Recent Tweets

Follow Me on Twitter

Powered by Twitter Tools

Three Relocation Exceptions to Watch Out For…

Back in February, we discussed how important it is for relocation managers to be as consistent as possible when granting exceptions. Inconsistent exceptions not only pit employees against each other, but they can also bloat the overall relocation budget. That’s why a lot of savvy HR and relocation professionals are adamant about documenting the details behind the exceptions they grant. Later on when a similar situation comes up, or even at the end of the year when you are planning budgets, it’s just too hard to remember the rationale behind certain decisions.

Another tool in the exception tool belt is preparation. Relocation managers who are up to speed on the relocation and real estate industries should be able to anticipate the types of exception requests they will receive based on shifting markets.

And we are on the precipice…possibly right in the middle…of a big shift.

The Wall Street Journal and Zillow reported this week that, nationally, home values rose by 5.8 percent in June from one year ago, which is the largest gain since 2006. So far this year, prices are up 2.7%, the strongest year-to-date gain in June since 2005. The article also goes on say that inventory remains tight in the majority of the major housing markets. In fact, the National Association of Realtors is encouraging home owners to sell now in order to take advantage of buyers who cannot find a home.

While there are other factors that may drag down growth over the next two quarters, it would be prudent for HR and relocation managers to brace themselves for new exception requests in response to rising home prices and tight inventory. The top three we see coming down the pipe are below:

1. Request for equity advance

If your transferee is moving to a market where home inventory is tight, it is very possible that they will want to jump on a house right away, even if the current home is not yet sold. Under normal circumstances, transferees will receive their equity when their home is purchased. In this case, however, they may need their equity sooner to fund the purchase. We have seen companies give equity advances of up to 75 percent of the estimated equity in the home to help transferees. Are you prepared to offer this benefit? Don’t wait until the exception comes through to decide. Now is the time to consider your response to such a request and if your company would be amenable to help a transferee caught in this situation.

2. More temporary living

Temporary living is one of those benefits that always seems to be in the exception pool. If the housing market is down, transferees need more time in temporary living to wait out the market for their home to sell. If housing is up, transferees ask for more time in temporary living as their home sold quickly prior to finding the right house. We can’t win!

In this particular case, since there is a dearth of inventory, it’s possible that your transferee’s home will sell far more quickly than originally thought. Tight inventory at destination can exasperate the problem further. Consequently they may ask for more time in temporary living while they look for a new home. And you may be inclined to grant it.

But…not so fast! This is one exception you should turn down or modify.

Remember, their origin home is sold so the transferee does not have any “living” expenses.  The company should not bear the cost of a transferee living for free.  Knowing that this will be a temporary location, and all of the transferee’s household goods have been packed and are in storage, it may make more sense to cover furnished housing and reimburse the transferee for the difference between their origin mortgage payment and the monthly temporary living rent.

Temp living has long been the darling of exceptions. Since it’s so common, but the nuances change drastically, this is an exception where it is critical to document the rationale.

3. Extra storage and/or extra move

Again, if your transferee lives in a market where home inventory is tight, it’s possible that their home will sell more quickly than anticipated. If this is the case, and they do not have a home at destination, they may need to store their items for an additional period of time until they can find a new home. A variation of this may be an extra move.  If the transferee is moving into unfurnished temporary living accommodations, some of their household goods may need to be shipped there and then later shipped to their permanent residence.

There are bound to be more ups and downs in the housing market, but it’s safe to say that we collectively need to stop expecting that homes won’t sell and, instead, prepare for what happens when they do sell! These are just a few exceptions that we have seen in recent months and that we expect to consider.

What are you seeing?

Search

MIKE CANNING
VP, Client Services

RICK CALANNI
VP of Business Development Northeast Region

 

Site Tags

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |