Relocation Company

Jon Gilbertson, GMS, of SIRVA, Inc. and Susan Dawson of Genworth Financial discussed principles and techniques to apply to any RFP, contract or service relationship.

When developing an RF, there are many things that need to be considered during the process. Gilbertson and Dawson highlighted that for each program in your relocation policy you should have at least three questions related to the most critical service delivery process steps.

Specifications

The specifications in an RFP for commodities convey the style, appearance and quality of the product. The goal for specification of a service is to solicit information for you to understand how the specific service’s delivery steps will be satisfied. Be sure you are clear whether defining more specifications and expectation does not result in higher costs and higher management fees.

Evaluating

When evaluating RFPs, it is important to identify the importance of each service criteria by weighting or rating them on a scorecard. This can be done by your evaluation team scoring the comments and evidence that the supplier has provided. Gilbertson and Dawson give two ways to evaluate the RFP – the Business Process Review (BRP) or the Conference Room Pilot.

Business Process Review

The BRP is a walkthrough of the process to gain a better understanding of the clarifying comments by reviewing the process from beginning to end, clarifying gaps or questions in the process, asses any changes required and validating the potential supplier process.

Conference Room Pilot

The CRP approach is a more robust validation technique that validates real life scenarios by conducting an exercise with a team that would support your business. This can be done by role playing to assess answers and questions. This will help the team identify the gaps, review the process and make changes to the procedures.

However, the supplier assessment process doesn’t end at the RFP! Gilbertson and Dawson outlined 4 key categories to ensure the success of your service provider – Quality, performance, cost and continuous improvement. The process is continuous and clients should consistently change their policies and expectations. Equally important to keeping your expectations consistent, it is important to be aware and track the total cost when managing and assessing a supplier. Hidden fees can easily be lost and should be critical to consider in all relocation-related expenses.

To learn more about the RFP process, check out our other sessions at www.sirvauniversity.com.

As relocation professionals, what are some things we can do to prepare our transferees to navigate through this complicated and confusing time?
The first and probably best thing a transferee can do is talk to a relocation lender early in the process. Knowing where you are and what you need to do is critical to avoid stress, as well as be in a position to be aggressive with a home purchase offer, close on your terms and complete a successful relocation. The up-front application discussion should cover these seven things to ensure a successful home purchase. 

1. Know Your Credit Report: Many people don’t know what is on their credit report, a complete review is necessary to understand your credit situation and fix any issues that may exist.

2. Be Prepared to Provide Documentation: Income and asset documentation is required now. With all of the changes that have occurred in the mortgage industry, the level of verification is considerably higher than it was a few years ago.
 
3. Do Research on Product Availability: There are still many products available to fit a variety of needs. Understanding what is available and how you qualify is essential.

4. Learn about Property Type Trends: With declining property values, some property types such as condominiums, and other unique housing types are experiencing resale issues as guidelines have become more restrictive on property issues. Preparing for this reality is essential in setting sale expectations.

5. Be Ready to Provide Information for Rate Calculations: Many applicants call to ask “what is your rate?”, but this isn’t an easy question to answer anymore. Interest rates take into consideration factors like credit, LTV, property type, location, and loan size—so be prepared to provide your loan counselor with additional information.

6. Get Pre-Approved: You can still be approved over the phone or online quickly and easily in most cases. By being approved up front, you will be in the best negotiating position when you are ready to buy.

7. Talk through the Complete Mortgage Process: A complete conversation will include the entire mortgage process. Understanding the what, when and whys of returning your documents, the home appraisal, your loan commitment as well as what is involved in closing your loan is critical. It is important to know exactly what you should expect after the closing. Setting the right expectation will lead to a successful transaction.

Talking to a professional relocation lender applies to those buying in the short, intermediate or long-term. Start the conversation early on and a successful purchase will follow.  Please contact me if you have any questions.
 

Home sales are complicated right now. Sellers must find a way for their home to stand out in the crowded listing space that exists today. One tool SIRVA Mortgage utilizes, to make their SIRVA Relocation listings stand out, are mortgage financing incentives. A listing with “SPECIAL FINANCING OPTIONS” in the MLS jumps out to prospective buyers. However, it must be the right incentive to work.  And that is why…

Finding the right financing incentives to sell a house is in many ways just like courting a lady. It is more art than science and several things must take place in the right combination to be successful.

