Taking the “Surprise” out of Relocation Pricing

For ages, these fees have been captured by various entities. Originally, real estate agents collected fees by referring buyers to each other throughout the country. This income was used to offset relocation department budgets. Eventually, RMCs felt they were the procuring cause of the home’s sale and demanded that those fees be given to them, which, in effect, added to their bottom line.

Corporations—that pay all the costs of relocation—felt they were entitled to these fees. For instance, on a $400,000 property, the referral income can be an estimated $4,200. Multiply that amount by two when there is also a purchase transaction involved, and a total fee of $8,400 can be collected. This reflects a 35% referral fee, which is reasonable in the relocation industry.

Some RMCs charge as much as a 50% referral fee, oftentimes resulting in diminished quality in the agent chosen and, ultimately, poor overall performance.

This term generally means there will be no service fee charged in the administration of the move. However, all referral fees collected will be realized by the RMC. The adherence to strict listing guidelines is imperative for this fee structure to survive.
On an $800,000 property, the fee earned is $16,800. On a $150,000 property, the RMC still earns $3,150. Thus, there is seldom a “zero fee.”

Generally found in government contracts, this type of fee reflects the expected operating costs in the resale of the property and includes the costs found in servicing the move.

Commonly, these fees could be in excess of 30% of the appraised value of the property, but the client bears no risk in the home sale. In this fee structure, gain or loss in value is borne by the RMC.

These are additional fees that may be charged when the property does not meet the stipulations of the client relocation policy or RMC contract. In addition, when demands are made by an employee (and granted by the client) that are not consistent with the policy, fees may be incurred. These exceptions may allow an RMC to charge supplementary fees that do not conform to its normal fee structure and can be substantial.

These fees are self-explanatory and are often hidden in small print in service contracts.

Seldom discussed but often collected, RMCs will charge the client one fee and pay the vendor another.

As an example, an appraisal is invoiced to the client for $600, but the payment is made to the appraiser for $500. The additional $100 in revenue provides profit for the RMC but, as a consequence, may result in poor performance of the actual appraisal process. Multiply this type of activity times the many and varied delivery transactions involved in each move, and the returns may be huge for the RMC but cause the client and employee to suffer.

These are costs directly associated with the home purchase process. Take all the costs associated with acquisition, marketing, maintenance, resale, and closing of a property and divide into the appraised value of the property. The result will be the direct cost percentage.

If the appraised value of the property is $250,000, and the direct costs driven by the RMC total $45,000, the direct costs are 18 percent. Sometimes, RMCs will exclude some of the costs above and call them “indirect costs.”

It is important to truly understand all the costs associated with relocation transactions and be able to compare apples to apples when benchmarking. Be sure to ask for which of these fees you are (or are and don’t know it yet) being charged.