Relocation Dictionary of Terms

by | Mar 10, 2016 | News

Like any industry, the world of third-party employee relocation management is rife with technical terms. But you don’t have to be an expert or work for a relocation management company (RMC) to understand what’s being said.

Here are 37 terms to help make the complex simple.

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Amended-from-Zero Sale / Amend-from-Zero Sale
The Employee receives a third-party offer prior to receiving an appraised value offer from the RMC. The RMC determines if the offer is bona fide and provides a contract of sale to the Employee based on the acceptable terms of the outside offer.
Amended Value Amount
The offer amount extended to a relocating Employee from the RMC to purchase the Employee’s property based upon a bona fide offer from a qualified outside buyer. The RMC will amend the Guaranteed Buyout Offer to reflect the third-party value representing the Amended Value Amount.
Amended Value Sale
When the relocating Employee receives a bona fide offer from a qualified buyer after the Employee has received a Guarantee Buyout Offer from the RMC. The RMC amends its Appraised Value Offer to the acceptable terms of the outside sale price.
Anticipated Sales Price
The sale price at which a property would most probably sell when exposed to the market for a reasonable time with payment to be made in cash or its equivalent, assuming an arm’s length transaction. This is often done in accordance with the procedures in the Worldwide ERC® (Employee Relocation Council) Appraisal Guidelines.
Appraised Value Offer (AV or AVO)
An offer extended to a relocating Employee from the RMC to purchase the Employee’s property based upon the average of a specific number of appraisals conducted by designated, certified appraisers. The appraisals establish an Anticipated Sales Price for a relocating Employee’s residence.
Appraised Value Sale
The Employee accepts the contract of sale (Appraised Value Offer) extended from the RMC to buy the Employee’s property based upon the average of a specific number of appraisals.
Bona Fide Offer
An offer from an outside buyer that is in good faith.
Broker's Price Option (BPO)/Broker Market Analysis (BMA)
A Real Estate Broker’s “as is” and “with improvements” list price and estimated sales price of a property. The BPO/BMA is often used as a barometer for the appraisals, marketing strategies, and recommended inspections, repairs, and improvements.
Buyer Value Option (BVO)
Buyer Value Option (BVO) is similar to the Amend-From-Zero Sale; however, there is no appraisal or Appraised Value Offer to the relocating Employee from the RMC. The Employee lists the property and generates an outside offer. The RMC determines if the offer is bona fide and closes with the Employee under the terms of the outside offer. The BVO is an alternative to Direct Reimbursement and the Appraised Value Offer.
Carrier
Household goods movers with which the RMC has an established subcontractor relationship.
Commercial Bill of Lading (CBL)
The standard form that constitutes the contract of carriage between the RMC and a carrier.
Comparable Property
Comparable properties to the for-sale property in size and style and selected by the appraisers and broker or offered by the Employee for consideration. Properties must be in the same neighborhood, development, subdivision, or complex unless there are not sufficient comparable sales within the defined areas, in which case the appraiser may use comparables from general market areas.
Contract Price
The price at which the RMC agrees to purchase the Employee’s home whether as an Amend-From-Zero, Amended Offer, BVO, or Guaranteed Buyout Offer.
Designated Certified Appraiser
An individual who meets all the requirements of applicable laws to practice as an appraiser and/or be certified in states and/or localities that have certification and/or licensing requirements for appraisers. Specific criteria for a designated, certified appraiser include:

Have knowledge and experience in using industry-accepted relocation appraisal guidelines, such as the Worldwide ERC® appraisal form and standards;

Familiar with market conditions in areas of the home location;

Access to current location market data through multiple listing service (MLS) or other home list and sale data service, when available;

No present or future interest in the home, nor a relationship that would affect an independent judgment in determining Anticipated Sales Price;

No relationship with the Employee or RMC (personal or business) that would affect the objectivity and/or independence of the appraisal;

Not appraised the home within the prior 6 months;

Have ability to perform and deliver the appraisal in accordance with RMC-contracted timeframes; and

Appraiser’s fee is not based on a percentage (%) of the Appraised Value of the home nor contingent upon the sale of home.