You must:

• Show interest
• Attract attention and curiosity
• Fit in with their interests
• Invite her friends
• Impress the parents

First, showing interest is critical whether getting a women’s attention or selling a house. Just as important is the speed at which you do it. Incentives should be put on as soon as the house is listed. The longer it takes to put an incentive on the more likely you have missed a buyer—the sooner the better.

Second, you will need to do something significant to attract attention. Cheap out and lose out. Significant does not mean expensive, it means quality attention getter. Being creative will add value and impress more than something commonplace.

Incentives should fit the interests of those you are seeking. Each home has a unique market that will attract buyers with certain needs. For example, maybe consider offering reduced closing costs for lower priced homes, lower interest rates for middle priced homes, temporary interest rate buydowns for higher-end homes or home improvement gift cards for the fixer-upper. Finding the right incentive can do wonders when trying to drive traffic into the home.Next, you should invite friends and all interested parties. Along with the transferee, the relocation counselor and realtor play a key role in making sure the home is listed correctly and with the right incentives. When everyone is involved, good things happen.Finally, you should impress the parents. The corporate client and the client contact are like the parents. By selling the home quickly, the costs of temporary housing, travel, duplicate housing and the possibility of going to a costly buyout are reduced. Additionally, the opportunity to earn a home sale bonus, if one is offered, increases along with the likelihood of a successful relocation. With the parents on board, success follows.

If you have questions on financing incentives please e-mail us at MortgageFacilitators@sirva.com , we would be happy to help. 

Some companies have very sophisticated well-thought-through global mobility programs that have been tried and tested for many years. Others are stepping into the global arena for the first time. Either way it doesn’t hurt to check the health of your global mobility program and consider what I would believe to be the 10 best practices to ensure your global relocation program is a successful one.

10 Best Practices to Ensure a Successful Global Relocation

1. Policy
   1. Make sure you have a formal global policy in place that has been reviewed by your global relocation provider for competitiveness and efficiency and bench-marked against industry standards.Candidate Selection 
2. Candidate Selection
   1. Utilize pre-decision surveys or interviews to ensure that your candidate is flexible, adaptable and ready to take on the challenge of an international assignment.
3. Benchmark
   1. Keep up-to-date as situations change, trends develop, and new products come to market.
4. Cost Estimates
   1. In today’s economic environment it’s prudent to have a cost estimate completed before sending someone on an assignment so you have an idea how much it is going to cost.
5. Cost Analysis
   1. Know what you’re spending and what policy changes or exceptions are costing or saving money. There are many examples of companies focusing on elements that are inexpensive and denying them, while allowing exceptions for other elements that are very expensive.
6. Track Exceptions
   1. Be sure to always track any policy exception that was made or declined and the cost of that exception. This will help you be consistent in how you treat other exception requests in the future.
7. Use Proven Providers
   1. Proven providers can give you good advice on all elements of a global relocation and can make the process easier for you.
8. Don’t Cut Corners to Reduce Costs
   1. There is usually a good reason to do something well.
9. Create a Repatriation and Reintegration Plan Well Before the Assignment Ends!
   1. If you don’t, you may risk losing a valuable employee. Statistics show that up to 70 percent of repatriated assignees leave their employer within two years, usually to join a competitor.

For more information on the above global mobility program components and services, please contact SIRVA Relocation for a consultation.

 

Before you announce that a corporate group move (or relocation) is taking place, it is important to be prepared. A part of that will be identifying the resources you will need. Consider all the internal departments that need to be involved or will be impacted by the move. Evaluate if you need to bring in outside resources to assist you in managing the move.

Too often people underestimate the complexity of a group move and the critical need to have the time to properly prepare for the move prior to it being announced. For those employees who are moving, as well as those employees who are not going to move, you or someone on the team need to have the answers to a number of critical questions such as:

Questions that need to be answered for employees who are moving:

• What organizational units and types of jobs will be involved?
• How many jobs will be moved? From where? To where?
• Has selection criteria been established? Will the criteria be publicized?
• How will transferees be selected and invited? What will be the administrative process for job offer and acceptance?
• Will transferees’ departure-area jobs be re-filled? If so, how?
• How many job openings in the new facility will be filled locally?
• Will there be new-hires to be relocated?
• Will group move relocation benefits expire at a certain point in time?

