Relocation Home Sale Benefits

by | Oct 13, 2016 | News

There are benefits to a real estate sale during a relocation. The process begins with the sale of the home. When it comes to selling a home as part of an employee relocation, corporate buyouts come in two main varieties:

  1. An appraisal
  2. An outside offer

There are other types of relocation-specific home sales, such as direct reimbursement of expenses, but these open the employee up to unnecessary taxation.

relocation benefits

More on Buyouts

A guaranteed buyout (GBO) is based on the value of two appraisals, which average a guaranteed offer to buy a relocating employee’s home. A second type of buyout, a buyer value option (BVO), offers a buyout based on an outside buyer’s offer.

In both cases, the employer would take over the financial responsibility and (sometimes) title until closing with a buyer. This allows the employee to move on to his or her new location with less of a burden and to escape taxation. This happens because the money relating to the home sale never actually passes through the employee’s hands. A real estate relocation specialist can help understand these types of offers.

Additional Home Sale Bonuses

In addition to a buyout, employers often offer add-on benefits, such as loss on sale (LOS) protection or a sale bonus. Both LOS and a sale bonus can be engineered to incentivize a home sale. The former by reducing any negative impact of a sale and the latter by “sweetening” the deal if the sale happens in a timely manner.

These benefits are not tax protected. Employees may incur a tax on these benefits if the employer does not elect to “gross up” the incentive.

Home Sale Bonus Trends

A consideration for both additional home sale benefits is the employee’s status within the company. It is not uncommon for these relocation house sale benefits to only be offered to existing employees and those in higher tiers. New hires may fall into a different policy tier altogether.

Based on our benchmarking data, the average percentage of offering relocation home sale benefits is 67.5%. A breakdown of these benefit offerings by industry is detailed below.

  • Homesale Benefit – Manufacturing Industry 33% 33%
  • Homesale Benefit – Pharmaceutical Industry 91% 91%
  • Homesale Benefit – Restaurant & Quick-Service Chains 50% 50%
  • Homesale Benefit – Insurance Industry 100% 100%
  • Homesale Benefit – Food & Beverage Manufacturing 56% 56%

Sale Bonus

In general, employers are more prone to offer a sale bonus when a GBO is involved, since there is more risk of the home not selling. This bonus is often based on the sale price (1 – 5% being the most common), but some companies will offer a flat rate instead of a percentage.

Since some employers also require a mandatory listing period before accepting a GBO, it is common to see the bonus amount decrease over this time, starting at its highest amount before the appraisals are ordered or concluded (e.g. a 4% sale bonus before appraisals, 3% within 30 days of appraisals, 2% within 60 days, and 1% within 90 days).

It is common to see the bonus expire when the buyout expires.

Loss on Sale Protection

Homes bought during the peak of the housing bubble suffered losses in many markets over the past decade. But with the housing market strengthening and stabilizing, there are fewer losses today. To counteract any possible losses during a relocation home sale, the LOS benefit comes in many shapes and sizes.

Traditionally, loss is calculated based on the amount paid for the home and does not include capital improvements. Once the loss is determined (sale price minus purchase price), employers have two choices:

  1. Cover all of it (often up to a capped amount)
  2. Cover a portion of it.

As a further breakdown, some companies offer to cover 50 – 75% of the loss, and the employee must cover the remainder. Often, we see employees pay 100% of the loss but only up to a capped amount (e.g. anywhere from $20,000 – 50,000). If the loss is greater than this cap, the employee can either pay the difference and continue to market and sell the home, or decide against selling the home entirely. Our research has shown caps up to $150,000, but amounts this high are uncommon.

On average, 49.5% of companies offer LOS benefits. A breakdown by industry is detailed below.

  • LOS Benefit – Manufacturing Industry 17.5% 17.5%
  • LOS Benefit – Pharmaceutical Industry 91% 91%
  • LOS Benefit – Restaurant & Quick-Service Chains 12.5% 12.5%
  • LOS Benefit – Insurance Industry 62% 62%
  • LOS Benefit – Food & Beverage Manufacturing 56% 56%

WHR Group can help with LOS benefits and a home sale bonus. We can help structure per tier to meet your organization’s unique needs. Insulating the business from unnecessary risk is important. Real estate and home relocation services can be tricky to navigate. Our 20 years of relocation service expertise will guide you to the right policy for your organization.

