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Employers helping workers avoid housing losses, but only so much

Mary Umberger
Inman News

Faced with the possibility of a job transfer to another city? Don't be surprised if the first thing that crosses your mind is whether you'll lose money on the house if you moved -- rather than how the change of location might impact your family.

That's because real estate is driving many employees' relocation decisions these days, according to businesses and trade groups that study the ins and outs of moving workers from one place to another.

In 2008, companies reported that more employees than ever turned down relocation, and their principal reason was because of the situation in the housing market -- the first time in management surveys that real estate worries trumped family concerns, according to Atlas Van Lines.

"Depreciation in real estate, for the current home that folks own, is now one of the biggest challenges for companies, in terms of an employee accepting a transfer offer or not," said Scott Sullivan, executive vice present of Brookfield Global Relocation Services in Woodridge, Ill.

"The ultimatum often becomes, 'If the company won't cover the loss on the sale of my home, then I'm not moving,' " Sullivan said. "Relocation, from that perspective, becomes very expensive for the companies."

Expensive, indeed. Industry estimates of the cost of moving a homeowning employee range from $60,000 to $80,000. And those costs are going up as companies devise sweeteners to induce workers to agree to a transfer in an era when homeowners are coping with the prospect of their homes being worth less -- maybe far less -- than they paid.

Employers have always relied on incentives of one kind or another to make the upheaval of a transfer palatable to employees. But now the focus is definitely on the house, Sullivan said.

"Years ago, when homes were selling like hotcakes, you didn't need (real estate) incentives," he said. But like nearly everything else in today's housing market, that's changed.

Historically, companies have often bought transferees' homes outright so that they could be out the door and onto a plane to the new office. And they still do that, though there may be some preliminaries first.

"The biggest factor I've seen is that relocation companies used to purchase the house a lot quicker," said Teresa Young, principal broker at Best Realty GMAC in Chattanooga, Tenn. "Now they're letting them sit on the market longer."

Young said she's seeing companies offer full buyouts of employee homes, but others are offering merely to help with expenses.

Kristal Kraft, an agent for Berkshire Group Realtors in Denver, said she sees transferees whose employers have given them lump sums to relocate -- and wide leeway on how to use it in the move.

But the market and the employee mindset have generated many corporate variations, Sullivan said. For example, if the employee is facing taking a loss on the sale of his house, no matter who finds a buyer, it's becoming common for companies to underwrite the difference, he said. The amount can be significant -- but there are limits.

"(Companies) tend to have a certain threshold with which they're comfortable," Sullivan said. "We've seen companies taking losses on sales of $50,000 to $70,000.

"Obviously, there has to be a cutoff. But as a policy, that's a question that many companies are wrestling with" in this market, he said.

Other options that might save a few company dollars, overall, include offering the employee a bonus if he or she can find a buyer for the home, rather than turning the matter over to a relocation company. That amount might range from 1 percent to 3 percent of the sale price of the home, Sullivan said.

Or, the boss might throw in money to fix the place up in an effort to sell it faster. Sullivan said those fix-up investments used to occur after a relocation company, on behalf of the employer, had bought the home and taken it "into inventory." Now, he said, an employer may be willing to underwrite several thousand dollars to spiff up the place while the employee is still trying to sell.