Questions that need to be answered for employees who are not moving:

• Why wasn’t I asked to move?
• Will I be offered a new job?
• Do I need to apply for it?
• When will my current job end?
• Will there be a stay or retention bonus?
• Is there a severance package?
• If a job opens up at the new location, can I apply for it?
• Can I apply for a job at another location?

Now may be a good time to reflect on the fact that the “bursting of the housing bubble,"which impacted many parts of the United States, was preceded by record setting increases in home prices. While most of the country has seen two year price decreases, some areas like Las Vegas (down 37%), Phoenix (down 39%) and Miami (down 38%) stand out as being especially hard hit. Some experts are now saying that it may take decades for home prices to recover and that we should expect price growth to revert to more post World War II “historical norms." By historical norms we mean that housing prices are much more likely to rise consistent with income levels and inflation. This reality has not been lost on the real estate speculator (now driven out of the market) but what does this mean for corporate relocation transferees? Transferees need to be counseled through the home sale process to ensure that they are basing their decision-making process on current market conditions. For example:

1. The new home is less likely to appreciate during their years of occupancy
2. They should not only buy a home they can afford, but one that they will live in until their next transfer
3. Transferees should choose a home that will suit their long-term needs, as the ability to leverage home appreciation to “buy up” is far more difficult

For more information about counseling your transferees through the the corporate relocation home sale process, please contact SIRVA. 

In today’s precarious economy, many employers are considering giving relocation loans to employees. Several of these employers may not have provided relocation loans to employees before, but are now looking for ways to increase the opportunity to make such loans available.  .

A relocation loan that is done correctly can be offered to the employee interest-free and without exposure to creating imputed interest to the employee which would be treated by the Internal Revenue Service as compensation income.

The following information concerning below market rate loans is an excerpt from an article published by the Worldwide Employee Relocation Council® (ERC) in its Tax and Legal MasterSource:

A. Types of relocation loans

1. Mortgage loans

A mortgage loan is extended by the employer to the employee with the understanding that the employee will use the proceeds of the loan to purchase a new principal residence. Such loan may be a demand or term loan, and is conditioned on the future performance of substantial services for the employer. The loan may have a market interest rate, a below market interest rate, or no interest at all.

2. Equity bridge loans

A loan may be offered to an employee in order to enable the employee to receive the equity out of an old unsold residence to make the down payment on a new residence. The terms of the loan may require that the proceeds be repaid within a short time after the sale of the former residence. The loan may have a market interest rate, or a below market interest rate, or no interest at all.

B. Imputation of interest on a loan transaction

1. Explanation of imputed interest

When a loan is made at a below market interest rate, or with no interest at all, the Internal Revenue Code may impute interest to the loan even though the lender and borrower never did. If imputed interest rules apply to an employee relocation loan, the amount by which a market rate of interest exceeds the loan’s actual rate of interest is considered income to the employee borrower. (The market rate used is the "applicable federal rate," which is computed by the IRS under a formula in the Internal Revenue Code and periodically adjusted.) This income is considered to be derived from the employer-lender, because the employer-lender is considered to have paid interest on the loan to itself on behalf of the employee-borrower.

2. An example of imputed interest

An example of imputed interest may be helpful in understanding this complex area. Assume that the employer has made an interest-free bridge loan to the employee. The market rate of interest on the loan would be $100 per month if interest were charged by the employer-lender. No interest is paid by the employee-borrower or received by the employer-lender. However, the tax law considers the employee-borrower to have owed $100 of interest, and since the employee’s obligation to pay this $100 was satisfied by the employer-lender, the transaction is treated as though the employer-lender paid $100 per month to the employee-borrower, who then repaid it to the employer-lender. This characterization of the transaction gives rise to $100 per month of compensation income to the employee-borrower.

3. Reporting requirements for imputed interest

The employee-borrower must report imputed income on his/her tax return, even though the employee never received it, but then may be entitled to a corresponding deduction for the interest theoretically paid on the employee’s behalf by the employer-lender.

