Imagine that you are just leaving a meeting where you were told that your employer has decided to relocate a group of people from one location to another. The CEO told you that you are expected to manage the move. He/she stresses to you that the success of this group move is critical to the future of the company and everyone is counting on you to, "make it happen." Any number of business scenarios could lead to this decision.

Even though this may be your first experience in managing a group move, you may have heard stories about the stress group moves can bring to an organization and the people who are working on the relocation. You may recall hearing how a group move does not always turn out as planned, and that a lot can change between the time the plan is initiated and the last employee is in place at the new location.

Whatever you do, you need to be prepared for the responsibility of:

• Business disruption
• Talent loss
• Low employee morale
• Cost overruns
• Having your plan for the move challenged by others

You may not be able to eliminate all of the issues, but if you can bring an effective plan to the project and assemble the right team to execute the plan, the odds that the move will be a success and that you will survive the group move will be greatly  improved. The intent of our "How to Effectively Plan for a Group Move" white paper is to provide you with a proven approach to effective group move management.

 View white paper

If you would like more information about corporate relocation services including group move management consulting, contact us.

There are a variety of training techniques that prepare people for long distance foreign work assignments. They range from documentary programs that merely expose people to new culture through materials about the country's socio-political history, geography, economics, language and cultural institutions, to intense interpersonal experience training, in which individuals participate in role-playing exercises, simulated social settings and similar experiences in order to "feel" the difference in a new culture.

Although generic programs exist, cross-cultural training is most effective when it's tailored to the specific needs of the expatriate and the host country. Because learning about a new culture requires an understanding of one's own cultural biases and behavioral traits, companies that use customized, cross-cultural training typically receive better results. Successful cross-cultural programs can include the following:

• Host country information. Basic information about the assignee's host country, including its history, common religions, political structure and recent events, so employees can understand citizens' values and beliefs.
• Behavior adaptation. Although people have a hard time challenging their cultural understanding, they can learn to alter their behavior to adapt to a new culture. In this phase of cross-cultural training, expatriates examine the way that they currently handle a situation and what is required in the new culture.
• Local business etiquette. Even the most veteran and prolific employee can have difficulty without an understanding of business etiquette in other cultures. For example, the U.S. tendency to "get down to business" is regarded as rude in Japan, where business transactions often have a greater personal relationship component. An employee who appears impatient with Japanese traditions designed to establish friendship and trust will have little success in business negotiations.
• Communication techniques. A manager going to live in a foreign country for the first time might not realize how communication styles differ around the world. For example, U.S. employees tend to use "low context" communication, which is direct and task-oriented. Many other cultures have "high context" communication, in which messages are more indirect, like in the Middle East.

For more information about components that make cross-cultural programs successful, view our white paper, "Importance of Cross-Cultural Awareness."

A solution for attracting employees and experienced new hires to higher housing-cost areas

Companies have increasingly been faced with trying to solve the situation in which employees from low cost of living areas are relocated into higher-cost areas. This issue has become more difficult to handle since, from the mid-to-late 1990s, the demand for qualified employees has increasingly exceed the supply of these individuals. Previously, employees were willing to live with higher costs in exchange for their new position opportunities. Over time, however, employee expectations have shifted. Now, more than ever, employees believe that if their company relocates them into a higher-cost area, then the company should provide them with some financial relief.

This issue has been exacerbated by the increasing disparity in housing costs by geographic region. Runzheimer housing data measures the average cost of a typical transferee home (e.g. 2,400 square feet on an average size lot with four bedrooms and two and a half baths). Most recent data shows that the same home in similar neighborhoods cost $270,800 in Houston, $426,500 in Chicago and more than $906,000 in the San Francisco Bay Area.

This noise surrounding housing cost differentials has simply become too loud for companies to ignore.

What actions have companies taken?

Adjust Compensation (view details)
Cost of Living Allowances (view details)
Lump Sum Payments (view details)
Mortgage Subsidies (view details)

For more information around why mortgage subsidy programs are a popular choice, visit our resource library.

Group moves occur for a variety of reasons and in most cases can be treated (relative to the IRS rules) exactly as other non-group moves. A group move, however, may not meet the IRS 50-mile test. In that case, consideration should be given to providing a short distance group move policy. The IRS 50-mile test generally requires that in order for certain costs associated with a relocation to be excludable from income, the distance between an employee's old residence and the new work location must be 50 miles greater than the distance between the employee's old residence and the old work location.

