Relocation Strategies for Uncertain Times

By Staff Report

Feb. 13, 2006

End or modify mortgage interest differential assistance
Most programs require a difference of just a few percentage points, and with rates increasing from record lows, just about everyone might soon qualify for mortgage interest differential assistance. So either delete the program before this provision can drive program costs through the roof, or establish a minimum threshold (i.e., rates must be more than 10 percent or the difference greater than 5 percent for like mortgages).

Add back loss-on-sale provisions
If you add this potentially expensive provision, tie eligibility to aggressive marketing requirements like maximum list price guidelines and the requirement to present all potential offers. This will increase the likelihood of a quick sale and minimize the compounded costs of loss on sale and extensive carrying costs.

Decrease marketing time to 60 days
    This will provide a sense of urgency to transferees and encourage them to capitalize on pricing the home right initially since they won’t have the luxury of testing the market.

Increase temporary living period by additional 30 days
    Give employees a little more time to market the home while it is lived in, which is when it will show best. This also may prevent exceptions.

Give hiring managers discretion for relocation bonuses
Taking the relocation bonus out of the relocation department allows companies to implement consistent policies but provides the hiring manager (who will be paying the bill) with the opportunity to adjust the bonus to get the ideal candidate.

Provide buyer incentives, such as a mortgage buydown
    Buyer incentives will help employee properties stand out from the mounting competition, draw traffic to the listing and increase the probability of a quick sale. Mortgage buydowns are particularly effective because in addition to differentiating the home in the marketplace, they overcome affordability issues and allow those buyers who feel they may have “missed the market” to participate.

Consider revising employee incentive programs
    A sliding-scale incentive may encourage employees to price right initially, when it will have the most impact (i.e., 2 percent if an outside offer is generated within 30 days, only 1 percent over the next 30 days).

Use a lump sum for expenses
    Supported with the right level of services and counseling, a lump sum gives employees more flexibility to meet unexpected costs and stretch their allowances to cover delays, while minimizing exceptions. One company highly recommended a lump-sum credit card, which also provides valuable cost tracking and expedites the delivery of funds to transferees.

Add a payback provision
    Payback agreements dictate that employees will be responsible for covering a portion of their relocation costs if they leave the company within a specified time period after the relocation. Several companies reported they had recently extended the provisions of their payback agreement for a two-year period, rather than one. Evaluate retention statistics so management can appreciate the real cost of relocation if the company experiences a higher-than-average turnover among transferees.

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