed dozens of pages per respondent.
  4. Narrowing down RMCs to invite to participate in your RFP.
  5. Developing questions and releasing RFP questions to RMCs.
  6. Responding to RMC’s questions regarding the RFP.
  7. Reviewing RFP responses which may exceed 80-150 pages for each RMC.
  8. Narrowing down RMCs to participate in best and final presentations and technology demonstrations.
  9. Choosing an RMC.

The organizational costs and time spent can be an immense distraction to your company:

•  If you’re soliciting RFPs from 8-10 bidders, and the responses are anywhere between 80-150 pages from each supplier, your personnel must review all completed responses. If you think about the costs of an HR manager, a payroll manager, a procurement manager, a tax manager, an accounting manager, and a logistics manager, e.g., and their combined total hour’s spent planning and reviewing bid solicitations, this can exceed tens of thousands of dollars.

•  Once all needed staff reviews responses and the company has shortened the list and invites several prospective RMCs for in-person meetings, how many staff members are taking part in those meetings? What are their annual salaries and how many hours is each employee spending in pre-planning internal meetings, vendor presentation meetings, and post-presentation internal reviews? Even when all presentations and tech demos are conducted virtually, the combined time is immense.

•  Finally, what is the opportunity cost to your organization? Each hour your procurement managers, relocation directors, and mobility leads spend in meetings is time taken away from your transferees. While your staff is distracted by RFP responses and presentations, they are expected to simultaneously keep up with their normal workload.

Eliminating the wrong suppliers: Many viable RMCs don’t participate in competitive bidding opportunities. The reasons vary from high associated costs to having a different pricing structure that does not compare easily in an apples-to-apples review process. You could be missing out on an RMC that would be your ideal fit.

Promises of unattainable pricing: For some RMCs, winning new business is more important than meeting your needs throughout a long-term partnership. These RMCs might bid for your business and win the business, even if their proposed pricing is unattainable for their bottom line. This can cause issues during the implementation process or result in a requested fee increase in the first or second year.

Consider Issuing an RFI First

The current RFP process takes place before companies even determine suitability. Consider issuing a Request for Information (RFI) first before issuing an RFP to weed through suppliers. Ask no more than 10-20 questions. If, for example, you need someone with offices in international locations, or you a need high-tech solution, or if you want a provider with a no voicemail policy, you can weed out unqualified bidders immediately. An RFI should ask for references, and you should check those references before inviting providers to participate in the formal RFP bidding process. Pre-screen before inviting bidders to ensure those bidding meet the company’s general qualifications.

Get to Know Only a Select Few to Invite to your Bid

Choose a few potential RMCs and first ask them to provide demos or presentations. Sit down with three favorite potential providers and discuss what’s most important to them. Get to know them and then invite those select few to participate in your RFP. Talk to trusted industry colleagues and find out if the colleague’s current provider is a good fit or not, and why. Determine if a potential vendor’s work style and culture are compatible with your company’s work style/culture

If it just comes down to who has the lowest price, then issuing a full RFP might not make sense. Consider an abbreviated RFP which only covers critical aspects of your program, placing greater emphasis on cost scenarios and projections from the RMCs.

Negotiating with a preferred supplier instead of going out for bid

If going out to bid doesn’t sound like the best option for your company, the other option is the non-competitive procurement process. You can select a supplier (sole sourcing) that you know will provide the best service based on your relocation requirements, your research, and your prior communications with the supplier. This process works well if you know one or two RMCs that already fit your needs and company culture. This option also works well if you are working within a small window of time. You won’t have to review multiple in-depth proposals—just the proposals from the RMCs of your choosing.

Things to Consider

Consider the Time and Costs

Does issuing a blind bid to 8-10 bidders make economic sense for your company? Are you comfortable with the amount of internal people resources that will be pulled into the process (time and costs)? In other words, what is in the best interest of your company? Do you have the time to fully vet RMCs through a competitive procurement process, or do you need an RMC now? Do you have a couple of RMCs already in mind, or do you need more information on other options out there? Selecting an RMC is an important business decision for your company.