It is not uncommon for companies to change office locations, or have multiple facilities in the same geographic area, where the distance between an employee's old and new work location may or may not meet the IRS 50-mile test. For example, in larger cities, where a move may be from one side of a metropolitan area to the other, it is likely that the IRS test will not be met. These "short distance" office relocations, however, can significantly impact the commuting patterns of employees. It is highly unlikely that employees impacted by an office move, where their commute could be increase by up to 49 miles, will simply accept an "IRS explanation" as to why they are not entitled to relocation benefits. Employees will often make their feelings known and ask management to consider providing some or all of the relocation benefits provided in a standard regular or "long distance" employee transfer.

The relative distance that a short distance group move involves, necessitates a closer look at the specific features provided in a company's relocation policy to see if benefits should be offered for a short distance group move. Properly structured, short distance group move programs reduce absenteeism, attrition and administrative time, and are often far less costly than a normal relocation program.

For more information about short distance relocation packages, visit our relocation resource library and view our white paper.

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.

There is no such thing as a small relocation, but some companies don't require the large-scale support needed by those relocating hundreds or even thousands of employees annually. For these companies, SIRVA Advantage might be the answer. SIRVA Advantage is a program developed specifically for companies that relocate fewer than 30 employees per year. Currently, 120 companies participate in the program.

Through the program, companies have access to a dedicated service delivery team with specialized experience in small-volume relocations. Users don't have to be experts in relocation because all the details are handled for them. SIRVA can get a relocation program up and running quickly, and because they manage every aspect of the program, companies don't have to worry about the details. Transferees receive the full benefits of having a corporate relocation provider manage their transfer without the large corporate relocation budget.

"Companies that relocate a small number of employees have different needs than those of their large-volume counterparts," said Tim Callahan, senior vice president of sales and marketing SIRVA, Inc. "These companies may not be as familiar with the process or the complexities involved in different domestic or international relocation scenarios because they simply don't relocate employees as often."

Using SIRVA Advantage, companies can choose their services á la carte, which offers them the flexibility to develop a cost-effective custom program to fit their needs. SIRVA Advantage provides companies with guidance and assistance on a range of relocation issues, including:

• Domestic and international support
• Fixed-fee or traditional home sale programs
• Home marketing services
• Home finding and new home purchase services
• Home rental and temporary housing services
• Mortgage services
• Move management
• Tax and legal services
• Vendor contracts
• Online relocation tracking and reporting

One-on-one attention and interactive tools
The Advantage process starts with a consultation between our client and SIRVA Advantage's Business Development Manager, Jane Yanosko, to coordinate services tailored for each transferee - with this program a corporate relocation policy is not needed, SIRVA's abbreviated contract serves as the purchase order for all services authorized by the client. Once services are determined and the transfer process is initiated, the client and the transferee receive dedicated support from relocation counselors and associates focused on serving clients with fewer than 30 relocations annually.

In addition, transferees have access to MoveOurHome.com, a Web portal designed to help them take an active part in their move. MoveOurHome.com has up-to-the-minute relocation information configured on a per-client basis. On the site, transferees can view company-specific policy information and transferee-specific relocation program information.

"Transferees can submit, view and check the status of expense reports, communicate with their relocation counselor, and specify home and area preferences," continues Callahan. "They also have access to an online move organizer and essential destination information such as weather, crime statistics, school reports, population figures and other community information."* SIRVA Advantage was developed based on input from current customers and internal service teams, and is designed to provide a company will a small or no relocation program a high level of service on a more flexible, on-demand basis.

To learn more about SIRVA Advantage, contact Jane Yanosko, SIRVA Advantage business development manager, at 800.531.3840 or jane.yanosko@sirva.com.

In the past, employers offering corporate relocation services had to assure that a home buyout price paid to the employee was a fair market value, no more and no less. The use of broker market analyses to help establish an appropriate listing price and independent appraisals to establish the buyout price was an attempt to assure that the home buyout price represented a fair market price.

