Relocation Guide

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.
 

It’s a new lending world from the last time you obtained a mortgage loan. Here are some challenges the refinance market has in store for you.

Home Value
With the decrease in market values in just about every market, your home may not be worth what you think or what you need it to appraise for. Depending on your particular situation, you may not qualify or your loan terms may be different due to a lower appraised value that can cause a higher loan-to-value ratio. 

Loan Requirements
Qualifying for a loan is tougher than ever. Guidelines around higher cash reserves, higher credit scores and lower debt-to-income ratios have become standard. In addition, documentation around income is being required.  
 
Cash Out Refinances
Qualifying for taking cash or equity from your home is considerably more difficult and more costly with rates up to .75% higher on these loans. Expect less available cash due to lower home values and tighter lending restrictions.

Tangible Net Benefit
Regulations in many states require a clear tangible net benefit to be provided to the consumer when refinancing. Tangible net benefits are documented proof by your lender that your situation will improve under this new loan. For instance your interest rate going from 7 percent to 5 percent without excessive closing costs would be a tangible net benefit. 

Choosing the Right Provider
There are significant differences in rates, closing costs, up-front fees, programs and on-time closing by provider. You should shop providers carefully to find the best combination to fit your needs.

The refinance market space can still help many home owners save thousands of dollars. Know what you are getting into, do your homework and be realistic about what you can achieve.

SIRVA Mortgage also provides a free consultation to any transferee to compare Good Faith Estimates (GFE). The consultation will ensure the transferee has “apples to apples” comparison on refinance options. 

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

Last month I posted a story about Mr. Jones who worked through a short sale situation.  This month we highlight Mr. Johnson who lives a few doors down from Mr. Jones.

Mr. Johnson has had his house listed for 120 days. Home values continue to decline and there are few buyers in the market. Mr. Johnson has received considerable pressure from his new manager to get moved and settled into his destination city. Mr. Johnson isn’t sure what he should do or what solutions may be available to him.

This relocation situation has become more common in today's market. With the tightening of qualifying guidelines, available options have become limited in the past year. The current solutions include:

• Qualify with both the existing home and the new home mortgage payments
• Rent the existing home
• Hold off from buying until the existing home is sold

Qualifying with both house payments
If a current residence is under contract for sale but has not yet closed, and a transferee is purchasing in the destination city, both the current and the proposed payments must be used in qualifying for the new mortgage loan. In addition, loan underwriting guidelines will require:

• Minimum cash reserves of six months principal, interest, taxes and insurance (PITI) for both properties if the equity in the existing residence is less than 30 percent
• Minimum cash reserves of two months principal, interest, taxes and insurance (PITI) for both properties if the equity in the existing residence is 30 percent or more

Underwriting guidelines will not require the PITI of the existing home to be counted against the transferee if:

• The above cash reserve requirement is met
• The current residence is under an executed sales contract
• There is confirmation that any financing contingency has been cleared**
  
  ** Guaranteed purchase offer agreements can be used to replace executed
  contracts with outside buyers in the case of a relocation loan. The purchase offer must be guaranteed and agreement must be in force.

Renting the existing home
Lending underwriting guidelines allow up to 75 percent of the rental income to be used to offset the current mortgage payment for qualifying purposes if all of the following requirements are met:

• There is documented equity of at least 30 percent in the current property (derived from an appraisal, AVM or BPO less all outstanding liens)
• There is a fully executed 12 month lease agreement
• There is a copy of the security deposit from the tenant and confirmation of deposit into the borrower’s account

If the 30 percent equity in the property cannot be documented, the rental income may not be used to offset the mortgage payment. Both the current and the proposed payments must be used to qualify for the new transaction and six months of PITI for both properties would need to be in cash reserves.

Hold off buying until your existing home sells
This is the option we see most transferees accept. Unfortunately, with the decline in the real estate market and decrease in home sales—we see relocation fatigue, an increase in temporary living costs and cancelled moves. Staying consistent with your communication messages to transferees is important during the listing period. Encouraging aggressive marketing tactics and active involvement with the listing agent will help the transferee through this time. See David Barlow’s blog on Navigating the Real Estate Market for more information.