4. Negative tax consequences of imputed interest

If interest is imputed to loans it has negative tax consequences for the employer-lender and may have for the employee-borrower. The employer-lender must pay payroll taxes (FICA, RRTA, and FUTA) on the amounts imputed as interest income to the employee-borrower. (The employer-lender, however, does not have to withhold federal income taxes on the imputed interest income.) The employee-borrower may or may not be eligible for a deduction of the imputed interest. The interest on a mortgage or bridge loan may be deductible as "qualified residence interest" under the general rules applicable to homeowners. However, there may be situations in which interest income is imputed to the employee, but the employee is unable to take a corresponding interest deduction. For example, there is a $100,000 limit on the amount of home equity debt upon which interest is deductible.

C. Avoidance of imputed interest

1. De minimis exception

If the total principal amount of the employer’s mortgage loan, bridge loan, or both outstanding to the employee does not exceed $10,000 during the year, the loans are ex-empted from the imputed interest rules due to their small size. No interest will be imputed in this situation.

2. Exemption for employee relocation loans under regulation 1.7872-5T

Under a temporary regulation, imputed interest will not apply to compensation-related mortgage or bridge loans if the following requirements are met:

      a. Exemption for mortgage loans

          The loan agreement must require the following provisions:

i. The proceeds of the loan must be used only to purchase the new residence.

ii. Such loans must be secured by a mortgage on the new principal residence acquired in connection with the relocation of the employee to a new principal place of work.

iii. The loan must be a demand or term loan.

iv. The benefits of the interest arrangements must not be transferable.

v. The below market interest rate (or the lack of interest) must be conditioned on the future performance of substantial services by the employee.

vi. The employee must certify to the employer that the employee reasonably expects to itemize deductions for each year the loan is outstanding.

     b. Exemption for bridge loans

The terms of the bridge loan must meet all the requirements for the mortgage loan as stated above except for the security requirement. Note, however, that any interest actually charged on a bridge loan will not be deductible by the transferee unless the loan is secured by either the old or new residence. In addition, the bridge loan agreement must provide that the loan is payable in full within 15 days after the sale of the employee’s immediately former principal residence. The aggregate of the principal amount of all outstanding bridge loans must not be greater than the employer’s reasonable estimate of the equity in the former residence. The former residence must not be converted to business or investment use.

     c. An unresolved issue

One issue that remains unresolved under the temporary regulation is whether the exemption applies in situations where imputed interest would not be deductible under the general rules applicable to home mortgage loan interest deductions. This problem is particularly acute for bridge loans, which are often unsecured by either the old or new residence, and, even if secured by the old residence may be considered home equity loans, and therefore limited to $100,000 of principal on which interest would be deductible. Although the IRS has not spoken to this issue, it is arguable that the 1986 Tax Reform Act, which imposed the current limitations on deductibility of interest, would be held to modify the exemption contained in the temporary regulation. However, in the absence of any IRS statement of position, it should be assumed that the regulation may still be relied upon. The IRS continues to follow the regulation, and has shown no interest in revisiting it.

Accurate and timely accounting of relocation expenses has a far-reaching impact on the overall performance and success of a corporate relocation program, to both the company and the individual transferee. An expense management process should support users without being burdensome, so they can concentrate on the other aspects of their jobs. Corporate relocation managers and/ or payroll managers should consider several key issues when evaluating the effectiveness of the expense management process in their companies.

Once a company has reviewed its current process and determined that improvements are needed, the next step is to decide how to make enhancements. In today’s business environment there are not many functions within an organization that are not a target for outsourcing, including expense management. And for a relocation manager, the decision to outsource this particular function will come with new questions that need to be addressed.

Questions to determine outsourcing readiness:

Is there an overall culture of familiarity with outsourcing transactional functions (e.g. benefits processing) that already exists within the company?

If the company has previously outsourced other functions, then formulating a plan to outsource the management of relocation expenses can be evaluated not only on its own merit, but can also rely on precedent and draw on successful processes that have been followed in the past. If this is not the case, then a transition project plan needs to be developed and approved.

Is this a core competency that the company has or wishes to retain?

Expense management is a very detailed process that requires an in-depth knowledge of the ever-changing tax laws and regulations at the federal and state levels. Part of the evaluation process is to assess the current depth of knowledge of the team and determine if it is adequate and can be sustained if team members change. In the end, the evaluation process may lead to questioning whether or not this is a function that should remain in-house.