Direct Delivery
A shipment that is delivered directly to the residence without Storage-in-Transit.
Direct Reimbursement of Home Sale Expenses
The reimbursement provided to an Employee who has been authorized for relocation expenses and is entitled to reimbursement of home sale expenses. The RMC may provide home marketing services designed explicitly for direct-reimbursement home sale efforts.
Disclosure Statement
A statement made available to potential buyers providing known information of the property; community or association; and repairs and defects relevant to the home, such as water seepage in a basement or the presence of radon gas or lead-based paint.
Employee (EE)/ Transferee (TEE)
A relocation or transfer eligible employee as determined by his or her Employer. In relocation, Employee and Transferee (EE or TEE) are interchangeable.
Escrow
In relocation, escrow encompasses the following:

An arrangement where an independent, trusted third-party receives and disburses money and/or documents for two or more transacting parties with the timing of such disbursement by the third-party dependent on the performance by the parties of agreed- upon contractual provisions;

An account established by a broker, under the provisions of license law, for the purpose of holding funds on behalf of the broker’s principal or some other person until the consummation or termination of a transaction; or

An account held by a lender to pay obligations, such as property taxes and insurance premiums.

Expiration Date
The date by which the Employee must accept or reject the Guaranteed Buyout Offer for participation in the home sale program.
Foreclosure
The legal process reserved by a lender to terminate the borrower’s interest in a property after a loan has been defaulted. When the process is completed, the lender may sell the property and keep the proceeds to satisfy its mortgage and any legal costs. Sales resulting from foreclosures may be used in the appraisal process to determine the Guaranteed Buyout Offer as prescribed by client policy.
Guaranteed Buyout (GBO)
Once the property appraisal process is concluded according to policy, the Guaranteed Buyout Offer (GBO) is delivered to the Employee both verbally and by hard copy. As determined by company policy, a standard GBO is valid for 60 – 90 days.
Home Sale Services
These services include the performance and coordination of all real estate transactions for the Employee, including assistance in marketing the home, negotiating with potential outside buyers, helping the Employee become familiar with his or her new location, providing renter/buyer assistance, and dual-career and mortgage counseling.
Inspections
A professional examination of a home’s major components that may include exterior, foundation, framing, plumbing, septic, electrical system, heating, air conditioning, pest, roofing, and interior.
Line Haul Services
Transporting a shipment under tariff from the point of origin to its destination.
Loss on Sale
The difference between the GBO and the eventual sales price. This amount usually has a limit of how much the RMC can accept without direction from the client.
Loss Protection
A relocation policy that provides a provision where a relocating Employee is reimbursed the difference between the original home purchase price and eventual Contract Price. There may be caps on this amount with provisions for tax protection and capital/structural improvements to be included or excluded in loss protection as determined by company policy.
Management Fee
The price paid to the RMC for managing the Employee’s move.
Mortgage Payoff
Represents full payment of all monies due to the Employee’s mortgage lender(s) when acquiring the Employee’s property based on client policy and sale type. The RMC is responsible for ensuring that all mortgage liens are released by lenders and no further obligations of any kind are held by Employee based on the contract date.
Move in Transit
The activities associated with the shipment and storage of an Employee’s personal property in connection with one’s relocation.
Move Management Services (MMS)
The process of and activities related to moving an Employee’s personal property, including carrier selection; preparation of bills of lading; shipment booking; moving; overseeing carrier evaluation process; performing service performance and prepayment audits; providing management information reports; assisting in claims preparation, filing, and settlement; and providing on-site quality control service and a quality assurance plan.
Moving Expenses
All costs incurred by the RMC in handling and moving an Employee’s personal property, including but not limited to packing, transporting, storing, and unpacking. Moving expenses exclude the negotiated Management Fee.
Prepayment Penalty
A monetary penalty imposed by a lender on a borrower who pays a loan off before its expected end date.
Relocation Management Company (RMC)
The third-party corporation engaged by the Employer to manage Employees’ relocations.
Storage-in-Transit (SIT)
Temporary storage authorized in connection with a shipment of household goods.
Tax Protection
Most costs associated with relocation are considered income to an Employee. The company policy may provide for tax protection, referred to as “gross up” of some or all of the taxable expenses.
Title
All interest held by the Employee in the property. For purposes of the home sale services, “title” shall mean the degree of ownership held by the Employee that provides full power for the disposition of the property.

Taking the “Surprise” out of Relocation Pricing

by | Feb 11, 2016 | News

Businesses are created to make money. This is true of relocation management companies (RMCs) and the resources they utilize. We are pretty confident that your firm has been structured for bringing in revenue to be distributed to owners, stockholders, and employees alike, but how is money made in relocation?

One of WHR Group’s operating principles is to truly communicate with clients while one of our corporate goals is to reduce relocation expenses. The information presented in this paper should take some of the mystery out of the often difficult discussion of relocation pricing and further explore how fees charged by RMCs and their vendors may affect the cost of relocation.

There should never be a surprise when you review a relocation invoice, which is why the following list of common fees will help you better understand and negotiate a reasonable contract for relocation services. While fees vary from company to company, they are, in general, similar across all RMCs.