Due to the rapidly declining real estate market, a questionable trend has reared its ugly head—employers who are desperate to find a way to increase a transferee’s home buyout offer, without triggering a “direct offer” scenario, are now asking for relocation appraisals without forecasting. A directed offer requires the IRS to treat the buyout amount paid to the employee, in excess of the home’s fair market value, as income to the employee.

Standard corporate relocation practice calls for appraisals that attempt to determine a home’s anticipated sale price taking into account current marketing conditions (known as a forecasting adjustment). Forecasting in a declining market results in lower appraised values than those without forecasting adjustments—ignoring a forecasting adjustment will likely result in the appraised value being inflated.

The result is that the employer pays an amount to the employee that is higher than fair market value while having appraisals that appear to support the value by not using the forecasting adjustment process.

As was pointed out by Pete Scott, Worldwide ERC Tax Counsel, in the tax and legal update session at the San Antonio Worldwide ERC Conference, risks of ignoring the forecasting component include a rejection by the IRS of the appraisal as good evidence of fair market value; the appearance of a directed offer; a departure from standard policy that could result in a purchase price substantially higher than the sales price and income that is taxable as wages and subject to withholding/payroll taxes. There was substantial agreement among the members of the ERC Public Policy Committee in San Antonio as well as among appraisers attending the meeting that the practice should be discouraged.

This strange reversal of practice is driven by the need for employers to do whatever is possible to encourage employees to accept their corporate relocations, while not creating additional income to the employee. Employers, however, should not abandon standard practices or depart from their own former policies regarding appraiser instructions by ignoring forecasting.

Mortgage expectations in the United States have changed as a result of the current lending market, and transferees will face a different lending process from what existed only a few months ago. While it is still easier to get a home loan today than it was eight years ago, transferees should be aware of several changes so they can avoid mortgage surprises.

"Transferees should be encouraged to be pre-approved and speak to a mortgage counselor once they accept a relocation, even if they are not yet ready to purchase a home," says Rick Hoover, director of client services at SIRVA Relocation. "A credit check can be completed up front, which allows transferees to be proactive in addressing any issues. They should also be prepared to provide relevant financial documentation, as programs that allow no, low or limited documentation have disappeared or been drastically curtailed in most areas."

In addition, transferees should also expect to buy within their salary range, since the use of projected bonuses or incentive pay is no longer acceptable. They should also expect to make a down payment, as zero down loans are not as accessible. Making a down payment-even a small one-also lowers the opportunity for negative equity situations in the future.

Another significant change is the availability of certain types of loans. Jumbo loans are now more restrictive than smaller conforming loans, and as a result, executives who may have been approved for jumbo loans last year may no longer qualify. Also, combination loans-such as 80/10/10 or 80/20 loans-which many transferees have used to avoid mortgage insurance or as a bridge loan, are more restrictive than ever. Pricing and underwriting guidelines have made these options less favorable, causing mortgage insurance to once again be more prevalent than in the recent past.

"Mortgage lending changes regularly, and it is important that transferees have access to a knowledgeable resource to answer any questions," continues Hoover. "SIRVA has mortgage counselors available to work with transferees within a company's relocation policy parameters. They can walk transferees through various lending options and help determine the right loan for them based on several factors, including risk levels, cost, credit qualification and housing needs."
Hoover emphasizes that if companies conduct their own counseling with employees, they should stress that transferees talk to a lender at the beginning of the process, even if they don't intend to purchase a home right away. This will help transferees better understand what will be required once they are ready to move forward. 

Regardless if transferees work with a SIRVA Mortgage counselor or another mortgage professional, they should have the proper financial documentation available before beginning the lending process. "Underwriting guidelines can change daily," explains Hoover. "The more educated transferees are about the process, the better prepared they'll be."

For more information about the latest mortgage trends visit Paul Klemme's Blog, "The Mortgage Insider" or visit our resource library to view our recent Webinar, "Today's Mortgage Industry and its Impact on Relocation."

• Tie benefits to desired behavior: Companies have every right to require transferees to follow established home sale processes. The process to be followed should be clearly stated in the company's corporate relocation policy along with the benefits to the transferee.  Reasonable expectations include complying with the company code of conduct and following the corporate relocation service providers' recommendations which are based on the company's policy. Penalties for not complying with the terms of the policy, as well as any home sale incentives that are to be offered, should also be clearly outlined.

