Companies offering guaranteed buyouts in their relocation policy are finding that their transferees are not too happy. Is it for good reason? Yes…and no. The economy has stabilized, but the housing market still has a long way to go before there is a sustainable rebound. This can be confusing – and incredibly frustrating for employees who approach their relocation with optimism, only to learn through the appraisal process that the price of their home has sunk way below their expectations. While the appraiser, the relocation company and/or HR is not responsible for macro-economic influences, all groups should be prepared to answer tough questions about appraisals without becoming defensive. Here are the top four appraisal issues that HR should understand as we continue to manage the housing slump:
Comparable Sales are Hard to Find. Appraisers are having a difficult time finding comparable sales that are realistic. Since the market has slowed down, it’s more likely that last home sale in the subject market area was months – or even years – ago.
Values Have Changed Rapidly. In a down market, especially in this case, comparable sales values are far from stable. Home prices have continued to fall at a relatively quick pace, which means that a house that sold three months ago many not have the same value today. This is, of course, a very tough pill to swallow for transferees who expected a rebound.
Appraisals Challenged. Of course, no one wants to learn that their home is worth less then expected – especially if expectations were already low. Home sellers and refinancers are starting to challenge appraisers by questioning the comparable sales subjects that were used, level of experience, value estimates and more.
120 Days No Longer Sufficient. While the industry has long considered 120 days to be a normal marketing time frame for a home, it may be time to reconsider. These days homes are on the market a lot longer than 120 days, even with price reductions. Basing an appraisal on 120 days of forecasting may not be realistic – and employees may request longer marketing times.
While it’s difficult to offer relocating employees any encouraging words when they receive a perceived low buyout offer, it is important to remind employees that this is their safety net offer. This is the lowest price they will receive for the sale of their home. They should use the period from when they receive their buyout offer to when they need to accept the offer to aggressively market their home and take any extra steps needed to find and vet a qualified buyer. This includes making sure their home is listed as low as the transferee can afford and that the curb appeal and interior condition of their home is at its peak.
There is no silver bullet to make the transferee feel better about a slumping real estate market, but gently reminding them that they too may be a buyer, and that bargain prices may be available where they are looking to relocate, may ease some tension. At the very least, everyone involved – from the appraiser to the HR department – should be patient, open and understanding of these issues in order to ease relocation concerns gracefully.
Are you offering Guaranteed Buyouts? How have your employees reacted to recent appraisals? How have you handled sinking home prices with transferees?