Relocation Insights


Buyer Value Option Programs

Many companies need recruiting tools that give them a competitive advantage in the search for talent. Relocation policies can be one of those recruiting tools, particularly in terms of offering home sale assistance.

Deciding which type of home sale assistance program will best meet a corporation's workforce mobility objectives is no easy task. One way to balance the need for assistance to the transferring family with the corporate objective of keeping relocation costs to a minimum is to offer a Buyer Value Option (BVO) home sale program.

Features and Benefits of Buyer Value Option

What is a Buyer Value Option program? Simply stated, a Buyer Value Option or BVO is a company supported home sale program that provides professional assistance and support for transferring employees selling their homes. The employee is expected to find a buyer for his/her home and the offer from the buyer establishes the value of the home. This “buyer value” is the price that the company then offers their employee. The methodology for the determination of value is the main difference between a BVO and a Guaranteed Buyout Program, which is a home sale program whereby the guaranteed value is typically based on the average of two or more appraisals with a fixed acceptance period.

How does a BVO program work? As with many home sale programs, the employee is provided with home marketing assistance, which includes help with selecting a listing agent. The employee lists the home and his/her Cornerstone Consultant provides expert marketing strategies. The goal of the program is to sell the home quickly and for the best possible price. When an independent buyer is found, Cornerstone presents an offer to the employee based on the terms of the offer from the independent buyer and closes with the employee. Cornerstone then signs a new listing agreement, draws a second contract of sale from Cornerstone to the independent buyer and closes that transaction.

BVO’s benefit both the employee and company. These benefits include: Tax Benefits: Under a direct reimbursement scenario, the IRS considers the reimbursement of home selling costs to be taxable income to the employee. Thus, companies can incur high tax assistance or gross up costs for those reimbursable expenses. However, certain home sale programs can result in exclusion of those costs.

In 2005, the IRS issued Rev. Rul. 2005-74, which answered many questions regarding Guaranteed Buyout/Amended Value Sale programs. It’s important to note that this ruling did not specifically mention BVO’s. However, the guidance provided with regard to Amended Value Programs generally matched BVO programs. Thus, most clients consider BVOs to be tax protected and, therefore, a substantial cost savings.

Increased Employee Productivity: Once the employee accepts the company’s BVO offer, the risk of the sale transfers to the company. This inherent risk to the company is an important component of a properly structured BVO program. The IRS requires two separate sales, with the expenses from the second sale not affecting the expenses of the first sale. Thus, if the second sale falls through (and the incidence of fall-through is less than 1%), the first sale (to the employee) is unaffected. The employee can focus instead on the new job as well as settling into the new home and community.

Enhanced Employee Experience: As an added benefit, the employee does not attend the closing with the independent buyer; this is handled by Cornerstone. The employee’s closing with Cornerstone is completed remotely, and equity is paid upon vacate or Cornerstone’s execution of the Contract of Sale, whichever is later. This process relieves the employee and spouse/partner of the potentially large time and monetary commitment of attending a closing in the former location or arranging for personal representation at the closing.

Combined with the expert guidance from Cornerstone that gets the home sold quickly and at the best possible price, and the benefits of a competitive BVO program, the employee’s mobility experience becomes less stressful and more supportive.

Important Tax Protection Perspectives

To help the relocation industry set proper procedures for tax protected home sale programs, Worldwide ERC developed “Eleven Key Elements and Procedures of an Amended Value Option” which were referenced in the IRS ruling. These 11 steps, as they have become known, have to be followed to help ensure tax protection. Companies can choose to deviate from the set procedures, but this can increase the risk that the IRS will challenge the tax advantage of the home sale program.

Worldwide ERC recommends eventual conversion of the BVO program to a Guaranteed Buyout for closer compliance to the IRS ruling (sometimes referred to as a “sunset clause”). Companies with sunset clauses may provide a buyout after a certain defined marketing time, such as after 180 days, if the home remains unsold. Professional home marketing assistance along with required actions by the employee, such as adhering to initial list price parameters, can reduce the need to use the clause. Even with a sunset clause, however, the cost savings of a BVO can be considerable because a property that is marketed for an indefinite period of time results in a delayed relocation, lost productivity and possible increased costs due to duplicate housing, increased temporary living and storage costs.

Cost Comparison

The average cost of a BVO ranges from 8% to 8.5% of the selling price. Compare this to the average cost of direct reimbursement with gross up, which can be 12.5% or more, depending on the gross up methodology. An illustration of the potential cost savings can be seen below:

 Direct ReimbursementBVO
Sale Price$450,000$450,000
Real Estate Commission (6%)$27,000$27,000
Closing and Carrying Costs (2%)$9,000$9,000
TOTAL COSTS$36,000$36,000
Tax Assistance (gross-up)(60%, includes tax on tax)$21,600N/A

Cost Savings Versus Risk

Based on the Cost Comparison shown above, a BVO program with ten participating employees would generate gross savings of $216,000 per year. The savings could be much more significant if home values are higher than the $450,000 used in the example above.

A comparison of risk and reward must consider that the tax benefits are, for the most part, based on the employer’s unconditional purchase of the employee’s home and the employer’s assumption of beneficial ownership of the property until the sale to the outside buyer. Cornerstone takes every possible precaution to minimize the chance of a sale fall through; however, if a sale does not close, the employer would have beneficial ownership of the home.

As the owner of the property, the employer takes on the potential for a loss on sale as well as the ongoing carrying costs, statutory compliance, fire, storm and even “slip and fall” incidents; however, the home will be insured while in inventory.


Carefully constructed and executed home sale programs such as a Buyer Value Option program provide efficiencies and take financial advantage of current tax regulations. The benefits of the program are potentially offset by the typical risks of home ownership that accompany an employer’s unconditional purchase of an employee’s home.

Company supported home sale programs are a substantial part of a comprehensive relocation program and, based on overall industry experience, provide returns that more than justify the increased risk.

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