• Require full property disclosure and educate transferees on ineligible properties: Accurate assessments of property history, condition and initial ownership risk when a home is sold limits future risk potential and protects both the company and transferees. Transferees should understand that purchasing ineligible properties may cancel future home sale benefits.

• Require active transferee marketing participation:  Home marketing needs to be well planned, supported and implemented properly by all parties involved. Because the real estate market is changing rapidly, marketing strategies must be adjusted quickly, and prices need to be reduced in shorter intervals. Failure to adequately react can extend marketing time, increase corporate relocation program costs, push homes into inventory, decrease the pool of potential buyers, and reduce the final price transferees receive on the home sale.

• Evaluate all offers: Every appraisal should be thoroughly reviewed before giving it to the transferee in order to ensure they properly recognize the current market conditions. Do not hesitate to negotiate down to 95 percent of the appraised value. This also minimizes the emotional reaction to perceived "low" offers and the potential loss of an offer that would have been acceptable to the company.

• Require mandatory home-finding assistance:  Home-finding assistance reduces home loss-on-sale risk for those transferees (such as new hires) who are future relocation candidates and ensures employees don't purchase ineligible properties. It also helps mitigate the challenges of current market conditions, such as selecting a qualified agent, planning home-finding trips, evaluating financing options and reviewing contracts.

• Develop home sales programs that fit your company's risk profile:  Home sale programs vary in risk based on several factors. These include program type, number of controls in place, current market conditions, locations where homes are sold or purchased, past company practices and company culture. It is critical that companies are aware of the risks involved and create a home sale program that meets the company's overall service, cost and risk objectives.

For assistance incorporating these real estate best practices into your corporate relocation program or to learn more about how to mitigate real estate risks via a home sale program, visit David Barlow's blog.

The continued weakness in many real estate markets has resulted in many companies spending more for relocation than anticipated. The cost of home loss-on-sale programs, extensions to temporary living benefits and the cost of inventory homes (in non-fixed fee programs) are three areas that are frequently cited by companies as being sources of concern.

None of us can control our real estate markets but we can manage our company’s relocation policy. We need to start with the realization that relocation (like other company benefits) comes with requirements of participation and the company (as the bill payer) has every right to set the rules. Transferees may want to use any agent or appraiser they wish but, like the medical plan they chose, they need to recognize that eligibility for relocation benefits requires that they chose from an approved list of service providers. Network real estate agents are critical in today’s market where they reduce the probability of inflated home values which lead to high listing prices and the increased probability of the home going into inventory.

The other critical control is the listing price. The relocation industry has long recommended that this be 105% of the average of the two MPSP’s (Most Probable Sale Price) and this has been widely adopted. Now more and more companies are going to 104% and 103%. Nothing is more critical in relocation cost control than seeing that a realistic listing price is set. No transferee should have the right to over list their property when it is their company (and not them) who will bear the unnecessary cost of such an action such as increased temporary living and the cost of a home that falls into inventory.

There are several key decisions and considerations to weigh when considering whether to implement a loss-on-sale assistance program or revise an existing program. These include eligibility, rules and requirements, minimum transferee loss or deductible, maximum benefit caps, capital improvements and tax assistance.

According to Barlow, eligibility could be extended to any of the following combinations of groups: all homeowners regardless of salary tier; only homeowners in the highest salary bracket(s); and/or homeowners who purchased within a certain number of years before their transfer.

“Companies might also want to consider whether new construction should be penalized since they generally depreciate quicker in a declining market than existing homes,” he added.

One critical requirement should be that, whenever transferees purchase and sell their homes, they must follow all of the rules required in their company’s
relocation policy. “This includes whether or not the transferee bears a minimum loss of some sort, incurs a deductible to offset the loss-on-sale, or shares the loss with the company,” explained Barlow.

Barlow also recommended all companies have maximum benefit caps, which may be determined by such factors as geographical area (i.e. California vs. Illinois) and whether or not the amount is tax assisted. Generally caps range from $10,000 to $100,000, with $25,000, $50,000 and $75,000 being most common.

However, at the end of the day, the amount of the program is going to be what the company can afford and this varies not only by company but also by industry.

According to the National Association of REALTORS® (NAR), 2007 home sales were down 12.7 percent from 2006. And, excluding new construction, home prices in 2007 slipped 0.7 percent from 2006—marking the first nationwide decline since the Great Depression.

