RISMEDIA, May 4, 2009-Results of a recent survey by Weichert Relocation Resources Inc. (WRRI), one of the world’s leading relocation and assignment management companies, offer compelling insight to the strategies today’s companies are employing to more cost-effectively deploy key talent under increasingly challenging economic conditions.
Now in its third year, WRRI’s annual Mobility and the Current Real Estate Market survey has become the definitive guide to corporate relocation trends in a volatile market. For the 2009 edition, WRRI surveyed relocation and HR professionals at 210 companies throughout North America and discovered that 92% had made some type of policy or program changes in the past year to combat a slow market and shifting employee needs.
Among these changes, forty percent of companies added or increased the amount of loss-on-sale assistance offered to their employees, 37% added or tightened existing list price requirements, 34% increased the amount of temporary housing coverage and 28% added or increased home selling incentives to motivate buyers and sellers.
“Overall, our results indicate that more companies realize that one of the most effective strategies they can use to safeguard against higher relocation spend is holding employees more accountable for what goes on during their home marketing period,” said Ellie Sullivan, WRRI’s Director of Consulting. “Yet they also acknowledge the alarming rise in negative equity and loss-on-sale situations among their mobile workforces, which they have to address to overcome employee resistance to relocation and position themselves for success when recovery occurs.”
One newer trend revealed is that 25% of today’s companies are no longer determining the guaranteed offer by the traditional method of averaging two appraisals within a 5% spread. Instead, they’ve adopted alternative valuation methods that include offering a guarantee based on only 95% of the average of two appraisals. As one company explained, “Once an employee realizes that the safety net of the guaranteed offer is only ninety-five percent, it provides an extra incentive for that employee to maximize the sales price.”
Companies are also flexing more muscle where their employees’ home marketing efforts are concerned. Seventy-one percent mandate that employees work only with company-approved brokers-up from 61% in 2007-while seventy-five percent have set minimum home marketing periods. Sixty-six percent maintain list price guidelines and ninety-two percent consider offers below the appraised value of their employees’ homes.
Only 19% claim no active involvement in their employees’ self-marketing efforts, down from 27% in 2008.
Other noteworthy findings include:
-Middle managers are being hit hardest by the current market slowdown. Ninety percent of respondents said that employees in this demographic are having difficulties selling their homes, while 82% indicated that these employees are experiencing significant loss-on-sale.
-Among the companies enforcing list price guidelines, 66% of respondents require that their employees’ initial list price be no greater than 105% of the appraised value or Broker’s Price Opinion. More companies are also requiring subsequent list price reductions to 103% or 100% of the appraised value.
-Seventy-one percent of companies offer loss-on-sale assistance to their employees. Eighty-three percent of these companies place a maximum dollar cap on the level of assistance they offer, with $50,000 being the most widely cited amount (25%).
-Despite the rise in negative equity situations, 58% of companies consider it the employee’s responsibility to pay off the mortgage. Thirty-four percent of companies handle negative equity situations on a case-by-case basis.
-In an effort to create demand for employee homes, 62% of companies using a Guaranteed Buyout Program (GBO) offer incentives or a bonus during the self-marketing period. For those companies using a Buyer Value Option (BVO) program, only 29% offer incentives. Once a home comes into inventory, 68% of companies offer incentives.
“This last point is one of the most alarming, because it indicates that most companies still don’t appreciate the tremendous value in offering buyer incentives up front before a home has the chance to become inventory,” said Sullivan. “Once a home starts languishing in inventory, carrying costs pile up, potential buyers assume there’s a problem with it and there’s the added challenge of trying to move a vacant home that never shows as well as a home that’s currently lived in.
“Our research indicates that buyer or broker incentives deliver the most compelling results when they’re used during the initial marketing period, as they help create demand, provide negotiating leverage and ultimately reduce your overall costs.”