To learn more about determining outsourcing readiness click here
 

1. Is there a customized, seamless integration with payroll?
    
2. Is there a documented exception management process with the ability to track and report exceptions by type, division, cost center, etc.?
    
3. Does the provider just “rubber stamp” exceptions, or is there a clear audit approach to policy compliance and approved exceptions?
    
4. Does it provide cost-of-living allowances (COLA) and lump sum calculations?
    
5. Is there a process in place for making timely and accurate payments on the employee’s behalf for recurring costs (temporary living, rent, etc.)?
    

We all know that real estate is local. However-in our current real estate situation-we are seeing more markets continue to see a slip in home sales with only a few who are reporting an increase. The National Association of Realtors (NAR) reports areas such as Colorado Springs, Colo., Sacramento, Calif. and Spartanburg, S.C. are experiencing double-digit pending sales gains compared to a year ago with a significant percentage of these sales attributed to investors who are buying foreclosed properties. So while some markets have seen tremendous growth in home sales compared to last year, others have seen contract signings slashed by as much as 50 percent.

The current real estate market for the typical residential home is still very much a buyer's market. Attractive interest rates, large inventories of homes for sale and lower-than-average sale prices make it a great time to buy. Sellers aren't so fortunate. In fact, some areas have seen home values drop so low that typically willing transferees are hesitant to take a corporate relocation because of loss-on-sale concerns or owing more on their properties than the current market value sales price.

According to a recent survey conducted by the Worldwide ERC®, the number one reason employees are reluctant to relocate is a direct effect of the troubled real estate market. The survey indicated that more than 95 percent of respondents reported "slowed real estate appreciation at the old location," as the reason their employees are averse to moving. This is a stark contrast from last year when only 16 percent cited the real estate market as the reason for their reluctance. Instead, high housing costs, high cost-of-living and family resistance to move, were top concerns.

"Today, it's an unfortunate fact that those true soldiers that have faithfully relocated every two to three years are cooling to the idea because of the economy and the fear that they will take a considerable home loss-on-sale," says David Barlow, SIRVA's senior consultant. 

Barlow advises companies that have not done so to consider implementing a loss-on-sale policy to remain competitive and to help their transferees with the reality of falling home values and sale prices. He also advises companies that already have a loss-on-sale policy to re-evaluate the loss-on-sale limit or cap to ensure it is sufficient in today's difficult real estate market.

It's no secret that the current real estate market has had a significant impact on the relocation industry. Companies have had to reevaluate and update their corporate relocation policies to overcome the challenges of the current market.

Barlow doesn't wager a guess on when the market will turn, but he expects companies will be working through the challenges of the current real estate market for some time to come.
 

Here at SIRVA our clients are increasingly asking how the continuous economic turmoil impacts their company insofar as their relocation program is concerned. Specifically, they want to know how their company can continue to effectively and efficiently hire new employees and relocate existing employees during these difficult times.

So what should companies do in such challenging times insofar as relocation is concerned? In addition to learning how to better leverage relocation policies currently in place, this is the optimal time for companies to look at some of the innovative and time-tested relocation program provisions that are proving highly effective at protecting both your company and your employees. Here are some suggestions:

Best Practices for Home Sale: Making sure your relocation program includes four (4) critical home sale provisions—regardless of what type of home sale program you have—and how to effectively enforce expectations.

Loss On Sale and Negative Equity: An inside look at the innovative new options for the company and the transferee in these two complicated, yet frequently encountered, situations.

Pre-Decision Analysis: Before the formal relocation process is started, companies need to assess whether candidates are able to actually complete the relocation in today’s economic climate.

Read the complete article now

The U.S. housing market is continuing to slow, and most economists and housing professionals predict the housing slump will linger longer than previously forecasted.

A downturn in real estate markets creates several challenges for employers' relocating transferees, the most significant of which is the growing number of homes that end up in inventory. This rise in home inventory leads to higher overall relocation costs and increased property management duties for employers.

Total home sale costs also become less predictable in sluggish real estate markets, and unpredictable home sale costs translate into unpredictable total relocation costs.

