Thanks to the current oversupply in the housing market, fewer workers want to relocate. Those who do often want significant help unloading their old houses. Meaning: Your organization may need to revamp its HR relocation policies in light of the down market.
In today’s market, home buyers are clearly in the driver’s seat. But that puts home sellers in the hot seat. Home prices began to tumble in 2006 and have fallen even further this year.
The sub-prime mortgage crisis and insecurity about job prospects (the U.S. economy lost 4,000 jobs in August, the first drop since 2003) has buyers and sellers nervous.
Indeed, the National Association of Realtors (NAR) says psychological factors are mostly to blame for real estate sluggishness.
The Worldwide Employee Relocation Council (WERC), a Washington-based association, calls the current situation a “perfect storm” for employer home-sale and relo programs: Inventories are rising; losses on sale are increasing; caseloads for relocation and HR specialists are growing more complex. Relocation costs are mounting.
Employers eager to attract the best employees need to start working now to ease the relo and home-sale process.
5 winning relocation tactics
According to WERC, top employers are using these relocation tactics right now:
1. Sale incentives and lump-sum payments. To encourage employees and their Realtors to set a competitive home-sale price right away, some employers are asking employees to price their homes for no more than, say, 105% of their value. Then, if a home sells within a certain amount of time, the employee gets a lump-sum payment or a small bonus equal to a percentage of the sale price (usually in the 1% to 4% range).
2. Loss-on-sale. Reserved mainly for key employees, executives or critical new hires, loss-on-sale policies pay the difference between an employee’s home purchase price and the sale price.
3. Extension of mortgage-buyout periods—and temporary benefits. Because houses are taking longer to sell, many employers have lengthened the time before they will offer or agree to buy an employee’s home if it doesn’t sell. While some employers still offer 30- or even 60-day time periods, many more have extended the period to at least 90 days. Other organizations are opting to extend the period for temporary housing benefits in the new location instead.
4. Pre-marketing assistance. Pairing employees with approved real estate “stagers” can spruce up a home and help make a quicker sale. Employers may even choose to offer employees an amount to help cover the cost of such services, which focus on making minor changes and fast updates to bring a property up to better condition and saleable status.
5. Delaying major moves. When it’s feasible, some companies are choosing to postpone certain major relocations until next year or beyond—when economists predict housing-market conditions will rebound slightly. The NAR’s chief economist, for example, thinks home prices will manage to rise 1.7% in 2008.
Advice: Keep hiring managers clued into the market’s effect on hiring and relocating employees. Relocation issues can have a profound impact on staffing and budgets. Relocations have a long shelf life. If an employee relocates this year, the costs of the relo could still carry over into the middle of 2008—with costs then charged back to individual departments.
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