Specialist examines complexities of a relocation home sale
EDITOR’S NOTE: This is the second article of a two-part interview with Steve Rogers of NEI Global Relocation.
Steve Rogers is Client Relations Manager at NEI Global Relocation and a 25-year veteran of the relocation industry.
In the first article (Homes, May 12), Steve did an excellent job in explaining some of the nuances involved in the relocation home sale process, and why it is essential for agents to be trained in relocation in order to be able to properly represent the client in such transactions.
Here is Part 2 of our interview:
MS: What are the tax implications associated with relocation home-sale programs?
SR: Since the character of these sales are different than a typical buyer/seller transaction in the local community, there are tax implications to the company and employee. In most cases the employee is either reimbursed or has the seller’s closing costs paid by the relocation company on behalf of the client company. This creates income to the employee.
MS: What are gross-ups and how do they play into relocation home-sale programs?
SR: As I mentioned previously about tax implications, there are some costs that create income to the employee and will be added to their W-2 at year-end. In order to offset the taxes on this additional income due to the relocation, most companies will gross-up or tax protect the employee for those amounts.
Gross-up policies differ from company to company and it is not a requirement to offer the benefit. A typical gross-up can average between 55 to 60 percent of the additional income, e.g. if it is a $1,000 expense and gross-up is applied, the additional cost to the company would be about $600 for tax protection of the employee.
MS: What are some of the main differences between a non-relocation home sale and a relocation home sale?
SR: The most significant difference I see is many of the relocation sales have a guarantee offer of some sort backing up the marketing efforts, something a non-relocation sale lacks.
The relocation seller has often had appraisals completed and already has a pretty good idea of the range the most likely sales price will fall.
Most relocation sales will have to be written on the relocation company’s contract or the client company’s contract of sale, which may be unfamiliar to agents and could cause concerns for an agent unfamiliar with relocation company forms.
It might also take longer to negotiate the contract since the client company has final approval for the sale. This would be especially true over a weekend. Agents must be patient since there may be more than one party involved in the negotiation process and final approvals.
All of these factors are why I emphasize that most companies will use relocationtrained, full-time agents to perform the marketing and sale of an employee’s home. These agents understand the process, the forms, the timing, the people and their roles and can assist the seller, and the buyer and their agent, in realizing a relocation sale is an excellent opportunity, but it goes on its own terms.
MS: Is there any additional information that you would like to share?
SR: Relocation sales have an added dimension that a non-relocation sale often lacks. The relocation owner has to sell in order to be at their new location in a short period of time. The non-relocation buyer may not always have this need or indeed the desire to move quickly depending on their situation.
It is critical to use relocation-trained, fulltime real estate agents in these transactions. There can be real issues when a “family friend” or “family member” participates in a relocation sale without a background in relocation sales.
We find it critical to work with a firm that has a relocation director managing a team of agents responsible for their training. There are a host of details in a relocation sale.
For example, the employee typically never signs the agreement, which is a nuance of the relocation industry and if not followed can create tax and liability issues for a company and their employees.
Michelle Sandlin has been involved in the relocation industry since 2000. She serves as Vice President/President-Elect on the Houston Relocation Professionals Board of Directors, and is Vice President/ Director of Communication & Marketing for Chicago Title. Send questions/comments to: michelle.sandlin@me.com. Follow on Twitter: @MichelleSandlin; www.facebook.com/HoustonRelocation.
If you have something to share or contribute, please send an email to michelle.sandlin@me.com. Please look for another Michelle Sandlin “On the Move” relocation article in today’s Jobs section.