I will be asked to accept a real estate relocation soon. Can you share more detail about the relocation process?

April 7, 2015

Real estate relocation companies come in all shapes and sizes. It is near impossible to track volume, but about one million employees are relocated by their company in the US annually.

 

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Reader Question: Your recent answer to the relocating employee caught my eye. I will be asked to accept real estate relocation soon. My employer has no relocation benefit described in the company policy. Our HR director admits to limited relocation knowledge. Can you share more detail about the relocation process? Jonathan K.

Monty’s Answer: Corporations hold different viewpoints on how to manage relocation benefits. The employing company often has a relocation benefit in place that assists the employee both administratively and financially in making the move. The benefits can range from a lump sum program to a total cost protection environment.

One possibility why your employer has no published policy is that the company internally negotiates with employees without the services of a relocation company at the time they offer the relocation. Other companies believe the benefits of utilizing a relocation company outweigh the benefits of internal management. Those benefits include specialized expertise to relocate families faster and more efficiently and that utilizing a relocation service frees internal employee(s) to focus on their core competencies at the company. While relocating employees is an expensive proposition, a well-managed program and smart policy can reduce relocation costs.

The core benefit is a home purchase

The employee sells their home in the old location to the employer allowing them to purchase a home in the new location. Here are descriptions of three popular programs to help the employee to the new location quickly and efficiently:

REGULAR ACQUISITION

  • The corporation initiates the process through the relocation company by identifying a relocating employee.
  • A relocation counselor contacts the employee and explains the program.
  • Home value is established by appraisals averaged together to become the guaranteed buyout.
  • The employee attempts to secure a buyer that is better than the company offer. If they cannot, it triggers the guaranteed buyout.
  • The relocation company then manages the resale of the property to an “ outside party buyer. ”

AMENDED VALUE SALE

  • The initial steps are similar to the Regular Acquisition program.
  • This program changes at the point the employee receives an offer. The relocation company matches the offer to purchase from the “ outside party buyer. “
  • The employee accepts the amended sale and sells the house to the relocation company.
  • The relocation company then proceeds to resell the house to the ” outside party buyer. “
  • If the offer from the “ outside party buyer “does not close, the employee is not affected.

BUYER VALUE OPTION (BVO)

  • Similar to the Amended Value sale, in that an offer from an outside party buyer sets the buyout price to the employee.
  • The relocation company purchases the property at the price offered by the ” outside party buyer ” and proceeds to resell the house to the ” outside party buyer ” and manages the resale of the property.
  • The BVO is dissimilar in that there are no appraisals or inspections performed on the property.
  • The employee is required to secure an offer to purchase from an outside party buyer, and it is that offer that is the basis for the sale price offered to the employee.

There are other twists, programs and options. These examples are not offered simultaneously within a company.

Will your company add relocation benefits?

Employees being relocated have been known to convince their employer to add relocation benefits to the company benefits package. While incorporating such benefits is a management decision, there are instances where companies have done so. While many relocation companies require a set minimum volume to put a contract in place, other companies see small users growing into good accounts and will create a contract for one or two moves. It may take an effort to identify several potential relocation service companies. Perform an Internet search by typing “corporate relocation service providers” in the search bar to identify them.

Impact of relocation on the economy

There are many relocation companies, large and small, boutiques, specialty shops and more, that process about a million US relocations annually. Like any other business, these companies are not created equal.

According to Worldwide ERC, an industry trade association, the average cost to move an employee in 2013, depending on a variety of factors, is between twenty-two thousand and ninety thousand dollars. The capital flowing into the economy generated by relocations is spread over many types of businesses from van lines to furniture, landscaping and more.