Subscribe to meBack in October, 2007, the article in our newsletter titled “What’s happening with market?” discussed the beginning of the real estate market slowdown and why. The article noted one reason for the slowdown in our area was the reduction of corporate relocation of employees. I just recently came across information in an online real estate news magazine that gives more insight into the state of corporate relocation.
The article notes when the economy tightens, decision making changes. Corporations look for ways to orchestrate moves that are more efficient, to create programs that are leaner relative to benefits available to those being transferred, and to be sure that there are compelling reasons relocation is warranted. Moves must be imperative rather than discretionary.
An example of increasing the efficiency of the relocation relates to changes to the loss on sale (LOS) provision of many relocation packages. If the home the relocated employee is leaving was purchased for more than is able to be realized in a sale, the transferee is protected from absorbing that loss. Covering the loss on sale is the number one most expensive cost to the corporation. For those who are protected by such a provision, the average cost to the corporation is $20,000. In 2004, 33% of all companies had a LOS policy; 46% have one today. The percentage rose as a result of the value of homes declining and therefore the risk of loss rising quickly. Some corporations are controlling those rising costs by capping the allowable amount of the loss and by not including capital improvements made by the employee as a part of that loss on sale. Transferees might be paid 100% of loss up to a maximum amount of ‘X’.
Reasons for fewer employee relocations according to the article include the condition of the job market and how this has affected the employee’s ability to accept a transfer. With the job market in turmoil and unemployment high, most people are just happy to have a job or to find one. If the employee is required to move to keep that job, so be it. However, with dual family incomes playing such a crucial role in making ends meet, giving up one salary is not always an option. That applies even in a new hire situation. In good employment times it was fairly easy to help the trailing partner find employment. That is no longer true. The quality of the job market at the destination will play a role in whether the employee is able to make the move.
Additionally, many transferees are ‘upside down’ in their mortgages. They owe more than the house is worth. The amount may be so significant that any loss on sale protection would do little to bridge the gap. Those folks are often just unable to move. It would be unusual for the corporation to just ‘make it happen’ as might have been the case at the height of the market.
As noted back in 2007, a tightening American economy means fewer corporate employee relocations. Fewer relocations to our area means real estate transactions and therefore more competition for home buyers’ money
(Aaron Cole, is the creator of HomeSOLDin60TM, the simple six-step process created by Aaron Cole that guarantees a home seller the best chance of getting the best price for his or her home in the shortest time. To learn more about Aaron’s 60-Home Sale program, visit www.HomeSOLDin60.com or contact him at (864) 292-3333.)