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Relocation packages:
Don't cut yourself short

By Laura A. Bruce • Bankrate.com

Cut the costsWhen Mitch McDeere, the Tom Cruise character in the movie The Firm, interviewed for a job at a Memphis law firm, the company offered him a dream deal -- a fat salary, a leased BMW, a low-interest mortgage and paid-off school loans.

In this story:

Help with home sale

Help with home buying

A reasonable package

Additions worth
requesting

Lump sum packages

OK, maybe you shouldn't expect a Beemer -- even today, when companies are bending over backward to hire qualified employees. Still, knowing what others are being offered may help you strike a better deal when it comes to relocation.

Relocation packages vary from company to company, but they're far more generous than 10 or even five years ago.

Scott Knudsen, manager of relocation services for Bloomington, Ill.-based State Farm Insurance Companies, says someone hired 20 years ago would be stunned at what people are offered today.

"We never had to go out of our way to attract people to our doorstep. They were beating down our door. Things have changed. We're competing for the same tight labor resources as everybody else."

At State Farm, new hires and transferees get a pretty sweet relocation deal. While upper-echelon employees may get a few extra perks here or there when relocating, generally speaking, says Knudsen, the company's relocation package is one size fits all.

Help with home sale
It starts with helping employees sell their homes.

For a long time, according to Knudsen, the company had one type of home buyout program. Employees got a couple of appraisals and, as long as they were within 5 percent of each other, that was the guaranteed buyout.

At that point the employee could market the home for up to 120 days to try to get a better price -- or sell it for up to 5 percent less than the guaranteed buyout. But Knudsen says the company wanted to give employees more incentive to help in the marketing process.

"The appraisal process took in all trends and could look like a negative," says Knudsen. "If people lived in a less desirable area, they'd get an appraisal and say, 'Ugh, that's $20,000 less than I paid for the property.' So, we wanted to find a way to avoid the stigma of a negative appraisal."

What State Farm came up with is a program that requires employees to get the house listed right away and lets market conditions control what the house is worth. Knudsen says the company saves about $1,000 in appraisals. In return, employees get an incentive bonus of up to 4 percent based on the sale price of the home. In addition, they're reimbursed for closing costs.

Help with home buying
In addition to paying full moving expenses, State Farm also helps employees with house-hunting in the new location. If the employee gets sticker shock, State Farm comes to the rescue.

"Everything is negotiable. Some things employees will have to ask for and justify. A lot of companies have standard relocation packages -- they're not going to deviate from their policy. If you want something extra you have to sell, sell hard."

"If there's a higher cost of living involved in the neighborhood they're moving into, we'll pay a cost differential benefit over a four-year period," says Knudsen.

Not all companies are as generous as State Farm. Relocation specialist Bill Reber of Bill Reber and Associates in Dayton, Ohio, says some companies will do everything for the internal transfer candidate and only do some things for outside hires.

"Everything is negotiable. Some things employees will have to ask for and justify. A lot of companies have standard relocation packages -- they're not going to deviate from their policy. If you want something extra you have to sell, sell hard," says Reber. "A lot of companies don't want to set a precedent; it can get expensive -- do it for this guy and not the last guy, then he gets disgruntled."

A reasonable package
Here's what Reber says employees should feel comfortable asking for in a relocation package.

  • Realtor fees and closing costs at both ends.
  • Temporary living expenses. Reber says the norm is for 30 days, sometimes it could be extended to 60.
  • House hunting trip. The standard is one weekend, three days max. Possibly a second trip after an offer is accepted.
  • Travel expenses en route to new home.
  • If you're a renter, some companies will pay the lease cancellation fees.
  • Tax gross-up. This covers any tax liability the employee incurs for relocation benefits.

Additions worth requesting
Here are some additional benefits companies may -- or may not -- agree to provide.

  • Third-party buyout of home.
  • Return trips to previous home if employee has moved ahead of the family.
  • Assisting spouse in finding employment.
  • Double mortgage assistance. If you're carrying two houses, or one house and temporary living expenses, the company may be willing to help.

Double mortgage assistance is a perk State Farm grants.

"We'll pay one of the housing costs through a 45-day period," says Knudsen. "They don't have to feel pressured that they have to buy right away. This gives them time to buy smart. In essence, we're picking up the mortgage payment on the original house for a couple of months or we're paying the temporary housing expenses."

Lump sum packages
Employees who have little or no job experience, perhaps hired right out of college, usually can't hope to get the same relocation deal as an experienced employee. Reber says companies may offer these employees a lump sum payment.

"The company will usually do one of two things -- pack, move and pay for temporary living expenses, or give the person a lump sum. The employee moves himself and pockets whatever is left over. It's usually $3,000 to $5,000 and is sometimes seen as a front-end bonus," says Reber.

But there may be a catch. According to Reber, those employees should be prepared to pay out of pocket because sometimes the money isn't payable until 90 days on the job.

The bottom line when it comes to relocation expenses is: Find out what the company's policy is, get a good grip on what it will cost you to relocate and see if the company policy is adequate. If it isn't, see if there's room for negotiation. Many companies will try hard to make it work.

"Today, employees are more open to talking about 'I can't make this happen,' " says State Farm's Knudsen. "If they move and find the housing is too expensive, they have sticker shock. Then you have an unhappy family, unhappy employee, productivity may suffer and, in the long run, the policyholder, our customer, could suffer."

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-- Posted: Oct. 15, 1999

Quick take | A closer look | Cut the costs | Cut the confusion

 

 
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