Relocation service providers (RSPs) offer several home sale programs, each with varying levels of risk, to help corporate relocation transferees. Employers should consider the advantages and disadvantages of each program to determine the level of risk involved, and those employers who want a predictable and low-risk home sale program should consider a fixed-fee program.

Learn more about the fixed-fee program.

Lynn Bragg, Worldwide ERC® CEO, has agreed to speak at this year's SIRVA University, which will be held on April 1 - 4, 2009 at The Ritz-Carlton in Palm Beach, Florida.

Lynn will be presenting a 2009 relocation industry outlook address, which is sure to be an informative session for the relocation professionals who attend this year's event.

Lynn's Full Bio
Video of Lynn Speaking at ERC's Global Workforce Symposium

More information about this anticipated event to follow.

On December 5, 2008, SIRVA announced the appointment of David Byers as the Company’s new chief commercial officer. Byers brings more than two decades of operations, marketing, sales and brand management experience from H&R Block and Foote, Cone&Belding Inc. to SIRVA.

“David’s deep knowledge base in financial products and services, and his experience in developing and managing brands will help drive our relocation services business,” said SIRVA President and Chief Executive Wes Lucas. “Similarly, his background working with distribution networks will bring tremendous value to our moving business.”

Byers was with H&R Block for eight years and progressed quickly through the ranks, from senior vice president and global chief marketing officer to senior vice president of U.S. operations, and most recently, chief operating officer of retail tax services. In these roles, he was responsible for H&R Block’s U.S. operations, sales and business development functions, which comprised more than 13,000 retail locations and 100,000 employees. Prior to H&R Block, Byers’ career included working for global advertising agency Foote, Cone & Belding Inc., Del Monte Corporation, and most recently, he served as chief executive officer of The Mutual Fund Store.

See Press Release
 

With today’s business focus on managing costs, there may be an opportunity for you to do a review of your corporate relocation spend. 

Closing costs on the purchase of a home by the transferee in the new location are nine percent of the total relocation cost, averaging over $8,000. Your results may differ depending on your move patterns, demographics and relocation reimbursement policy.

Home purchase reimbursement policies can be categorized into four styles:

1. Full reimbursement
2. Capped reimbursement
3. Lump sum
4. No reimbursement

The first thing to consider, when reviewing home purchase costs, is the company’s philosophy toward corporate relocation benefits. Are you part of a company that desires to reimburse all expenses or is the idea to assist with the costs associated with the move? The answer will certainly impact the relocation policy language and the expense associated with each move.

Preferred relocation lenders that are partnered with you will assist in controlling your costs. Preferred lenders will have negotiated lender fees and will not engage in fee add-ons. Higher fees from outside lenders can cost the company or the transferee hundreds or even thousands of dollars more.

One of the most costly line items in home purchase is points, also known as origination or discount points (fees). These can vary depending on the loan amount. Each point is one percent of the loan amount and typically can reduce the interest rate by a quarter of one percent (.25). Many companies that had reimbursed two points have dropped down to reimbursing one point, while others have reduced one point to zero points. In today’s low interest rate environment, a reduction may be an opportunity to reduce costs without disturbing reasonable benefit levels.

With FHA loans becoming more prevalent, reimbursement of the Mortgage Insurance Premium (MIP) should be avoided. Like the VA funding fee or Private Mortgage Insurance (PMI) these are buyer paid costs that should not be company paid.

Construction loans can also be a costly expense. Many construction loans have two closings, one for the construction and one for the end or permanent loan. Best practice is to pay for only one of the closings, not both.

A general inspection can be a good way to improve the quality of a home purchase and increase home eligibility in the event of another move. These inspections should be capped at $500 to limit the company’s exposure to unnecessary inspections.

Many policies include the reimbursement of home purchase closing costs for current renters. Elimination of this benefit can produce cost savings—however this should be aligned with your company’s philosophy concerning the level of financial support offered during the relocation process. 

Also be aware that sellers, and many builders, can try to push their closing costs onto the buyer, especially when relocating buyers are not familiar with local customs. To reduce the company’s exposure, your policy should indicate reimbursement of normal and customary buyer closing costs. SIRVA is available to review your relocation policy to ensure you are using best practices to safeguard your costs. David Barlow, SIRVA’s senior consultant and author of Navigating Today’s Real Estate Market, has done extensive benchmarking on relocation policy components. He is a great resource to call upon as you examine your policy,

SIRVA Mortgage also provides a free consultation with any transferee to compare Good Faith Estimates (GFE). The consultation will ensure the transferee has “apples to apples” comparison and that the fees are in line with the relocation policy. Oftentimes, we see an estimate that has a lower interest rate that is offset by increased fees. These situations are discussed and reviewed to determine the best option for the transferee.