WHR can help:

•  Would you like to schedule a WHR product or service demo?
•  Would you like to meet to talk about our culture, values, and how we can solve your challenges?
•  Would you like WHR to participate in your RFI or RFP?

Contact Us!

Related Articles

7 Benefits of Outsourcing Your Relocation Program

8 Things to Look for in a Relocation Supplier

Providing Mortgage Support to Transferring Employees in Today’s Housing Market

by | Jan 1, 2023 | News | 0 comments

As companies compete for talent, it’s important that your organization offers the right mortgage support to transferring employees. Whether it’s a new candidate or an existing employee, don’t lose talent because your organization isn’t offering the same or more support than your competitors. Given the current housing market conditions, it’s especially important to evaluate mortgage support so that contracts are not canceled.

According to a CNBC article, “Amid higher interest rates and a softening housing market, home buyers are continuing to back out of purchase contracts at an elevated rate. About 64,000 home-purchase agreements were canceled in August, according to a new report from Redfin. That’s equal to 15.2% of home contracts initiated during the month and similar to the 15.5% canceled in July. A year ago, the share was 12.1%.”

Rising interest rates could also have a negative impact on your transferees and their willingness or ability to relocate. When some employees are finally ready to go under contract and lock in their mortgage rates, the rates could be much higher than they were when they got pre-approved or when they received an accepted offer. This could also cause a canceled contract if the new rate is unaffordable.

“Data from the National Association of Realtors shows that housing affordability has plummeted by 29% over the last year – marking the steepest annual decline on record. The downturn is attributed to rapid mortgage rate and home price growth that has significantly quelled affordability. That’s because buyers of a median-priced home are now facing monthly mortgage payments that are more than $400 higher than they were in 2021,” according to a Business Insider article.

There are many ways that your organization can help transferring employees with mortgages. Below we’ve outlined a host of options that WHR Global (WHR) can facilitate through our preferred mortgage provider network.

Mortgage Interest Differential Assistance (MIDA)

MIDA helps employees when mortgage interest rates are high by easing the gap between current market rates and the lower rates that employees have on their current mortgage. This is not to be confused with a sliding scale (explained below), or a standard 1% loan origination/loan discount benefit because those benefits are applied regardless of the interest rate. The MIDA can be paid as a direct mortgage subsidy through the mortgage company. The MIDA benefit is determined by factoring the lower amount of either the transferee’s current outstanding loan balance (rounded up to the nearest $1,000) or the new mortgage amount. The difference between their current interest rate and the new (higher) mortgage interest rate, for similar products, (i.e., 30-year fixed rate to 30-year fixed rate), and multiplying the difference by the qualifying amount:

An Example from a WHR Supplier Partner, Rocket Mortgage


3.00% Old Interest Rate
5.00% New Interest Rate
2.00% Interest Rate Differential X $400,000 Current Loan Balance (Old Mortgage)
 
$8K is the yearly mortgage interest differential (.02 x $400K = $8K)


Payout Example

Year 1: $8K x 100% = $8K Total, or $666.66/month ($8K/12 = $666.66)

According to Rocket Mortgage, “The above is just an example. You can design the overall MIDA structure to what works best with your company culture and relocation program needs. For example, you can pay the full MIDA amount in year one only, adjust the percentages each year, or lengthen the term of the MIDA payment, etc.”

Interest-Based Mortgage Subsidy

This option slowly increases the transferee’s interest rate over time. Your organization pays the difference between the current note and the lower subsidized rate. Every year, the employee’s responsibility will increase by a 1% higher subsidized rate. This helps transferees transition into the higher mortgage payment. It can be applied toward principal and/or interest. If the subsidy is interest-based, your organization’s payout is dependent on the loan amount (which may be variable). To avoid this variable, some companies define a fixed dollar amount.

