Inman

The changing face of relocation

Faced with the possibility of a job transfer to another city? Don’t be surprised if the first thing that crosses your mind is whether you’ll lose money on the house if you moved — rather than how the change of location might impact your family.

That’s because real estate is driving many employees’ relocation decisions these days, according to businesses and trade groups that study the ins and outs of moving workers from one place to another.

In 2008, companies reported that more employees than ever turned down relocation, and their principal reason was because of the situation in the housing market — the first time in management surveys that real estate worries trumped family concerns, according to Atlas Van Lines.

"Depreciation in real estate, for the current home that folks own, is now one of the biggest challenges for companies, in terms of an employee accepting a transfer offer or not," said Scott Sullivan, executive vice present of Brookfield Global Relocation Services in Woodridge, Ill.

"The ultimatum often becomes, ‘If the company won’t cover the loss on the sale of my home, then I’m not moving,’ " Sullivan said. "Relocation, from that perspective, becomes very expensive for the companies."

Expensive, indeed. Industry estimates of the cost of moving a homeowning employee range from $60,000 to $80,000. And those costs are going up as companies devise sweeteners to induce workers to agree to a transfer in an era when homeowners are coping with the prospect of their homes being worth less — maybe far less — than they paid.

Employers have always relied on incentives of one kind or another to make the upheaval of a transfer palatable to employees. But now the focus is definitely on the house, Sullivan said.

"Years ago, when homes were selling like hotcakes, you didn’t need (real estate) incentives," he said. But like nearly everything else in today’s housing market, that’s changed.

Historically, companies have often bought transferees’ homes outright so that they could be out the door and onto a plane to the new office. And they still do that, though there may be some preliminaries first.

"The biggest factor I’ve seen is that relocation companies used to purchase the house a lot quicker," said Teresa Young, principal broker at Best Realty GMAC in Chattanooga, Tenn. "Now they’re letting them sit on the market longer." …CONTINUED

Young said she’s seeing companies offer full buyouts of employee homes, but others are offering merely to help with expenses.

Kristal Kraft, an agent for Berkshire Group Realtors in Denver, said she sees transferees whose employers have given them lump sums to relocate — and wide leeway on how to use it in the move.

But the market and the employee mindset have generated many corporate variations, Sullivan said. For example, if the employee is facing taking a loss on the sale of his house, no matter who finds a buyer, it’s becoming common for companies to underwrite the difference, he said. The amount can be significant — but there are limits.

"(Companies) tend to have a certain threshold with which they’re comfortable," Sullivan said. "We’ve seen companies taking losses on sales of $50,000 to $70,000.

"Obviously, there has to be a cutoff. But as a policy, that’s a question that many companies are wrestling with" in this market, he said.

Other options that might save a few company dollars, overall, include offering the employee a bonus if he or she can find a buyer for the home, rather than turning the matter over to a relocation company. That amount might range from 1 percent to 3 percent of the sale price of the home, Sullivan said.

Or, the boss might throw in money to fix the place up in an effort to sell it faster. Sullivan said those fix-up investments used to occur after a relocation company, on behalf of the employer, had bought the home and taken it "into inventory." Now, he said, an employer may be willing to underwrite several thousand dollars to spiff up the place while the employee is still trying to sell.

And after the employee agrees to the transfer and lands at the new destination, there’s the matter of whether he or she will be able to afford to buy a new house in an area.

With lending regulations being so much more stringent than just a few years ago, an employee might turn down a transfer because he presumes he wouldn’t qualify for a mortgage in his new area, at least at an affordable rate. So some companies may subsidize a certain percentage of monthly mortgage costs for three to five years, Sullivan said.

Of course, the presumption in all this is that companies are even considering transferring employees at all. It would hardly come as a surprise to most that the economy has dealt a blow to relocation. …CONTINUED

However, Sullivan’s company, Brookfield, reported in September that although many companies are dramatically scaling back on relocation, certain industries — telecommunications, oil and gas — are experiencing an uptick in relocation due to mergers, emerging global markets and other factors.

Nonetheless, the whole picture has been declining since 2006 and probably will see significant cutbacks this year, compared with 2008, according to Worldwide ERC, a trade association for the relocation industry.

The group said 72 percent of companies in a recent survey had reported problems with employee reluctance to relocate, and it, too, blamed housing anxiety, which far outpaced family issues as the main reason for employees balking.

The group said 70 percent of 182 companies surveyed had revised their relocation policies in the past year, a 5 percent increase from the previous year. Of 16 possible categories for policy change, 14 were housing-related, it reported.

Sullivan said that if relocation is a huge decision in a healthy economy, it’s much more complicated for both company and employee today.

"It’s difficult for the corporations, it’s difficult for the employees," he said. "If a company can’t pay for the loss on sale, some people will just have to turn down the relocation."

Employees should be prepared to negotiate the terms, he said, and the time to get ready is before an offer is presented.

"Consumers have to be negotiable," Sullivan said. "Maybe a better word is educated. If you have any inkling at all (that a job transfer is a possibility), ask now for the company policies on transfers. Ask how the company is going to keep you whole in a transaction."

Mary Umberger is a freelance writer in Chicago.

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