For more information visit http://www.sirva.com/CorpRelo_Mortgage_Landing.aspx

When a borrower owes more on their mortgage loan than a property is worth, the borrower is in what is commonly called “negative equity.”

When a seller is in a negative equity position, they are obligated to come up with the negative balance to pay of their loan. The seller is required to do this for two reasons:

1. The lien holder (the lender) will not remove the mortgage lien unless it receives full satisfaction of the amount due on the mortgage loan.
2. The prospective purchaser of their property will not purchase the property with the mortgage lien still on the property.

What is a Short Sale?
A short sale is a means by which a seller can satisfy the negative equity. Instead of the seller paying the negative equity, the seller’s lender reduces the mortgage loan value and accepts a lesser amount from the sale of the property—hence, eliminating the negative equity.

History of Short Sales

Historically, in situations where the seller was unable to come up with the negative equity, lenders have not allowed a short sale. Lenders were willing to allow a property to proceed to foreclosure because property values were always increasing and could support a resale sufficient to recover the loan balance. Even when a short sale was denied, it was not generally the case that the seller would default on their loan—they would decide not sell their home. Short sales were only permitted in extraordinary situations when default was imminent and the resale value would not support the loan value.

Short Sales Today

Due to across the board extraordinary losses in property values, and increases in mortgage loan defaults and foreclosures, lenders are now more inclined, as a matter of policy, to consider a short sale transaction.

The lender will still require evidence that the sale price cannot support the current loan value and will look for evidence of potential default. However, lenders are more inclined to entertain a short sale based upon current real estate market conditions and the likelihood that the property value will not support the loan value in the foreseeable future.

Lenders have historically required anywhere from 30-60 days to complete a short sale transaction. Although many larger lenders are establishing departments to address short sale transactions, the time frames are not expected to be reduced due to the increase in negative equity situations. 

If a borrower waits until an offer is received to ask their lender to consider a short sale transaction, then there is a strong possibility that they will lose the transaction while awaiting their lender’s decision. Although a lender will not approve a short sale until they know the terms of the sales transaction, they can begin to investigate the borrower’s request, set the proper parameters for approval and be prepared to make a quicker decision when an actual offer to purchase is presented. Borrowers should contact their lender as soon as possible if they are in a negative equity or limited estimated equity position on the property. Because there is a significant amount of data and several factors for a lender to consider, the sooner the lender is able to begin evaluating the situation, the more opportunity there is for smooth and successful short sale transaction. 

Lender Requirements

Lenders still require ample support indicating that the short sale is the last viable option for the borrower. Therefore, the borrower must be able to demonstrate that they have looked at other alternatives such as credit card advances, family gifts and relocation employer benefits before requesting a short sale. Depending on the borrower’s particular and unique circumstances, the lender may require that the borrower enter into an unsecured consumer loan for the short sale balance.

Many lenders also require evidence that all reasonable steps have been taken to minimize the transaction costs. Many lenders will look to reduce broker commissions and other closing charges to maximize the amount of funds available for the loan payoff. It is important to explain to a lender that in a corporate relocation transaction the employee/borrower has no transaction costs and thus a reduction will not provide more funds to the lender (and, in fact, may reduce incentives to sell the property at the best possible price).

Lenders vary as to transactional involvement—some will only review the data presented and others will actively engage in the home sale process. SIRVA has experienced lenders that want regular marketing updates and even require that they control the listing process, listing price and any listing price reductions. In order to increase sales opportunities, some lenders have even required special incentives and concessions are included as a party of the marketing strategy, including special financing offers to prospective buyers. All of these possibilities are lender specific and vary significantly based upon the borrower’s position, the facts surrounding the transaction and the transaction terms themselves. This provides an additional reason to contact the lender as soon as possible if there is the possibility of a short sale situation.

Despite the complications and time involved, short sales must be considered as a viable alternative in dealing with negative equity situations in relocation transactions until the real estate market recovers and values become stable again. 