After reviewing his options Mr. Johnson’s next concern is his down payment. We will look at the possible solutions for a down payment next month and see how Mr. Johnson is progressing with his move.

If you have a group move to manage and are seeking assistance, SIRVA Relocation is able to provide the following services:

Defining Objectives
SIRVA works closely with your Company’s management team to define the overall objectives of the move and ensure their implementation during the move process. As a part of our consultation, we will discuss the Company’s business and human resources goals and objectives, policy issues, the group move timeline, and factors to consider in the cost analysis and process development.

Relocation Cost Analysis
We provide expertise in analyzing the total cost of a group move by detailing the cost impact of policy decisions and local market conditions on both the Company and the employee.

Policy Design
SIRVA can incorporate your business objectives into an appropriate group move policy. A key component of policy design is the solicitation, review and analysis of your employees’ input via the employee survey that we will design to meet the needs of your employee population and the constraints your management has placed on the process. This information, along with policy and benefit guidelines, will result in a Group Move Policy Handbook detailing the corporate relocation program for your employees.

Employee Presentations
We have the depth of experience to assist the Company in securing the employee’s enthusiastic commitment to the move through a carefully planned and professionally presented program for the entire family. This program includes a complete overview of the new destination city and state, plus the ability for employees to ask questions and address concerns about the move. In short, we bring the experts in each resource area to the transferee.

Relocation Resource Center
SIRVA can prepare an on-site, on-going “Relocation Resource Center” for employees and their families, which provides information about the destination city’s schools, housing options, medical facilities, etc.

Information Kit
Each employee will receive a complete package of information about the destination city including, if appropriate, a video about the city. Employees will be assigned a personal relocation counselor who is available to answer questions, research any specific needs they or their family members may have, and arrange for individual home finding trips to the new city (if included in the plan).

Area Tours
SIRVA can organize area tours guaranteed to satisfy your employees’ questions about their new city.

Other services include:
• Home Marketing Assistance
• Home Purchase Assistance
• Home Finding Assistance
• Temporary Housing Assistance
• Spouse Job-Finding Assistance
• Employee Expense Tracking Administration and Tax Calculation Capabilities
• Mortgage Assistance
• Vendor Selection and Management
• Training Material and Programs

When localizing an expatriate, there are several compensation items that need to be considered. Here is a checklist to use a guideline:

1. Base salary. Should the employee be "re-priced" to the local market pay structure? Should a premium be offered for international experience? Many organizations move the employee to local salary levels. If there is an extreme difference in salary levels (either lower or higher), however, a phased-in approach is often carried out. On the other hand, oftentimes organizations justify paying an expatriate on a higher pay structure because of his/her international experience and business relationships with the home office.

2. Retirement benefits. Because retirement plans, social security and pensions do not cross national boundaries, this is often the most difficult item to transition. Often employees have expectations to remain on their home country retirement program, but unfortunately there is no typical solution to bridge the gap between country plans. Some basic alternatives include retaining the employee in a tax-qualified home country plan, simply transferring to the local plan or using an umbrella-funded plan.

3. Income taxes. Normally, the expatriate will simply transfer to the local tax system. This is not a problem for most of the world. American workers, however, are put in a difficult situation because they are taxed on a worldwide basis. Many organizations will continue the "tax equalization" process on an as-needed basis to prevent double taxation on American expatriates. Employees of other nationalities do not require such assistance.

4. Housing. It is recommended that organizations remain flexible regarding host country housing because many factors come into play when deciding how to handle housing for the expatriate. In many locations throughout the world, expatriate housing is vastly different than local standards and expectations. In some cases, it may be unreasonable to expect an expatriate to move into a local neighborhood or local style housing, e.g. Mumbai, Beijing, Jakarta, etc. Therefore, if the expatriate is moved to the local salary structure, a housing allowance may be needed to subsidize continued living in expatriate style housing. Other issues that arise with housing tax issues, family matters, property ownership laws, home search assistance and moving costs.

5. G&S differential/assignment incentives. In locations where assignees receive a G&S differential, the common practice is to immediately stop the allowance. Other options include a phase-out or lump-sum buyout, although it is rare for companies to continue to pay a G&S allowance beyond the effective localization date. Other assignment incentives such as mobility premiums, hardship allowances, etc. are also normally stopped upon conversion to local status.