Dollar-Driven Mortgage Subsidy

When an employee is moving to a higher cost of living area (not due to higher interest rates), this option provides a pre-determined dollar amount based on the employee’s level. The amount can even be determined pre-move and pre-home selection. It can be applied 100% to principal and/or interest, based on the employer’s policy. It cannot exceed the monthly mortgage payment amount. Sometimes the subsidy is payable over a period of time that the employer chooses, 3 years, e.g. The payment is made directly to the mortgage company and applied against the employee’s mortgage payment.

Sliding Scale: Buying Down Points

A one-time expense used to permanently buy down the interest rate on a new home. This is especially helpful when interest rates are rising. Your organization will designate at what rate the scale starts and what mortgage discount points will be covered for each interval of the scale. Mortgage points are prepaid interest paid upfront in exchange for a lower interest rate and lower monthly payments.

Loan Discount Points (points) – Fees used to buy down the interest rate at the time of origination for the life of the loan. Points are calculated as a percentage of a loan amount. E.g., 1 point is 1% of the loan amount. One discount point does not equal a 1% reduction in interest rate. The value of a loan discount points is based on market conditions.

Example

Let’s say the current market interest rates on a 30-year fixed rate loan is 5.25%, the transferee would be eligible for 1 loan discount point based on the example sliding scale below based on $400K loan amount: 

  • 0% – 4.99% = 0 pts
  • 5% – 5.49% = 1 pts = $4K
  • 50% – 5.99% = 1.5 pts = $6K

Buying Down Points Example on a $200K loan

0 points (4.5% APR*)
1 point (4.25% APR*)
2 points (4% APR*)
Costs per Point(s)
$0

$2000

$4000
Employee's Monthly Payment
$1,013.37

$983.88

$954.83
Total Employee Savings on a 30-year loan
N/A

$10,616.40

$21,074.40

Other Possible Ways to Help the Transferee

$3K credit: Employer to cover the closing, or the credit could be used for escrow, or used to buy down the interest rate.

“It’s so important to provide the right benefits to transferees, including mortgage support. As an organization, you don’t want to lose a valuable employee or a potential new candidate to another company.”

Ben Koceja

Client Services Manager, WHR Global (WHR)

As a Relocation Management Company, WHR can provide your employees with our pre-approved network of mortgage providers.

Contact Us!

Relocating Employees Can be Challenging: How to Reduce Costs & Keep Employees Happy

by | Dec 15, 2022 | News | 0 comments

What if we told you there was a way to reduce your transferee’s household goods moving claims, save organizational costs, and provide better customer service? Improved customer service means on-time deliveries/pick-ups and happier employees. To accomplish all this, you’ll want to make sure your Relocation Management Company (RMC) has the technology and strategies in place to facilitate these objectives.

Supplier Talent Shortages Can Mean Higher Costs

Given the talent shortage, employee relocations have increased, since now organizations must move people from different states and even countries looking way beyond their office vicinity to fill open roles. All these employee relocations, plus global assignments, mean a higher volume of work for household goods (HHG) carriers but these carriers are experiencing talent shortages too. Driver shortages can equate to HHG carriers charging higher costs that are then passed on to your organization. “While the truck driver shortage has eased slightly, it remains near its all-time high. Based on our estimates, the trucking industry is short roughly 78,000 drivers. That’s down slightly from 2021’s record of more than 81,000 – but still extremely high historically,” according to American Trucking Associations Chief Economist Bob Costello, in a 2022 Material Handling & Logistics article.

Household goods (HHG) move carriers can choose to accept or reject a move. Some may choose to accept a move even if they don’t have the workforce or equipment to handle the volume. This can translate into late pick-ups, late deliveries, undocumented crews, higher claim rates, and ultimately unhappy employees. The right RMC move management technology will avoid these potential problems and streamline the process.