According to the Trippel Survey&Research LLC Seventh Annual Relocation Managers Survey: Relocation Management Company Industry©, SIRVA Relocation ranked second in overall performance and satisfaction among the industry’s top six largest relocation companies. The company achieved the highest scores among the six largest relocation providers in eight of the 24 areas surveyed, and it also placed as one of the top three providers in 22 out of 24 areas surveyed among the largest relocation providers. SIRVA Relocation LLC is a subsidiary of SIRVA Inc., a leading global relocation services provider.

“These results are a direct reflection of our steadfast commitment to providing our customers with unparalleled service and value every day,” said SIRVA Inc. CEO Wes Lucas. “Our goal is to be the most trusted and sought-after relocation services provider in the industry based on the work we do and solutions we offer. I am elated to see that customers are recognizing the value we bring to the table.”

Trippel Survey&Research conducted this survey—which launched September 12 and concluded October 1—with the goal of obtaining evaluations from corporate relocation managers regarding levels of satisfaction with firms in the relocation industry. More than 300 survey evaluations—representing 298 different relocation management companies—were received. The six largest relocation management companies in the survey accounted for nearly 75 percent of all evaluations returned.

Categories in which SIRVA Relocation achieved the top score included: Responsiveness and flexibility to your needs; Service recovery; Year-end tax reporting; Management reporting; Identifying trends and responding to them; Suggesting policy recommendations; Suggesting ways to reduce your costs; and Taking actions that control or lower direct real estate costs.

This March SIRVA University, SIRVA Relocation’s annual conference exploring corporate relocation industry trends and professional development, played host to 150 of the nation’s top relocation industry executives. The event, which was held at the Westin Kierland Resort in Scottsdale, Ariz., provided an exclusive forum for industry insiders to discuss vital, ongoing and emerging industry issues with experts
and colleagues.

Attendees included representatives from human resources, domestic and global relocation, procurement and supply chain departments from more than 75
different companies.

”Our industry is facing a lot of challenges, and SIRVA University provides an opportunity for human resource and relocation professionals/specialists to gather and discuss best practices and practical solutions,” noted Mike McMahon, president, SIRVA Relocation.

This year, conference roundtables and educational sessions covered topics ranging from tips for promoting relocation programs within an organization, home loss-on-sale assistance to relocation trends in China. Additional sessions addressed relocation fundamentals, such as policy trends and best practices, and provided a comprehensive history of the industry—on both a domestic and global scale.

“The educational roundtables in particular were an opportune time for attendees to interact directly with SIRVA executives and fellow relocation professionals,”
said McMahon. “And the keynote speakers were incredibly well received by all.”

SIRVA University Presentations Available Online

Those who were unable to attend this year’s event can download SIRVA University presentations and event images at www.sirvauniversity.com/agenda.asp. Individuals can also download audio recordings of the various sessions to hear them as they were presented, including question-and-answer sessions. Individuals seeking more information on SIRVA University 2008 can e-mail sirvau@sirva.com. If you'd like more information about SIRVA or corporate relocation consulting visit: www.sirva.com.

This March SIRVA University, SIRVA Relocation’s annual conference exploring corporate relocation industry trends and professional development, played host to 150 of the nation’s top relocation industry executives. The event, which was held at the Westin Kierland Resort in Scottsdale, Ariz., provided an exclusive forum for industry insiders to discuss vital, ongoing and emerging relocation industry issues with experts and colleagues.

Attendees included representatives from human resources, domestic relocation, global mobility, and procurement and supply chain departments from more than 75 different companies.

This year, conference roundtables and educational sessions covered topics ranging from promoting corporate relocation programs, home loss-on-sale assistance, developing employee relocation packages for global mobility and relocation trends in China. Additional sessions addressed relocation fundamentals, such as policy trends and best practices, and provided a comprehensive history of the industry—on both a domestic and global scale.

SIRVA University Presentations Available Online

Those who were unable to attend this year’s event can download SIRVA University presentations and event images at www.sirvauniversity.com/agenda.asp. Individuals can also download audio recordings of the various sessions to hear them as they were presented, including question-and-answer sessions. Individuals seeking more information on SIRVA University 2008 can e-mail sirvau@sirva.com.