The sub-prime disaster led financial institutions to more closely evaluate borrowers, and as a result, those individuals that could previously secure a mortgage may not be eligible today. This drop in qualified buyers has meant an increase in housing inventories and the number of days homes are on the market across the country.

While the current real estate market means greater selection and reasonable prices for fewer qualified buyers, it’s especially tough on sellers. Loss-on-sale (LOS) assistance programs are typically used to partially protect home sellers from taking a loss on their home when relocating for business. LOS programs are typically employed when home market values depreciate at a faster pace than would be covered from having lived in the home long enough to break-even.

At SIRVA University, David Barlow, SCRP GMS, senior vice president of client support services at SIRVA Relocation, discussed best practices when developing
or revising a corporate relocation LOS assistance program. He discussed program management definitions, sample formulas, up-to-date facts, and eligibility requirements. He also discussed common pitfalls and how they can be avoided.

According to the NAR, the worst may be over but the national market is not yet in a positive price territory. While there is every indication the market hasn’t yet turned the corner to nationwide home price recovery, experts are confident a correction may begin as early as the end of this year.

“From indicators we’ve seen, downward price pressure in many markets will continue, but likely at a reduced rate of decline,” said Barlow. “The number of home sale losses is likely to stay relatively high but shouldn’t increase from 2007. It will get better, but the market won’t reverse itself overnight.”

Don’t Call it a Comeback
Loss-on-sale assistance programs were developed more than 25 years ago to address similar market conditions as what we see today. The need for these programs often diminished as the market strengthened, but they were sometimes employed during very short relocation intervals or with new construction to ensure sellers didn’t take a loss on their homes. In point of fact, in normal real estate times, it was nearly always the new construction that resulted in a LOS.

In poor market conditions, the amount of time between a relocation and the break-even point changes dramatically, and transferees essentially need to stay in their homes much longer to avoid taking a loss on their property.

According to Barlow, potential transferees have every right to want to wait out a bad market to avoid a loss on their home. They also have every right to expect their company to provide greater financial incentives if they are expected to relocate in a down real estate market. In fact, transferees are increasingly resisting and turning down corporate relocations if their companies decide not to help.

Correcting a common misconception, Barlow also noted that home LOS has nothing to do with the transferee’s equity position in their home. If a person has taken out a second mortgage or an equity line of credit the LOS benefit they may receive is often not going to provide the relief they need. Companies are strongly advised to limit LOS programs to the difference between what the transferee paid for the home and the home’s selling price.

% Loss-On-Sale Facts & Figures
95% of homes sold out of inventory result in loss to the company, even in good real estate times
50% of companies offer loss-on-sale assistance benefits
89% of SIRVA client’s share loss with their employees
75% of companies do tax protect the loss-on-sale assistance amount

Is it right for your company? Find out tomorrow as we continue to blog about LOS programs. Interested in learning more about reducing real estate risk? visit David's blog.

The continued difficult housing market creates cases where some homeowner employees find themselves in personal financial situations that are not conducive to accepting a relocation. Previously, “family considerations” were often the most common reason for an employee to delay or reject a corporate relocation. In today’s housing market, however, the problem is sometimes a home cannot be sold for an amount sufficient to cover the outstanding loan(s).  

While more than half of companies have a loss-on-sale program in their corporate relocation policies, these programs correctly treat (through a wide variety of formulae) the difference between the purchase price of the home and the selling price. Where employees have taken out second mortgages and/or lines of credit, however, they may in fact be “upside down”--namely owing more on their home than it is worth. In these situations, companies are wise in not making up “negative equity.” Negative equity is often the result of financial and purchasing decisions, which were made in times when real estate was appreciating. The negative equity, however, has no bearing on the actual loss-on-sale.

Today it is critical that the BMA/BPO process—which determines the MPSP (Most Probable Sales Price)--quickly identify cases where an employee may be “upside down.” Once an employee’s “home health” is known, all parties (employee, company and relocation service provider) can assay whether the relocation should proceed, or if the best course of action is to consider an alternative candidate. Making this judgment early before corporate relocation commitments and expenditures are made is a prudent course of action.