Virtual Bid Board

WHR Global’s (WHR) Move Management Platform (MMP®) offers movers a virtual bid board allowing carriers to choose the moves that best suit them based on crew locations/equipment availability, and reject those moves that don’t. For each move, carriers may choose to submit their price based on what works for their time frames and traffic lanes, while avoiding overbooking. These bids are calculated on WHR’s negotiated, fully transparent single-factor rate and create a mini-RFP for each move. This is especially advantageous when carriers bid lower than the negotiated rate during the off-season or to avoid low-load or deadhead trips. That means no more empty trucks and carriers can pull moves versus having moves pushed (assigned) to them. This type of model allows the carrier to save costs, which translates into a lower quote on HHG movement being passed on to your organization. Also, since the carrier can pull the moves they want, your employees can experience more on-time deliveries, pickups, and overall better service.

After submission to MMP®, our Supply Chain team analyzes all available moving options based on locations, length of time of transit, ability to meet requested dates for the individual move, past performance overall satisfaction metrics, claims metrics, and on-time delivery percentages.

“Our Move Management Platform has been a great program, as it allows us to pair the right move company with the right move. We developed this with a focus on utilizing a pull model instead of a push model.  We want our move companies to pull moves in the direction that they want to work, as opposed to dealing with any move assigned to them.  By doing so, we feel our move network will be better served to provide great customer service. This has been especially important over the 18 months while the moving industry has dealt with severe driver and labor shortages.”
Adam Rasmussen

Supply Chain Manager, WHR Global

Ensuring Excellent Service

Speaking of service, WHR has identified critical checkpoints throughout the HHG process. Our event management system sends real-time pulse surveys to make sure everything stays on track (e.g., confirm pack and load dates, delivery dates, satisfaction feedback, and more). If an issue arises, we can immediately step in to resolve the issue between the employee and the mover.

Also, since WHR is a solely and independently owned organization with no vested interests or ownerships in any supplier organizations, we are free to choose the best HHG mover for each move. We can select suppliers with the best prices, service history, availability, transit time, technology capability, adherence to privacy requirements, references, and insurance claims percentages. When the best possible crew is selected, the probability of a claim drastically decreases, and satisfaction increases. WHR’s Supply Chain department is constantly vetting new suppliers to add to our supply chain so that we do not experience a shortage even though the HHG carrier market may be facing labor shortages.

Remember, your RMC should have the right technology and strategies in place to save you organizational costs, reduce claims, and keep your transferees and assignees happy.

You can view a short video describing WHR’s MMP platform here.

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Six Tips for Relocating Employees that Attract & Retain Talent

by | Nov 1, 2022 | News | 0 comments

Employee relocations or even temporary assignments to a new location can be complicated and stressful for your employees. You’re not just shifting employees from one location to another, you’re uprooting them from their community, friends, extended family, and everything familiar. You’re also moving their partner, children, and pets. As an employer, you have a huge responsibility when moving an employee and family to a new city, state, or even country. It’s very important that the employee’s move experience is as stress-free as possible. Employee relocations handled correctly will help your organization attract and retain valuable top talent.

1. Consider Employees’ Emotional & Mental Health: Meet their Needs

If a relocation is not handled well, the employer risks losing the employee to another company – someone whom your company may have already invested time and money into. If you want to attract and retain top talent, and you consider your employees one of your most valuable assets, remember to address more than just relocation costs and logistics. Taking care of an employee’s emotional health will pay out for years to come. Is your relocation policy meeting your employees’ needs? The right policy helps to reduce transferee stress so that employees can focus on working in their new location.

Do:

  • Give employees time off to assimilate in their new location. Many organizations give employees 2-3 paid days off.
  • Provide support to transferees’ families (spousal assistance, language lessons).
  • Gather employee post-relocation feedback to make future policy decisions (WHR Global sends out a 1-year post-relocation survey).
  • Have your Relocation Management Company (RMC) help with logistics including visas, shipping, customs fees and clearances, transportation, legal issues, and more.