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Service Fee
The cost charged by an RMC for overall program administration, including salaries, overhead, and profit. Historically, and still true today, additional fees may be charged, such as the following:

Initiation Fee

Appraisal Service Fee

Resale Fee

Equity Funding Fee

It is very important to understand what additional fees may be incurred if not included in the service fee. Be sure to ask to see an invoice that illustrates all costs associated with a move.

Referral Fees
For ages, these fees have been captured by various entities. Originally, real estate agents collected fees by referring buyers to each other throughout the country. This income was used to offset relocation department budgets. Eventually, RMCs felt they were the procuring cause of the home’s sale and demanded that those fees be given to them, which, in effect, added to their bottom line.

Corporations—that pay all the costs of relocation—felt they were entitled to these fees. For instance, on a $400,000 property, the referral income can be an estimated $4,200. Multiply that amount by two when there is also a purchase transaction involved, and a total fee of $8,400 can be collected. This reflects a 35% referral fee, which is reasonable in the relocation industry.

Some RMCs charge as much as a 50% referral fee, oftentimes resulting in diminished quality in the agent chosen and, ultimately, poor overall performance.

Zero Fee
This term generally means there will be no service fee charged in the administration of the move. However, all referral fees collected will be realized by the RMC. The adherence to strict listing guidelines is imperative for this fee structure to survive.
On an $800,000 property, the fee earned is $16,800. On a $150,000 property, the RMC still earns $3,150. Thus, there is seldom a “zero fee.”
Fixed Fee
Generally found in government contracts, this type of fee reflects the expected operating costs in the resale of the property and includes the costs found in servicing the move.

Commonly, these fees could be in excess of 30% of the appraised value of the property, but the client bears no risk in the home sale. In this fee structure, gain or loss in value is borne by the RMC.

Non-compliance Fee
These are additional fees that may be charged when the property does not meet the stipulations of the client relocation policy or RMC contract. In addition, when demands are made by an employee (and granted by the client) that are not consistent with the policy, fees may be incurred. These exceptions may allow an RMC to charge supplementary fees that do not conform to its normal fee structure and can be substantial.
Takeover, Cancellation, or Extended Market Time Fees
These fees are self-explanatory and are often hidden in small print in service contracts.
Mark-Up Fees
Seldom discussed but often collected, RMCs will charge the client one fee and pay the vendor another.

As an example, an appraisal is invoiced to the client for $600, but the payment is made to the appraiser for $500. The additional $100 in revenue provides profit for the RMC but, as a consequence, may result in poor performance of the actual appraisal process. Multiply this type of activity times the many and varied delivery transactions involved in each move, and the returns may be huge for the RMC but cause the client and employee to suffer.

Direct Costs
These are costs directly associated with the home purchase process. Take all the costs associated with acquisition, marketing, maintenance, resale, and closing of a property and divide into the appraised value of the property. The result will be the direct cost percentage.

If the appraised value of the property is $250,000, and the direct costs driven by the RMC total $45,000, the direct costs are 18 percent. Sometimes, RMCs will exclude some of the costs above and call them “indirect costs.”

It is important to truly understand all the costs associated with relocation transactions and be able to compare apples to apples when benchmarking. Be sure to ask for which of these fees you are (or are and don’t know it yet) being charged.

Moving Women with Purpose

by | Dec 10, 2015 | News

Gender inclusion is a very real issue in the workplace. And not just in the US.

PricewaterhouseCoopers recently released a study detailing how much of an issue gender inclusion remains across the globe and related to international relocation opportunities.

While you may not offer international assignments to your employees, the study highlights key knowledge that every company should consider when crafting relocation policies:

  • Are you formally aligning your company’s diversity inclusion goals with your relocation program goals?
  • Are you offering equal relocation experiences amongst employees?
  • Are you offering relocation experiences to your most deserving employees, and not just to employees you believe most likely to accept the position?

View the full infographic for more information on creating an equal and prosperous relocation program for all involved:

emplooyee relocation

A Deep Dive into Program Transparency

by | Nov 12, 2015 | News

Transparency is a key component in understanding how the third-party supply chain is being compensated for services related to moving your employees.

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Transferring human capital is an expensive proposition, especially considering the status level of employees being moved—typically key leaders and future leaders of an organization. Plus, the majority of these employees are going to sell their largest investment: Their home. That’s a lot of dollars riding on the fate of a successful move experience.

