A Sense of Anticipation: We are moving to Seattle!

The move may be months away but pictures of distant homes for sale are being forwarded to relatives and friends. “Look where we could be living in Seattle!” Several real estate agents receive emails from what looks to them like a promising prospect. “We are relocating to Seattle; can you send us some more information on this home?”

The Reality: the Transferee’s Relocation is Being Outsourced.

Elsewhere, in the other world — the real world of corporate relocation — company policies and procedures on relocation determine what happens next. The relocation of an employee is an outsourced activity delegated to a relocation management company which handles every aspect of the relocation and, most importantly, the cost of the relocation.

The Reality: Relocation is Expensive and Costs Need to be Managed.

According to Worldwide ERC (formerly Employee Relocation Council), the current, average cost of a domestic relocation was for:

• Current Employee Homeowner $62,185
• New Hire Home Owner $55,165
• Current Employee Renter $18,365
• New Hire Renter $16,177

According to ERC, of the nearly 400,000 transfers generated by ERC member companies, 1/3 are new hires and 2/3 are current employees and 54% are home owners while 46% are renters. (ERC provides no data for international relocations but we can safely assume that the costs are higher.)

Managing the Cost Means Managing the Transferee

It’s understandable that relocation management companies are charged by their corporate clients to manage these costs. The sooner the transferee can become a productive employee the better. The less the transferee has to worry about logistics and life outside work the more likely the transferee will be productive.

Thus, many relocation management companies like Cartus (formerly known as Cendant) hire destination consultant companies like Full Circle that ensure the smoothest possible “settling in” of the transferee. When dealing with international relocations the destination consultants are dealing with visa issues, opening bank accounts and obtaining social security cards — activities that require considerable knowledge and expertise. In the end, this expertise benefits the transferee and saves the employer money.

Reducing the Cost of Relocation by Turning an Expense into Income

If the relocation involves real estate — selling and/or buying — relocation costs are “shifted” from Cartus and the corporate client, such as Microsoft, to companies and individuals involved in the real estate transaction.

Here’s how it works. The relocation management company works with select real estate brokers who assign agents to work with the transferee. For that privilege, the agent pays a referral fee — up to 40% of the real estate commission — to the relocation management company. If the transferee sells and buys, this happens twice.

Controlling the Process

In the case of Cartus, the preferred brokers are the ones that are owned by Realogy, the parent company of Cartus. The Realogy Franchise Group consists of well-known real estate companies, including CENTURY 21® and Coldwell Banker®.

A link on the Realogy’s website leads to the Title Resource Group (TRG) which “…is a full-service title and settlement services company” that …“serves real estate companies, corporations and financial institutions in support of residential and commercial real estate transactions”…“TRG is a nationally managed family of companies operating under well-known, local brands.” On the fact sheet it says that “TRG is as an integral part of the Cartus Asset Recovery Program.” Expense recovery may be more accurate.

The Internet Interferes with the Process

Back to the beginning: the transferee and any “significant other” are intelligent, internet-savvy individuals. They would like to have a say in the selection of the real estate agent. To them the choice of neighborhood and schools should not be left to someone chosen by corporate relationships. The transferee may have found an agent who speaks her language and knows the difference between living in Munich and Seattle because the agent has lived there himself. The transferee may also want to be the one to choose the mortgage lender since this is a major financial decision which requires a great degree of trust which can only be found in a personal relationship. Neither the purchase of a home nor the financing should be treated as a commodity.

The Transferee Has a Choice

Many transferees don’t know that they have a choice because the relocation process is not as transparent as it should be. In most cases, all a transferee has to do is to make her/his desires known to the employer and/or the relocation management company who then will have the transferee’s choice of broker/agent sign a referral agreement. This agreement allows for part of the commission to be paid back as a referral fee at the closing of the real estate transaction.

Possible Conflicts

What if the broker/agent refuses to sign the agreement and the transferee insists on choosing the agent? What if the agent is a long-time friend of a transferee who is moving to another city? Can the relocation management company insist on the referral fee “after the fact?”

Tortuous Interference and RESPA Issues

After-the-fact-referral-fees are not a recent issue. An article in Realty Times, published first in 2000, stated: “Tortuous interference is the interfering by one real estate licensee [broker/agent] with a contractual relationship between another real estate licensee [broker/agent] and their client. This is a violation of license law in every state. This law is broken every time a relocation company speaks with a transferee or the transferee’s agent about a referral fee after a contractual relationship has begun.”

The same article also raises concerns with RESPA — the Real Estate Settlement Procedures Act: “…unjust enrichment is a RESPA law violation and is reportable to the Department of HUD [Housing and Urban Development). RESPA regulations are such that no fee can be charged, received or paid in a real estate transaction without due cause. In other words, any fee charged must be earned and deserving in order to be paid or received.”

Centralized Management vs Transferee Choice

The best relocation practice takes advantage of the valuable services of relocation companies and experts while respecting the transferee’s right and desire for personal service. If YOU have been transferred, what has been YOUR experience?

Share it with others on SERENE where you will be heard and seen.