Global Workforce Symposium 2016 Takeaways

by | Oct 10, 2016 | News

relocation

As the world around us continues to feel more accessible every day, employers are forced to reassess the way they manage their global mobility strategies. Compliance demands, immigration changes, and pricing tariffs are all examples of trending topics global mobility professionals deal with on a daily basis. The Worldwide ERC®’s annual Global Workforce Symposium is a fantastic opportunity to learn from some of the most talented, world class experts in our field.

WHR Group sent its own top experts to the symposium once again this year. Some of them were able to share their thoughts, takeaways, and experiences.

Roger Thrun: CEO

I took away these main items this year:

• International short-term assignments from 6 months to 2 years are rising quickly

• Ireland is no longer the “it” country in Europe… Germany is the “new one” because of its employment base to choose from.

• If you cannot offer technology to complete a relocation on a handheld device in the next 5 years, you’re out as a viable relocation provider

• Companies want to be able to measure ROI, spend, and future costs on a dashboard at any time

• Technology is great, but customer service is still the backbone of the relocation… We move people with family, not machinery.

David Bronder: Vice President of Business Development

WHR Group is a member of ERC®’s Government Affairs Committee, which focuses on regulatory issues that impact the global mobility industry. Along with other industry representatives, I met with Senate and Congressional staff members to review three areas of concern for our industry: 1. Federal relocation (cost savings through industry best practices), 2. Tax (moving expense deduction), and 3. Immigration (the need for high-skilled immigration into the US). The Government Affairs Committee divided into three groups based on industry experience. All meetings were bi-partisan with the focus on educating staff members on our industry, the impact of tax and immigration regulations, and government relocation best practices.

WHR Group will continue to work with the ERC® Government Affairs Committee to ensure these important issues receive the support for the challenges they represent in our industry. A Senate staff member in the government relocation meeting stated, “The meeting was very beneficial, and bi-partisan support should not be an issue.”

Paul De Boer: President

The keynote speaker, Mick Ebeling, demonstrated a conviction of purpose that guides his life, and we can all take lessons from his experience. His life is “rich” in helping others as he drives Not Impossible Labs to help people overcome obstacles previously thought of as impossible. His motto is “If not now, then when?” Meaning you need to find something in the world you want to change and associate yourself with an amazing group of people that can solve the seemingly impossible.

What he has done and what he is doing with his life makes your daily issues and problems seem like small hills compared to the mountains he is climbing. I would highly suggest anyone to visit his website to see his story and the lives he is impacting: http://mickebeling.com/.

Building a Relocation Policy

by | Aug 31, 2016 | News

sample relocation packages
If you are considering revising your current relocation program, or creating one for the first time, you’re probably wondering where to start. Just like building a house, you want to start with the foundation.
When building a relocation program, begin with the policy structure. Remember, you have a couple of options to consider when creating your program. If you’re looking for assistance, our benchmarking studies have uncovered key trends in building the right policy structure.

Building or Revising Your Employee Relocation Policy

A common trend among companies offering relocation assistance is to provide different levels of benefits to their relocating employees. This allows a company to be cost-conscious and flexible.

The Tiered Approach

A set, tiered policy gives a company the ability to easily select which employees will receive which benefit package. Our research indicates an average of four tiers within any relocation policy. This allows for sufficient variation among benefit packages without creating too much complexity across employee levels.
While a tiered policy allows a company to be selective about which benefits are offered and to whom, some benefits may be offered to all packages. For instance, a household goods move may be offered to all relocating employees, but only certain employees might receive a homesale benefit. You will need to consider which benefits make the most sense for your different employee levels.
 

%

of surveyed companies use three tiers

%

of surveyed companies use four tiers

Building Tiers

There are several different factors companies use when creating a tiered policy. In fact, most companies use multiple factors. The most common factors we’ve identified in our studies include employee position level, homeowner versus renter status, new-hire versus existing-employee status, and budget.

The most frequently used factor to create policy tiers is the employee’s position or level within the company. Companies will most often offer richer benefits to C-level employees compared to middle managers, as the C-level role may be considered more integral to the employer. Cash allowances may be larger, timeframes may be less stringent, and the policy itself may become less constrictive overall for higher-tier tiers.

Homeowner versus renter status is another factor commonly used in creating a tiered policy. For example, a homeowner tier will likely be richer than a renter tier. Homeowners have higher associated moving costs to complete home repairs and get their homes ready for the market. Longer househunting might also be offered for homeowner tiers, as more time is typically needed to purchase a home than to rent.