The stress of moving might impact an employee’s mental health and subsequently, engagement with their employer. Transferees and their families may face a host of potential emotional and mental tolls from a relocation. According to an article in Employee Benefit News, “When it comes to employee relocation, most organizations focus on the nuts and bolts, thinking strategically about the costs associated with the move and what will be the most affordable option to get their people from point A to point B. It makes sense from a business perspective, but it’s not how to make a relocation successful. Employers must remember they are moving people, not just boxes. Any time you deal with people, you need to adopt a human-centered approach. While you’re helping them get their belongings from one place to the next, they’re dealing with switching insurances, licenses, and addresses. If they have a family, they need to enroll their children in new schools, find doctors, and a new job for their spouse or partner. On top of that, they might be dealing with some negative emotions from their family, unhappy with the move. All of this can influence how your employee feels about their new position and how they assimilate into their new role.”

 

Be Aware:

  • If one or more family members are unhappy with the move and having trouble settling in, the stress could affect the employee too. The employee might be feeling distracted, disengaged, or unhappy, and they might even consider leaving the new role and moving back to their original location. Uprooting an entire family’s life and acclimating to a new community can be stressful.
  • If an employee becomes disengaged, productivity could decline. The transferring employee may be worried about whether the new job will work out. A tired, disengaged, or distracted employee’s attitude may be felt by other team members and affect team dynamics.
  • Employee stress associated with moving to a new location might also include concerns about a partner’s career, children’s education, learning new languages, cultural differences, selling their old home, leaving old coworkers behind, or concerns about the new destination’s real estate market or crime rates.

“The Great Resignation is unprecedented; recruiters are competing against talent ready for a change and even talent that has been placed within the last two years. Employers will need to be strategic in their efforts to hire and retain.”

Kimberley Uitz, SHRM-CP, GPHR

WHR Global Human Resources Manager

Do:

Make sure you have a relocation policy that includes all potential support. The following list includes just some of the possible benefits to consider:

  • Immigration & Visa Support
  • Tax Assistance
  • Household Goods Move
  • Help Buying & Selling Homes, Finding Rentals
  • Language & Cultural Training
  • Medical Options (healthcare coverage, medical evacuation services)
  • Education Options (tuition reimbursement, tutoring)
  • Transportation Information
  • Utility Connections
  • Education Assistance
  • Site Visits/Area Orientation
  • Temporary Storage
  • Family Support
  • Ongoing Assignment Support
  • Destination Services
  • Temporary Housing
  • Driver’s License and Registration Information
  • Spousal/Partner Career Assistance

 

2. Benchmark Relocation Policy Against the Competition

Hopefully, your relocation policy is already part of your total rewards and talent management strategy. By benchmarking your policy against other companies, you will stay competitive in the war for talent. Make sure your policy provides a choice of offerings since relocation policies are wrapped into job offers. If you don’t benchmark against your competitors, you won’t know if your offerings are good or not. Are they subpar to what everyone else is offering? If you are hiring scientists, for example, and the talent is very specific and not easy to come by, you’ll want to make sure you’re competitive with salary, benefits, and your relocation policy. The right policy will help your company retain current employees and attract top prospective candidates. A weak relocation policy could have a negative impact on your recruiting and retention success rate. 

At the same time, benchmarking will ensure you’re not giving away too much when none of your competitors are doing that. Benchmarking your policy against others shows you’re in line with the industry. Maybe you’re offering unnecessary benefits and eliminating those offerings could yield cost savings. It’s also important to look at your industry and other industries you compete with for talent.

