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Employers Take Tighter Rein on Relocation Costs

July 16, 2007
Related Topics: Relocation Management, Policies and Procedures, Workforce Planning, Latest News
Relocation specialists battling rising property inventories and flattening home prices are creating measures to keep costs in check and shield themselves from shifts in an uncertain real estate market.

A recent Weichert Relocation Resources Inc. study of 106 U.S. and Canadian companies, the bulk of which have at least 5,000 employees and approve more than 100 employee moves per year, reveals that the days when relocating employees made most real estate marketing decisions are dwindling, says Ellie Sullivan of Morris Plains, New Jersey-based Weichert. Employees could select any real estate broker, but that’s no longer the case, Sullivan says. More than 60 percent of survey respondents say they require employees to list their properties with company-approved brokers.

Employees who don’t adhere to these terms run the risk of having to pay out of pocket.

“It is similar to the concept used by HMOs,” Sullivan says. “If you use a health care provider that’s out of network, then you are out of luck.”

Companies adopted this practice in response to financial losses they incurred over the years when employees too often selected a broker who wasn’t qualified for the job. “It gives companies greater quality control over the type of real estate expert that employees use.”

Companies have imposed other limitations. Approximately 60 percent of survey participants say they place restrictions on listing prices. Within this group, 34 percent require the initial list price to be no more than 105 percent of the real estate broker’s appraised value. Further, 70 percent of those participants say they require employees to market their homes for a defined minimum period of time.

“The conversations being held about relocation are similar to those circling around health care costs,” Sullivan says. “There is a need for greater control and greater education.” Yet, there is more support and infrastructure to help employees cope with a move. Many companies offer relocation counseling so workers are better equipped to handle the complex real estate component that’s involved in a transfer.

This is a smart measure, Sullivan says, because botched real estate deals can be costly—to the company as well as the employee. Almost 70 percent of the employers participating in the survey say they provide loss-on-sale assistance, with caps ranging from $10,000 to $275,000.

Sullivan doesn’t believe rising costs will significantly deter employee relocation, even when it involves midlevel managers or entry-level employees.

“There may be fluctuations in activity,” Sullivan says, “but the need of transferring is too significant to halt completely.”

Gina Ruiz

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