The A La Carte Approach

An alternative to a tiered policy is an à la carte, or menu, policy. This can be ideal for companies that like to be extremely selective about which benefits are given on an individual basis.

Building à la carte benefits

The discretion used in deciding which benefits to offer can be based on the employee’s need to relocate, the distance the employee is moving, or simply on budget.

Employees can also decide which benefits they receive. The company may offer an employee a specific lump sum amount or use a “points” system. The employee can then determine, based on the dollars or points received, which benefits he or she would like the employer to provide and which the employee would like to manage on his or her own.

This type of policy is currently more “on trend” due to several factors, such as more employees electing to retain their homes in their departure location and therefore not needing a formal homesale benefit.

Your company’s culture, talent development strategies, and much more need to be taken into consideration when you’re deciding how to develop your employee relocation policy. Offering too many benefits can be costly for your organization, while not offering enough can negatively impact your success in recruiting and retaining employees. Take careful consideration when determining which structure best fits your relocating employees’ needs.

policy designer

Mexico: An Emerging Market for Business and Expats

by | Jun 9, 2016 | News

If you weren’t able to attend this May’s Worldwide ERC® Americas Mobility Conference in Houston, then you missed out on Dwellworks’ VP of Latin America, Jack Fraind, present on Mexico as the latest (and slightly misunderstood) emerging market.
expat assignment, what is an expat

Market Opportunities

Imagine relocating to Mexico. What do you see?

According to Fraind, you should be envisioning a robust economy in many parts of the country, no longer simply related to manufacturing. Design, engineering, and other “white collar” roles are taking a foothold.

Mexico is emerging above the typical “beachy” (or perhaps cartel-related) imagery. Because beyond the weather and cuisine, Mexico is the world’s eighth largest producer of automotive parts and the world’s largest supplier of flat-screen TVs.

Mexico’s infrastructure is reliable and modern. There are malls, cinemas, and private hospitals specifically catering to medical tourism. Oaxaca and Playa Del Carmen are short vacations away from such bustling metros as Monterrey and Mexico City.

Market Challenges

While its global image is starting to change, there are, of course, challenges to consider regarding Mexico as an expat destination.

Fraind cautioned on corporate housing and rental issues for transferees in Mexico, such as low suitable inventory, the lack of modern appliances in many units, and needing a co-signer in most leasing agreements.

Fraind also explained there are long wait times and application processes for schooling—posing an issue for relocating families.

Visa processing is straightforward and relatively quick, but any delays in the application process means a delay in other destination services: applying for a bank account, applying for a driver’s license, and finding housing in a timely manner. Working with a professional destination support organization should eliminate the chances of delays.

Thanks in part to rebranding efforts alongside the country’s growth (“Mexico: The place you thought you knew”), businesses’ initial perceptions of Mexico are starting to shift to envision something more rich in infrastructure and opportunity. And a market where employees could thrive.

Keeping Relocation Data Safe

by | May 12, 2016 | News

Data security has always been a top concern for businesses, but with the increasing amount of online transactions and exchanges of personal information, data security means more today than it did years or even months ago.

The relocation industry in particular needs to hold data security in the highest regard. The online portals, mobile apps, and self-serve technology that today’s clients and transferees demand mean a person’s entire life (ID, banking information, home address) is potentially accessible to hackers.

What should you and your relocation provider do to ensure the integrity of such important information? Here are two important items we recommend as crucial to protecting your employees and their relocation data.

Keeping Relocation Data Safe

1. Conduct a SOC audit

Since 2008, we have participated in an annual SOC 1® (SSAE 16, formerly SAS 70) audit by an independent, CPA-licensed firm. The audit tests our system design, operating effectiveness, and internal controls.

According to Schneider Downs, SOC reports are the “de facto standard” for using the work of a third-party firm as “a substitute for performing first-hand testing in conjunction with financial statement audits or Sarbanes-Oxley compliance.”

Specifically, the auditor checks for:

  1. The existence and description of internal controls
  2. That these controls are operating with sufficient effectiveness to achieve security goals

2. Try to get “hacked!”

Annually, we also contract with a third-party IT security firm to perform an external vulnerability and penetration test against our network and websites.

If your provider completes similar tests, the report’s firm will break down the Critical Items, Areas of Concern, and Potential Problems to ensure the framework for protecting data meets the necessary standards.

