More help for workers on the move
The fallout from the housing bust is making it more expensive for workers to relocate for jobs, and that’s putting pressure on employers to offset housing-related losses for transferring employees.
Large companies have long reimbursed managers for relocation costs such as household shipping and moving expenses, real-estate brokers’ fees and house-hunting trips. During the real-estate boom, companies didn’t need to help employees with actual home sales. Homes moved quickly, and rising values often allowed employees to profit from their relocations.
But now that home prices are falling in many parts of the country — even as business expands — some companies are adjusting their relocation policies to provide more help to employees in troubled housing situations, including absorbing losses on home sales.
“Companies have had to change their programs and policies and step it up to keep their employees mobile,” says Cris Collie, chief executive of the Employee Relocation Council, an industry group. Collie’s group estimates that it cost about $62,000 on average to move an employee in 2007. Of that amount, $15,000 went for so-called loss-on-sale assistance, where companies made up the difference when employees sold their homes at a loss. In 2006, loss-on-sale assistance averaged about $9,000.
Typically, employees who are transferring to a new location are encouraged to sell their home themselves, and often within a period of about 90 days. But if the home doesn’t sell, some companies will step in and offer some kind of bailout, including buying the home from the employee for an appraised price and even reimbursing for a loss if the home’s value has shrunk.
Companies are also extending other moving benefits. AvalonBay Communities, an apartment real-estate investment trust, boosted its temporary housing allowance last year. It also added to its allowance for house-hunting trips, according to David Alagno, senior director for employment at the Alexandria, Va., company. UnitedHealth Group has extended its temporary housing program for some employees to give them more time to sell their homes, said Tom Valerius, vice president for recruitment services at the Minnetonka, Minn., insurer.
The most generous companies are buying employees’ homes from them at an appraised value, often determined by averaging two or three appraisals from real-estate professionals and reimbursing the employee the difference — or, more often, a portion of it — if the price is lower than what the employee originally paid. The company will then resell the house, often at a loss. And because homes are selling slowly, some companies that offer this benefit are seeing their inventory of unsold homes climb.
Few companies, however, fully offset an employee’s loss. According to a recent survey of its client companies, Weichert Relocation Resources, of Morris Plains, N.J., found that 68% of companies will reimburse a portion or all of an employee’s loss on a home sale.