The end of the year is always busy with professionals relocating for work, as hiring managers rush to use the remainder of their budget or as they prepare for new budget funds that will be available with the coming of a new year.
When you receive your job offer from an employer and you need to move a substantial distance away from your current location, you’ll typically be presented with a relocation package. This will be just one component of the overall compensation package including salary, health insurance, 401K matching programs, stock options, vacation and sick time, and signing bonuses.
If you haven’t been relocated by a company before, this might be a new benefit to you. And if you aren’t aware of what to ask for when negotiating your compensation package, you might leave some important options on the table.
In this post I’ll cover what typically happens when you need to sell your home when you move for a new job. My next post will cover options when you are buying a home in your new location.
In some cases, your hiring company may offer you a lump sum relocation amount. Say $25,000. This can be used any way you’d like; trips to your new location to look for a home, moving expenses, closing cost coverage, real estate commission coverage, etc. It is up to you to decide how to spend the lump sum. Be advised that there are tax implications related to the lump sum payment, so make sure you make your accountant aware of this benefit. Typically it’s viewed as income, so you’ll be liable for paying taxes on the amount.
If you’re not offered a lump sum allotment, the hiring company will typically offer two options; assistance with selling only or assistance with selling and a buyout option. In most cases you always want to push for selling assistance with a buyout option.
In either of these situations, the hiring company most likely will subcontract with a relocation company to help coordinate your move and the sale of your home. Cartus (Cendant Mobility) and Weichert Relocation are two large relocation companies that may be used. There are also hundreds of smaller relocation firms that may be hired.
If you receive a selling assistance only package, it is much like you would do if you simply chose to sell your home. The relocation company will have you interview anywhere from 2-4 real estate agents from different real estate brokerages in the area. You can specifically request agents if you’d like, otherwise you’ll meet with whoever is chosen by the brokerage when they are called by the relocation company.
As always, when you interview the agents it is important to understand their marketing strategy and pricing strategy for your home. Each agent will submit a report to the relocation company outlining the comparison homes they used to arrive at their list price recommendation, an analysis of the local real estate market (positive, neutral, or declining), and their marketing strategy. Once you’ve had a chance to meet with each of the agents and they’ve submitted their reports to the relocation company, you notify the relocation company of who you’ve chosen.
One of the nice benefits of the selling assistance package is that the real estate commission is typically covered by the hiring company. This results in an additional 5-7% of the sale price in your pocket. You may also be able to get your other closing costs covered. Be sure to ask if this is an option and try to negotiate it into your relocation benefit.
One of the drawbacks of receiving only the selling assistance package (without the buyout option) is that you are going to be holding on to your house until it actually sells. It’s really important to make sure the house is priced realistically if this is the case and you need to proceeds from the sale in order to buy your next home.
Often the stronger relocation option is a selling assistance package with a buyout option. The selling assistance portion is the same. The relocation company will typically give you 60 days to sell your home through an agent. If it doesn’t sell within that timeframe, they’ll offer a buyout of your house. Typically they send in 2 independent appraisers to determine a value for the house. As long as they are within 3% (or so) of each other in the value determination, the relocation company will offer you that amount for the house. They essentially buy it from you and then hold it in their name (still selling it through a real estate agent), freeing up your equity so that you can go on and purchase at your next location.
In some instances, the relocation company will buy you out immediately and you won’t even have to go through selling assistance. This is rarely happening these days because the market has slowed. Relocation companies are trying to minimize the number of properties they’re holding in their portfolios because they don’t want to be stuck with declining values.
When you’re evaluating the hiring company’s offered relocation package, try to push for a buyout option. It reduces your risk of holding a property for a long time when you’ve moved to another location and offers you more flexibility.