The bottom line is that you should never overlook the importance of third-party and unbiased audits. If your current provider does not undergo any third-party and unbiased audits, be sure to ask how the provider is ensuring proper controls through other means.

It’s easy to connect with experts to help test data security, so make sure it’s not just as easy for your provider—and your data—to be compromised.

Relocation Dictionary of Terms

by | Mar 10, 2016 | News

Like any industry, the world of third-party employee relocation management is rife with technical terms. But you don’t have to be an expert or work for a relocation management company (RMC) to understand what’s being said.

Here are 37 terms to help make the complex simple.

<img alt="repatriation">,<img alt="define relocation">,<img alt="bvo">
Amended-from-Zero Sale / Amend-from-Zero Sale
The Employee receives a third-party offer prior to receiving an appraised value offer from the RMC. The RMC determines if the offer is bona fide and provides a contract of sale to the Employee based on the acceptable terms of the outside offer.
Amended Value Amount
The offer amount extended to a relocating Employee from the RMC to purchase the Employee’s property based upon a bona fide offer from a qualified outside buyer. The RMC will amend the Guaranteed Buyout Offer to reflect the third-party value representing the Amended Value Amount.
Amended Value Sale
When the relocating Employee receives a bona fide offer from a qualified buyer after the Employee has received a Guarantee Buyout Offer from the RMC. The RMC amends its Appraised Value Offer to the acceptable terms of the outside sale price.
Anticipated Sales Price
The sale price at which a property would most probably sell when exposed to the market for a reasonable time with payment to be made in cash or its equivalent, assuming an arm’s length transaction. This is often done in accordance with the procedures in the Worldwide ERC® (Employee Relocation Council) Appraisal Guidelines.
Appraised Value Offer (AV or AVO)
An offer extended to a relocating Employee from the RMC to purchase the Employee’s property based upon the average of a specific number of appraisals conducted by designated, certified appraisers. The appraisals establish an Anticipated Sales Price for a relocating Employee’s residence.
Appraised Value Sale
The Employee accepts the contract of sale (Appraised Value Offer) extended from the RMC to buy the Employee’s property based upon the average of a specific number of appraisals.
Bona Fide Offer
An offer from an outside buyer that is in good faith.
Broker's Price Option (BPO)/Broker Market Analysis (BMA)
A Real Estate Broker’s “as is” and “with improvements” list price and estimated sales price of a property. The BPO/BMA is often used as a barometer for the appraisals, marketing strategies, and recommended inspections, repairs, and improvements.
Buyer Value Option (BVO)
Buyer Value Option (BVO) is similar to the Amend-From-Zero Sale; however, there is no appraisal or Appraised Value Offer to the relocating Employee from the RMC. The Employee lists the property and generates an outside offer. The RMC determines if the offer is bona fide and closes with the Employee under the terms of the outside offer. The BVO is an alternative to Direct Reimbursement and the Appraised Value Offer.
Carrier
Household goods movers with which the RMC has an established subcontractor relationship.
Commercial Bill of Lading (CBL)
The standard form that constitutes the contract of carriage between the RMC and a carrier.
Comparable Property
Comparable properties to the for-sale property in size and style and selected by the appraisers and broker or offered by the Employee for consideration. Properties must be in the same neighborhood, development, subdivision, or complex unless there are not sufficient comparable sales within the defined areas, in which case the appraiser may use comparables from general market areas.
Contract Price
The price at which the RMC agrees to purchase the Employee’s home whether as an Amend-From-Zero, Amended Offer, BVO, or Guaranteed Buyout Offer.
Designated Certified Appraiser
An individual who meets all the requirements of applicable laws to practice as an appraiser and/or be certified in states and/or localities that have certification and/or licensing requirements for appraisers. Specific criteria for a designated, certified appraiser include:

Have knowledge and experience in using industry-accepted relocation appraisal guidelines, such as the Worldwide ERC® appraisal form and standards;

Familiar with market conditions in areas of the home location;

Access to current location market data through multiple listing service (MLS) or other home list and sale data service, when available;

No present or future interest in the home, nor a relationship that would affect an independent judgment in determining Anticipated Sales Price;

No relationship with the Employee or RMC (personal or business) that would affect the objectivity and/or independence of the appraisal;

Not appraised the home within the prior 6 months;

Have ability to perform and deliver the appraisal in accordance with RMC-contracted timeframes; and

Appraiser’s fee is not based on a percentage (%) of the Appraised Value of the home nor contingent upon the sale of home.