6. Education for dependent children. After housing, this item is the most commonly subsidized cost after an expatriate is localized, especially if the local schools are inadequate based on international standards or if the host country language is an issue. To alleviate the problem, organizations should consider continuing education coverage, or pay a percentage of the education costs for one to two years.

7. Health care. Health care standards and costs vary greatly in different parts of the world and is a priority issue for most employees and their families. Normally, localizing employees will simply transfer into the local health care system, but concerns will arise if the health coverage in the new location is of a lower standard than in the home location. This will be a costly change for an employee coming into the United States, where typically the health care is more expensive. Because of their time spent in the host country, a localized employee will most likely be aware of the issues, and therefore be in a position to make appropriate decisions.

Finally, localization may subject the employee and the company to various employment laws and regulations that apply to employees hired by local companies. It is important to speak with a local employment counsel to understand the legal effects and ramifications of localization, including subjecting the company to stringent employment laws in some European countries.
Localizing expatriates can be a complicated process and is not as simple as transferring expatriates to a local compensation package. By having a strategic plan in place, companies can anticipate potential localization issues and make the process as efficient as possible.

The decision to relocate an employee or new hire is the result of a great deal of effort and evaluation by a company and then by the prospective transferee. Agreeing to relocate at the request of an organization is not always an easy decision for an individual and his/her family to make. When describing your company’s corporate relocation policy it is important to remember that no matter what the circumstances are, agreeing to relocate will begin a stressful and sometimes life-changing process for most transferees. When crafting the relocation policy it is advisable to look beyond just describing the level of benefits that will be provided. You should also consider if the policy will assist and support the transferee when it is examined at the start of the relocation.

When writing a relocation policy there is a checklist of things to keep in mind when setting the right tone:

Optimistic Empathy
Start your company’s relocation policy with a supportive and positive welcome or introduction. Recognize what your company is asking transferees to do and acknowledge what they may face during the relocation process. Let the transferee know that your company understands the experiences of other transferees that have preceded them. Point out that understanding and following the relocation policy will minimize the disruption to the lives of the employee and their families. Close the introduction with words of appreciation and thanks for accepting the relocation.

Rational Processes and Requirements
When describing a process or requirement in your company’s policy, include the reasons behind the wording. Letting the transferee know the “why” can often increase voluntary policy compliance and reduce the level of enforcement needed. While relocation is a complex process and there are a number of hard rules that need to be followed, the tone of the policy as being one of mutual benefit is critical. The key is to avoid setting a negative and controlling tone that may offend the reader and create a pessimistic view of the relocation process and even perhaps of your organization.

Clarity and Firmness
A policy needs to be both clear in what it says and firm in how it says it. A policy should not give the impression that the components are subject to personal interpretation and/or can be negotiated. Some policies even state up front that the company is ”…please to provided you with a quality relocation program and exceptions are not anticipated.” While the tone needs to be supportive, the policy must still clearly state what benefits will or will not be provided. If the company style/format guidelines permit, write the corporate relocation policy in the second person voice. Using the pronouns “you” and “your” adds a personal tone to the policy. It also assists the employee in understanding what processes and procedures he or she must follow.

Seems for sale signs are everywhere. We all know it takes longer to sell a house now, added to this real estate slow down is tighter credit guidelines due to the “credit crunch." Loan programs that offered a wide range of financing solutions are gone, 100% financing products have disappeared. Several mortgage insurers are not insuring loans with less than 5% down. Jumbo loan rates are considerably higher than conforming loan rates driving mortgage payments for these loans out of reach. Speculators and investors have all run off, foreclosures are popping up everywhere with no end in sight. Daily, consumers are hit with news on falling real estate prices and declining markets that have driven reality and fear into the minds of consumers. Those that may want to buy up cannot afford to since they are in a zero or negative equity situation or due to the stormy economy do not have the confidence to buy.
 
With so many people buying houses over the last several years and the tightening of credit, who is left to buy a house?  

I would be interested in your opinion, just click on the comment link below.