1. C O A L I T I O N Corner Coalition Corner: Business training tools for HR staff, real estate agents and other service professionals in the relocation and real estate industries Relocation Home Sale Assistance Programs – Part 1 of 2 by Peter K. Scott, Worldwide ERC ® /Coalition Tax Counsel Washington, DC © 2005, Employee Relocation Council/Worldwide ERC ® Coalition

2. C O A L I T I O N Corner Program objectives This program supplements an editorial feature in Worldwide ERC ® ’s Mobility magazine This segment is Part 1 of a two-part series that will: –Define a number of the most prominent types of relocation home sale assistance programs in use today –Help give users a better understanding of the basic differences in each program, preparing them for Part 2, which examines the tax implications

3. C O A L I T I O N Corner Introduction Employers use different methods and programs to help relocating employees sell homes Some of the more common programs examined here include: –Appraised Value Sale –Amended Value Sale –Buyer Value Option and –Direct Reimbursement

4. C O A L I T I O N Corner Appraised Value Sale Programs In an Appraised Value Sale program: An employee’s residence is appraised by two or more independent appraisers A guaranteed offer to purchase home is made by either the employer or relocation management company (RMC) acting on its behalf The amount of the guaranteed offer is generally an average of the appraised values If accepted by employee, the employer/RMC purchases the home and attempts to find an outside buyer Once the employee enters into a binding sale contract, he/she is unaffected by whether or not the employer/RMC is able to sell home, or the price/terms of that transaction

5. C O A L I T I O N Corner In an Amended Value Sale program: An employee’s residence is appraised by two or more independent appraisers and an offer to purchase the home is made by either the employer or relocation management company (RMC) The offer amount is generally an average of the appraised values Before accepting the offer, the employee markets the home to determine whether a higher price can be obtained The employee’s listing agreement with a broker must contain an exclusion clause under which the broker will not earn a commission if the house is sold to the employer or RMC If a third party makes a bona fide purchase offer, the employer/RMC will raise its offer to equal the third party’s – hence the term “amended value” The employee contracts to sell to employer/RMC, who then enters into its own listing agreement with a real estate broker, attempting to contract with and sell the home to the same third party buyer identified by employee Employee is unaffected by outcome of second transaction, as in appraised value sale program Amended Value Sale Programs

6. C O A L I T I O N Corner In a Buyer Value Option (BVO) program: No appraisals are conducted, and no guaranteed offer is made to the employee Rather… The employee markets the house, seeking a bona fide buyer offer in market place Once received, the employer or RMC makes an offer to purchase the home at “buyer value,” as established by the outside offer The employee contracts to sell to the employer/RMC, who then enters into own listing agreement with a real estate broker, attempting to contract with and sell home to same outside buyer identified by employee Buyer Value Option Programs

7. C O A L I T I O N Corner In a Direct Reimbursement (DR) program: Employee sells the residence directly to a third-party buyer Employer reimburses the employee for some or all of the associated costs of sale Direct Reimbursement Programs

8. C O A L I T I O N Corner Conclusion Employers have several choices when assisting relocating employees with the sale of a home Each one has its own characteristics, and carries unique tax consequences In Part 2, Worldwide ERC ® Coalition Tax Counsel Pete Scott examines the tax implications of each of the home sale programs outlined here