Direct Delivery
A shipment that is delivered directly to the residence without Storage-in-Transit.
Direct Reimbursement of Home Sale Expenses
The reimbursement provided to an Employee who has been authorized for relocation expenses and is entitled to reimbursement of home sale expenses. The RMC may provide home marketing services designed explicitly for direct-reimbursement home sale efforts.
Disclosure Statement
A statement made available to potential buyers providing known information of the property; community or association; and repairs and defects relevant to the home, such as water seepage in a basement or the presence of radon gas or lead-based paint.
Employee (EE)/ Transferee (TEE)
A relocation or transfer eligible employee as determined by his or her Employer. In relocation, Employee and Transferee (EE or TEE) are interchangeable.
Escrow
In relocation, escrow encompasses the following:

An arrangement where an independent, trusted third-party receives and disburses money and/or documents for two or more transacting parties with the timing of such disbursement by the third-party dependent on the performance by the parties of agreed- upon contractual provisions;

An account established by a broker, under the provisions of license law, for the purpose of holding funds on behalf of the broker’s principal or some other person until the consummation or termination of a transaction; or

An account held by a lender to pay obligations, such as property taxes and insurance premiums.

Expiration Date
The date by which the Employee must accept or reject the Guaranteed Buyout Offer for participation in the home sale program.
Foreclosure
The legal process reserved by a lender to terminate the borrower’s interest in a property after a loan has been defaulted. When the process is completed, the lender may sell the property and keep the proceeds to satisfy its mortgage and any legal costs. Sales resulting from foreclosures may be used in the appraisal process to determine the Guaranteed Buyout Offer as prescribed by client policy.
Guaranteed Buyout (GBO)
Once the property appraisal process is concluded according to policy, the Guaranteed Buyout Offer (GBO) is delivered to the Employee both verbally and by hard copy. As determined by company policy, a standard GBO is valid for 60 – 90 days.
Home Sale Services
These services include the performance and coordination of all real estate transactions for the Employee, including assistance in marketing the home, negotiating with potential outside buyers, helping the Employee become familiar with his or her new location, providing renter/buyer assistance, and dual-career and mortgage counseling.
Inspections
A professional examination of a home’s major components that may include exterior, foundation, framing, plumbing, septic, electrical system, heating, air conditioning, pest, roofing, and interior.
Line Haul Services
Transporting a shipment under tariff from the point of origin to its destination.
Loss on Sale
The difference between the GBO and the eventual sales price. This amount usually has a limit of how much the RMC can accept without direction from the client.
Loss Protection
A relocation policy that provides a provision where a relocating Employee is reimbursed the difference between the original home purchase price and eventual Contract Price. There may be caps on this amount with provisions for tax protection and capital/structural improvements to be included or excluded in loss protection as determined by company policy.
Management Fee
The price paid to the RMC for managing the Employee’s move.
Mortgage Payoff
Represents full payment of all monies due to the Employee’s mortgage lender(s) when acquiring the Employee’s property based on client policy and sale type. The RMC is responsible for ensuring that all mortgage liens are released by lenders and no further obligations of any kind are held by Employee based on the contract date.
Move in Transit
The activities associated with the shipment and storage of an Employee’s personal property in connection with one’s relocation.
Move Management Services (MMS)
The process of and activities related to moving an Employee’s personal property, including carrier selection; preparation of bills of lading; shipment booking; moving; overseeing carrier evaluation process; performing service performance and prepayment audits; providing management information reports; assisting in claims preparation, filing, and settlement; and providing on-site quality control service and a quality assurance plan.
Moving Expenses
All costs incurred by the RMC in handling and moving an Employee’s personal property, including but not limited to packing, transporting, storing, and unpacking. Moving expenses exclude the negotiated Management Fee.
Prepayment Penalty
A monetary penalty imposed by a lender on a borrower who pays a loan off before its expected end date.
Relocation Management Company (RMC)
The third-party corporation engaged by the Employer to manage Employees’ relocations.
Storage-in-Transit (SIT)
Temporary storage authorized in connection with a shipment of household goods.
Tax Protection
Most costs associated with relocation are considered income to an Employee. The company policy may provide for tax protection, referred to as “gross up” of some or all of the taxable expenses.
Title
All interest held by the Employee in the property. For purposes of the home sale services, “title” shall mean the degree of ownership held by the Employee that provides full power for the disposition of the property.