Providing a reliable, professional relocation experience is of the utmost importance when transitioning top talent from one city to another. It is only common sense that a relocation provider utilize the absolute best third parties in assisting with moves—such as top-performing real estate brokers, appraisers, home inspectors, and household goods movers.

We recognize that referral fees exist in leveraging these third parties, but to what extent are these suppliers being pushed for higher fees in exchange for business?

Transparency in Relocation

As an example, one large relocation provider just implemented a minimum 40% referral fee on real estate brokers. Implementing high fees can be a short-term win for the relocation provider, but do the best real estate agents even want or desire this business? Not likely, as agents want business that doesn’t continuously erode their margins.

As another example, if your organization provides a Guaranteed Buyout, then you know appraisers are used in determining the value of an employee’s home. A common approach for some relocation providers (that you may not be aware of) is to add service fees on top of the appraiser fee, or pay a fee where the lead appraiser has to leverage a “rookie” to perform the valuation. This often occurs when the fee the relocation provider is willing to pay is simply too low. An employee’s home is likely his or her single largest investment, so wouldn’t you want a lead appraiser to perform the valuation and pay the full fee for his services?

Third-party relationships are critical to get right—not only for transferring employees whose new career positions ride on successful move experiences, but also for the employer in the event properties needs to be sold out of inventory.

These are just some reasons why transparent pricing should matter to your relocation program. There is nothing wrong with referral fees, but having an understanding of what level of professional and satisfactory service you and your top talent receive is, ultimately, reliant upon what is being charged.

You would be well served in knowing the fees being charged and understanding the potential implications of high fees: Low service and potentially failed relocations.

Is Your Relocation Management Company Transparent?

by | Oct 8, 2015 | News

Cost transparency. Every relocation company promises transparent pricing and fees, but how do you know your current provider is disclosing all costs and revenue streams to you?
relocation management company, relocation management companies

According to Worldwide ERC® data, relocation assistance is the single most expensive HR benefit a company can provide to its employees. This means it’s critical for you to understand the associated fees, along with knowing potential revenue opportunities, so you can evaluate the return and be the expert on your company’s relocation investment.

You need to work with a relocation provider that discloses all operating costs. This ensures you are focusing on the total expenditure and can take advantage of any potential revenue opportunities. It also prevents mismanagement of your relocation program, making sure your provider’s fee structure doesn’t result in lost productivity from your talent.

Here are 4 ways to tell if your relocation provider is being transparent about your relocation program’s costs.

1. Ask About Your Relocation Program’s Referral Fee Structure

Do you collect referral fees on departure and destination home sales, or does your service provider?

And has your provider disclosed what they are collecting, or offered a share in these fees?

2. Ask About Hidden Fees

Are there mark-ups added to third-party services?

For example, does your provider collect a commission from household goods moves? Do appraiser fees come through as a direct pass-through expense, or is there a mark-up?

What about other expenses, such as destination service providers, title companies, and so on?

3. Ask About Other Revenue Sources

Are there connections to other third-party services where referrals or rebates are offered, unbeknownst to you?

4. Ask If Your Provider has Affiliations

Relocation providers with affiliations (or formal partnerships with select real estate brokerages, appraisal companies, temporary housing firms, and so on) may try to tout these partnerships as beneficial for you and your transferees. While these providers may have conducted extensive due diligence to make sure they were partnering with suppliers at a mutually beneficial discount, it doesn’t mean there aren’t better options for you and your employees to consider outside of these affiliations.

As an independent company, WHR Group does not operate under affiliations or formal partnerships with third-party relocation suppliers. This means our clients have choice when it comes to suppliers and a better opportunity of finding suppliers with higher service or lower cost than affiliates currently provide.

Take these four items into consideration when evaluating your current relocation provider’s business and especially before you enter into future contracts.

How Millennials Really Feel About Relocation

by | Sep 10, 2015 | News

With an estimated one in three U.S. workers belonging to the “Millennial” generation, corporations have been paying special attention lately to fulfilling these young employees’ relocation needs.

The drive to prove themselves in their first “real-world” job, high student loan debt, and an interest in travel and exploring new cultures has driven many Millennials to search outside their hometowns and marked them perfect for a traditional lump sum policy. They’re willing to relocate to begin their careers wherever they can find work. Place the move experience online to complement Millennials’ love of technology, and even less involvement is needed from the employer and Relocation Management Company to manage these moves.

But are these assumptions? Generalizations? Are these factors true for every relocating worker aged 18 – 34?

We asked a few Millennials—who have never moved for a job before—how they would define a quality relocation experience. What are the most important aspects they’re looking for in a move? Their responses might surprise you, and question whether a traditional lump sum is really perfect for this generation.