Corporate Relocation Pitfalls

Did you know that corporations will often pay all the moving expenses for a Denver relocation buyer? But, the money comes with a Catch 22. Relocation buyers have to deal with sometimes petty bureaucrats and “bottom of the barrel” Realtors. The Corporation’s relocation company often dictates the services the transferee receives. This relocation buyer has been disappointed twice by the agents he was forced to use.

Relocation Companies For Corporate Transfees

Corporations hire what are called “third-party relocation companies” to move their transferees between cities. Often, a home sale coordinator assigns a realtor and coordinates the marketing and sale of the transferees original home.

Then, a home finding coordinator assigns a Realtor at the destination city and coordinates the home purchase process in the new city. If the transfer ranks high enough up the food chain, the company will authorize and pay for what is called a third-party buyout. That means that the relocation company, not the corporation, actually buys the home from the transferee after a marketing period of usually 60-120 days. It sounds great. The only problem is that somebody has to pay for all this. Usually, it’s the transferees themselves,  the Realtors and other vendors such as moving companies,  who offset some of these moving costs for the Corporation. Realtors who will pay a hefty kick-back to the Relo company are selected for the employee being transferred.

So, a naive employee is likely to be stuck with a newbie Realtor or, at least, a Realtor who needs business enough to discount the commissions by as much as 50%. That is not in the employees best interests but it certainly in the financial interests of the relocation company and the corporate client.

Destination Relocation Appraisals

But, transferees can loose in another way. Appraisers, hired by the relocation company, are sent to the property to conduct an appraisal. The appraisers are beholding to the relocation company because they are the ones who hire them. As a result appraisals tend to be low so the relocation company can set the sales price low. That’s somewhat understandable because the corporation ultimately absorbs the loss on the home buyout. The third-party company does not want to see its client, the corporation, have to pay an exorbitant amount if the market were to change or take longer than expected. Realtors have to pay referral fees to the relocation company in order to get the business.

This is become a real sore spot among real estate agents. What started out as a modest fee of around 20% of the commission in the 1970’s, has now evolved to fees ranging from 35 to 50% of the commission. As a result, many good real estate agents will not take new business from a relocation company. And, corporate transferees will be stuck with an agent who doesn’t have much business or, worse yet, someone who is new in the business. That can mean inferior service to the buyer. Sometimes the transferee can have a choice in the Realtor is selected.

Choose Your Own Realtor

There are two ways this can be accomplished. The simplest way is for the potential transferee to enter into a pre-existing listing or buyer contract with a Realtor. Most relocation companies will sometimes reluctantly honor a written contract and not impose a fee on the commission or will at least reduce it.

If there is no written agreement, the transferee can still sometimes select a Realtor. This depends on whether or not the real estate agent and the employing broker are both on an approved list of relocation brokers. My company and I are both on the lists of most relocation companies. So, a corporate transferee can specify me as their preferred agent. Of course, I’d much rather have a pre-existing relationship with the transferee before the time comes to start doing business together with the relocation company. So, if you’re lucky enough to be offered a corporate relocation package from your employer, it’s time to celebrate! But, right after that, start planning to select your own Realtor before one is selected for you. And, if you are not using a relocation company, remember that might not be such a bad thing.