3. Compensate for Cost-of-Living Differences

Some of your employees may be moving to an area with a lower cost of living and some may be moving to a much higher-cost destination. If higher costs exist, provide a limited-term cost of living allowance to bridge the financial gap. Options for payout could include monthly, quarterly, annually, or a one-time lump sum. Set an ending time for this benefit and decide whether the benefit will slowly decrease or taper. It is best to only offer this benefit to those employees moving to higher-cost destinations; if your employee is moving from one high-cost of living area to another, consider withholding this benefit. Often, employers will establish a threshold (typically a percentage), for the benefit. Other employers will identify specific areas and only offer the benefit to employees moving to predetermined locations such as Boston, Chicago city limits, New York City, San Francisco, Geneva, Paris, London, Singapore, and Shanghai, for example.

4. Review your Relocation Policy

Review your employee relocation policy annually or every couple of years, at the very longest. It’s an opportunity to pause and look at employee survey feedback, plus confirm any changes in your company culture, driving principles, core values, talent strategy, the industry, and your competition. Make sure you’re allocating the right amount of dollars to both transferees and organizational needs. It’s also important you’re not paying for unneeded or outdated benefits. Lastly, review the purpose of your relocation program. This is a time for you to make sure your policy is aligned with your key stakeholders (talent acquisition teams, recruiting teams, and HR business partners).

To summarize, there are many benefits you’ll want to consider including in your relocation policy (not an all-inclusive list):

  • Home Sale (Guaranteed Buyout versus Buyer Value Option)
  • Direct Reimbursement
  • Policy Tiers vs Core Flex Benefits
  • Lump Sums (Lump Sum Only; Managed Lump Sum; Lump Sum in addition to other benefits)
  • Cost of Living Assistance (COLA)
  • Home Inspections (Major and/or Specialized)
  • Home Sale Bonuses
  • Loss on Sale
  • Rental Assistance/Lease Break Assistance
  • Destination Services (Temporary Housing, House Hunting Trips, Destination Closing Costs, Renter Destination Services)
  • Household Goods Movement (Vehicle Shipment; Temporary Storage)
  • Policy Exceptions

 

5. Compensate Employees for Their Tax Burdens

Tax Assistance & Tax Equalization

If you’re competing for talent and your competitors are compensating for tax burdens and you are not, you could lose in the war for talent. By offering tax benefits, you can take away some objections you might receive from current or future employees regarding relocation or assignment. Remember, in December 2017, the US government passed legislation that directly impacted taxpayers. Under the 2017 law, known as the Tax Cuts and Jobs Act (TCJA), taxpayers are unable to claim certain deductions, including job-related moving expenses.

Do:

Provide Tax Assistance

This alleviates some of the tax burdens on a portion of the employee’s income. Also referred to as gross-up, this is the additional money an employer pays their employee to offset any additional income taxes the employee would owe the IRS when that employee receives a company-provided cash benefit, like relocation expenses.

Tax Assistance Benefits
  • Helps your relocation program remain competitive
  • Improves employee retention and attraction
  • Alleviates some of the employee’s tax burdens
  • Lowers employee stress, allowing the transferee to focus on the new role sooner

Do:

Provide Tax Equalization

Tax equalization neutralizes an assignee’s tax liability associated with a global assignment. This compensation approach means an assignee pays approximately the same taxes if they remained in their home country. In other words, the assignee is not paying more or less had they not left their home country, regardless of the actual tax burden in the home and host country. WHR estimates that 95% of all global mobility programs offer tax assistance.

 

Tax Equalization Benefits
  • Decreases expatriate stress and allows the assignee to focus on the new role sooner. The less economic stress an employee feels, the more they can focus on the personal and professional development of an international opportunity.
  • Improves employee retention and recruiting efforts since the assignee would not have a tax reason to turn down a foreign assignment, transfer from one foreign country to another, or be repatriated.
  • Limits tax burden. Maintains a comparable home country tax basis for the assignee while on a foreign assignment. This means the assignee’s tax gain or loss is minimized and equalized as much as possible and remains the same had the assignee stayed in the home country.
  • Facilitates positive corporate citizenship for tax compliance in every location the company operates and eliminates the risk of local law non-compliance, tax regulations, and exchange rate controls.
“By providing tax benefits, employers help offset tax burdens for employees, and in doing so, some of the stress typically associated with relocations or international assignments can be decreased. When you consider that these benefits also help companies stay competitive, it’s a win-win for everyone,”
Jami Long

