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Relocation benefits vary for home sellers

It's never easy to sell a home and move long-distance. When you relocate, either for your current company or to take a new job, your employer might help you sell your house.

Employers, often through relocation companies, offer three basic levels of service. From least lavish to most lavish, they are:

  • Marketing assistance;
  • Buyer value option;
  • Guaranteed offer.

The transferee's employer decides the level of service. It often depends on where the employee stands in the company hierarchy.

"A higher level may get a guaranteed buyout, and a lower level might get a buyer value option or marketing assistance," says Lina Paskevicius, a consulting manager for Cendant Mobility.

Whatever the level of service, the goals are to keep the worker productive and to reduce taxes for both the employee and the company. Some employers perform the relocation work out of their human resources departments, but most hire relocation companies to attend to the details because it's what they specialize in.

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The basic level
How does a transferee benefit from that expertise? It depends on the level of service. A lower-tier employee might receive marketing assistance only. Commonly, the transferee will be assigned a consultant from the relocation company who will explain the relocation policy and benefits, help select a real estate agent, pick an appropriate asking price and offer advice on staging the house to make it attractive to prospective buyers.

The relocation consultant acts as a liaison between the seller and the real estate agent, ready to apply a little social lubricant. "Oftentimes," Paskevicius says, "it's easier for a third party to tell a transferee that they've got to get rid of that orange wallpaper."

Mid-level services
In this basic level of service, the transferee sells directly to the buyer. With the next level of service, the buyer value option, the transferee finds a buyer and negotiates a selling price. Then the transferee sells the house to the relocation company at the agreed-upon price. The relocation company turns around and sells to the buyer at that price.

This convoluted approach saves taxes for both the seller and the employer. The seller doesn't pay a real estate commission, which means that the employer doesn't have to reimburse the seller for it. That's good from the seller's standpoint because he or she would pay income tax on the reimbursement. Ultimately the employer pays the commission and other selling costs. They are counted as operating expenses rather than employee reimbursements, with more favorable tax consequences for the employer.

For sellers, other benefits come from using the relocation company as a middleman. All the seller has to do is find a bona fide buyer who genuinely intends to purchase the house. If the deal falls through after the relocation company has bought the house, or if the buyer has to delay the closing for some reason, it's the relocation company's problem. Typically, closing is done by mail and the transferee receives the equity within a week.

Under the buyer value option, the seller has to find a buyer. That's not the case with a guaranteed offer program. Bob Packard, vice president of operations for Lexicon Relocation, calls this the "crème de la crème" -- the most all-inclusive of relocation programs.

The elite package
Under a guaranteed offer program, the seller usually is given 60 to 90 days to find a buyer. If that happens, the closing is handled the same way as a buyer value option, with the relocation company as middleman. While the house is being marketed, two appraisals are performed on the house, and if the appraised values are close to each other, they are averaged. That sum is the guaranteed offer.

"If you want, you can take the offer," Packard says. "The transferee takes the money, moves on, and buys a house. The relocation company puts it back on the market. That way, the carrying costs associated with that house are the company's expenses vs. the employee's expenses. They can get on with the move and be productive at the other end."

The transferee can continue to try to sell the house for a while, even after the guaranteed offer is made. The object is to snag a price that's higher than the guaranteed offer. If the transferee succeeds in getting a better price, the guaranteed offer amount is amended to the higher amount, and that's how much the transferee gets.

What if the transferee takes the guaranteed offer and the relocation company sells the house for more? First of all, says Paskevicius, that's not likely to happen, because the house will have been on the market for several months, and it's probably empty and forlorn-looking. But if the house is sold for more than the guaranteed offer, the extra money goes to the employer, not to the transferee who once owned the house. In the more likely possibility that the house sells for less than the guaranteed offer, the transferee keeps his or her money and the employer absorbs the loss.

Many relocation programs offer incentives for selling the house quickly by asking for a reasonable price. The most common incentive is to offer the transferee a certain amount (typically 2 percent of the sale price) if the house is sold by a deadline. The seller can pocket the money, spend it on repairs or use it to pay discount points on the buyer's mortgage.

One seller says his home in northern Virginia had declined in value when he got an offer to relocate to Baltimore. The relocation company offered him this deal: If he sold the house within 90 days, he would be reimbursed for 90 percent of his loss; if it took longer than that and he accepted the guaranteed offer, he would be reimbursed for 50 percent of his loss. In the end, he accepted the guaranteed offer and the 50 percent reimbursement for his loss. "In the grand scheme of things, it was a pretty good deal," he says.

Sometimes a homeowner remodels a bathroom or makes some other kind of capital improvement, but the project's cost exceeds the added value to the house. It can't hurt to ask to be reimbursed for the difference. Some relocation plans will allow it and others won't.

 

-- Posted: July 7, 2004

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