What's Changed in the Employee-Sponsored Relocation Industry?

It used to be in the relocation world, when an employee was asked to move, most “relocation” packages were pretty cookie cutter based on if an employee was a new hire, renter or homeowner.  If you were a homeowner chances were you would receive a guaranteed buyout(GBO) offer of your current home from your employer to get you moved to the new location.  Well, times have changed based on economic and housing market conditions.  But, what hasn’t changed is the need for employee mobility.  I recently read an article in Mobility, the magazine of Worldwide ERC® that highlighted some policy changes that have become more prevalent that impact the home sale portion of a company sponsored relocation.

Pre-decision counseling – offers both the company and the employee pertinent information prior to offering a relocation package.  Identifies current or further down the road issues for departure and destination. In some cases, companies may require their employees to obtain 2 market analysis and/or appraisal of their home to determine up front before any expenses are incurred in a relocation then backing out due to factors of the real estate market or out of pocket loss on sale of the home.

Increasing number of AV (amended value) sales meaning employee receives a bona fide offer from an outside buyer and a GBO (guaranteed buyout) is avoided.  Many relocation policies have been modified which may require the employee to:

  • Market their home for a specified period of time,
  • Allow employee to accept offers below the GBO amount as a policy standard – this loss may be more cost effective than letting home go to inventory
  • Provide home sale bonus to employee
  • Require employee to list within a certain percentage of the BMA and/or GBO value
  • Require employee to adjust list price of their home within 105 percent of the GBO offer
  • Require list price adjustment within 31 days of receiving GBO offer
  • Require employee to market their home during the entire GBO offer period
  • Requires employee to review all outside offers with their relocation consultant

Creating well-structured home marketing assistance programs by mandating employee do the following:

  • Fully participate in the home marketing assistance program to retain eligibility for homesale benefits, including a homesale bonus, loss of sale, etc
  • List with preferred brokers, specifically brokers with experienced relocation trained agents
  • List home within a certain percentage of 2 broker market analysis, ordering a 3rd broker market analysis if the most likely sales price of the initial 2 market analysis are 5-7% apart
  • Reduce list price after 30 days of aggressive marketing
  • Begin appraisal process after 30 days of marketing rather waiting 60 days – this way the employee will have a more realistic view of anticipated sales price and not waste precious early marketing time of the home

Providing allowances that can be offered to either the buyer or broker, i.e. capped closing cost incentive to buyer or capped broker incentives.  Providing an upfront allowance to a homeowner for repairs/improvements, general clean up or staging.

Although some of these policy changes or enhancements may require additional up-front costs on behalf of a company, they may reduce the overall cost of a homesale by increasing the number of AV sales whereby a company does not take a home in to inventory.  A general rule of thumb of the costs associated with an inventory home is 1.5 percent of its purchase price for every month the home remains unsold.  Using the Worldwide ERC® average home purchase price of $326,000, it equates to $5,430 per month, after six months that’s a cost of $32,000 per home.

While all relocation policies differ, I believe that many companies have really done a good job of balancing the need to cut costs while still offering an attractive relocation benefit to their employee.  In the end, particular attention is being paid to initial list prices especially given the amount of inventory that is available to a potential buyer.  Whether a seller has a relocation sponsored move or is moving for personal reasons, because time = money, be sure your home is the best priced home in any particular price point.

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