WHR Global CFO

6. Hire a Professional Relocation Management Company (RMC) that Provides 24/7/365 Dedicated Assistance to You and Your Employees

Moving is considered one of the most stressful events in a person’s life. Add in crossing international borders, plus taking care of one’s partner and children, and that stress can be even higher. The right Relocation Management Company (RMC) will partner with your organization to write, implement, and manage a global relocation program that meets your company goals and helps you attract and retain the talent you need for success.

Contact Us!

Find helpful relocation resources and guides in our Relocation Toolbox

Click Here!

What is a Buyer Value Option (BVO) Home Sale Program & How Does it Compare to a Guaranteed Buyout (GBO) Home Sale Program?

by | Sep 29, 2022 | News | 0 comments

In a Buyer Value Option program (BVO), the employee is responsible for listing their home for sale, with marketing assistance from the Relocation Management Company (RMC). The employee must secure an outside buyer willing to purchase the home at a fair market value. A BVO provides all the tax benefits to the employer and employee, but it is dependent upon the employee securing an outside buyer. If the contract is deemed valid, the employee is funded their equity based on this outside offer amount and the RMC closes the sale with the buyer at a future date. In a BVO scenario, home appraisals are never ordered.
expatriate assignment, WHR Group, expat assignment

This differs from a Guaranteed Buyout (GBO) program. Under a GBO, the RMC orders two home appraisals and then averages the two to determine a guaranteed offer. If the employee is unable to sell their home on their own, the employer takes the home into inventory and must maintain it until the company is able to resell it. This obviously carries potential risks and additional costs for an employer. A BVO, on the other hand, minimizes this risk since the employer only purchases the home after the employee has secured an outside buyer. Both BVO and GBO home sale programs provide tax benefits to the employer and employee.

Consider both options to decide which aligns best with your company objectives.

BVO versus GBO Summarized

Buyer Value Option (BVO)

  • Employee is responsible for listing their home (with marketing assistance from the relocation company), securing a buyer, and then the RMC closes the sale with the outside buyer.
  • Broker Market Analysis completed by two real estate agents to establish an appropriate marketing parameter.
  • Tax advantage for the company & transferee.
  • No home appraisals.
  • Employee is not required to attend closing.
  • Minimizes company costs as buyer is secured by employee.
  • If home sale falls through, home goes into corporate-owned inventory.
  • Employee remains financially responsible for their home until an outside offer is accepted which might delay their move to new work location.

Guaranteed Buyout (GBO)

  • RMC orders two home appraisals and then averages the two to determine a guaranteed offer.
  • Guaranteed offer expedites the relocation process so that transferee can relocate faster.
  • If the employee is unable to sell their home on their own, the employer takes the home into inventory and must maintain it until the company is able to resell it.
  • The company carries risk of owning and maintaining the home until it is sold.
  • Tax advantage for the company & transferee.
  • Employee is not required to attend closing.

WHR can help employers and employees with BVO, GBO and other home sale program benefits including:

  • Direct Reimbursement
  • Home Inspections
  • Home Sale Bonuses
  • Loss on Sale
  • Rental Assistance/Lease Break Assistance
  • Destination Services (temporary housing; house hunting trip; destination closing costs; renter destination services)
  • Household Goods Moves (plus vehicle shipment and temporary storage)
  • Lump Sum Benefits
  • Cost of Living Assistance
  • Policy Exceptions
  • Policy Tiers vs Core Flex Benefits

Let us know if we can help you with your relocation and global mobility programs

Contact: 262-523-2800, sales@whrg.com

 

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Read more about Buyer Value Option (BVO) Home Sale Programs.
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