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Held Back by the House
"If we knew then what we know now, we would have stayed where we were," said Jill Divine, who moved with her husband, Ed Drouhard, to the Washington area from Florida.
(By Lois Raimondo -- The Washington Post)
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The average cost to transfer a homeowner is $62,000, according to Worldwide ERC.
"A lot of people don't realize that. So they get a $30,000 lump sum to move and they say: 'Wow. That's great,' " Richie said. "They may not realize that it's not enough to cover their costs and that a lump sum is all taxable income, so they're not really getting that amount of money."
Employees may be better off having employers agree to pick up specific expenses, Richie said, such as the actual move, the cost of temporary housing, the bill for house-hunting trips for the family, and the closing costs for the home they are buying or the one they are selling.
Some corporations and institutions handle employee moves and related negotiations internally. Others contract the work out to relocation companies that administer the employer's policies, including buy-out packages.
These packages guarantee that the employer or the relocation company will buy your house at market value and resell it if you can't sell the house on your own.
Only the most generous of employers offer these deals now because they have become money losers for many employers, relocation firms and transferring employees, as Drouhard and Divine found.
In the private sector, corporations generally assume any losses on the homes they carry even when they are working with a relocation firm. In the public sector, the government typically pays the relocation company a flat fee for the homes it acquires and the relocation firm takes the hit if the house sells for below that fee.
As a result, many employers are limiting the buyout offers they make only to hard-to-get executive-level recruits, said Sally Stetson, co-founder of Salveson Stetson Group, an executive search firm in Pennsylvania. "But even these top executives can be very disappointed with what they get for their homes."
That's because buyout programs are designed to be fallbacks.
The relocation company typically assumes responsibility for the employee's home 90 to 120 days after the owners have tried to sell it on their own. The thinking is that by then, the employee has put forth his best effort to sell the house and failed.
The relocation firm is left with a house that has been exposed to the market for a long time. That alone drives down the price, said Richie of Long & Foster. The home is likely to be vacant, another negative since it may not show well if it's not furnished and decorated.
Maintaining a vacant house can cost about 1 to 1.5 percent of the value of the home per month, Richie said. On an $800,000 house, the carrying costs could total up to $12,000 a month.