Kathryn Cassidy

Vice President/General Manager, Global Assignment Services

SIRVA Relocation

 

Julian Yates

Vice President, Global Client Services

SIRVA Relocation

 

 

As its title illustrates, Julian and Kathryn’s presentation this morning explored the fundamentals of global relocation and the essential elements of a successful relocation.  After discussing the wide-ranging reasons for globalization itself—which range from a push for technology improvements to a desire to add diversity—Julian and Kathryn discussed why companies’ have the need to relocate employees internationally in the first place.  Many drivers of global relocation are similar to those for domestic relocation, such as relocating an employee to mange a special project.  As attendees learned, however, global relocations present new challenges not present in domestic relocations.

 

Relocating an employee and his or her family internationally simply creates more room for problems to arise.  As Julian and Kathryn explained, issues can stem from administrative tasks, such as obtaining visas and work permits, or from the many aspects of situating the transferee’s family in the new location, such as finding schools for the children or employment for the spouse.  Furthermore, relocating an employee globally versus domestically presents more cultural, financial and logistical concerns that the company must consider.  Despite the challenges of relocating employees internationally, Julian and Kathryn provided attendees with best practices that companies can use to ensure successful global relocations for their employees. 

 

Developing and maintaining a strong global relocation policy topped their list as the most important factor for successful global relocations.  In addition to employing a good policy as the foundation for an effective global relocation, Julian and Kathryn explained that careful candidate selection can improve the success of global relocations.  By screening possible candidates and selecting only adaptable, flexible people for global assignments, companies can avoid potential problems from the start.  Using benchmarks, performing cost estimates and analyses, using proven providers, and having a repatriation and reintegration plan were just a few of the additional best practices Julian and Kathryn gave attendees to keep in mind as they explore global relocation within their own companies.

 

What challenges has your company overcome in dealing with global relocations?

David Barlow, SCRP, GMS
Senior Vice President, Client Support Services
SIRVA Relocation

Hank Roth
Senior Counsel
SIRVA Relocation

This morning’s attendees found David Barlow and Hank Roth’s presentation, “Reducing Real Estate Risk in Your Corporate Relocation Program,” extremely relevant to the current real estate environment.  David and Hank presented the discouraging statistics that illustrate the poor condition of the housing market.  For example, at the end of January, housing inventory rose 5.5%, and existing home sales fell 23.4% from January 2007.  Additionally, January’s 233,001 foreclosures were an increase of 57% from the year prior.  January was also the month with the second-highest number of foreclosures on record behind August 2007.  Since June 2006, home prices have declined in all but three of the top 20 U.S. real estate markets, Seattle, Portland, OR, and Charlotte, NC.  Clearly, the “good times” of the housing market are over.

After the housing prices dramatically increased from January 2000 to June 2006, the unfavorable state of the current real estate market leaves the question of what caused the real estate markets to fall.  David and Hank discussed in-depth the reasons for the real estate market landing in its poor position today.  Various factors contributed to the downturn of the real estate market: speculators created artificial demand only to leave the marketplace entirely;  the Federal Reserve tightened credit by raising borrowing rates from 1.25% (June 2004) to 5.25% (June 2006);  owning a home became less affordable as the gap between home prices and income widened; manufacturing jobs in the Midwest took a huge blow; and homeowners were sold loan products that only met short-term wants and needs, which left them unable to sell or refinance due to lack of home appreciation.  Furthermore, investors pulled out of sub-prime mortgage markets after experiencing large losses, which eliminated 20% of the market in a single week during August 2007 due to the product, qualifying and liquidity changes this move caused.

The poor housinge market and the resulting real estate risks present a genuine problem today for companies with relocation policies as they face difficulties in selling the homes of their relocating employees.  In order to minimize this risk, David and Hank presented attendees with the “SIRVA Dozen” consisting of 12 real estate risk controls for companies to implement:

1. Use qualified real estate agents at both departure and destination
2. Require two broker market opinions (BMAs)
3. Delay appraisals to provide opportunity to market home before incurred costs
4. Support a mandatory marketing period (at least 60 days)
5. Establish list-price caps; 105% or less
6. Modify a BVO/BVX to an AVO/AVX
7. Tie benefits to desired behavior
8. Require full property disclosure and educate transferees on ineligible properties
9. Require active transferee marketing participation
10. Evaluate ALL offers
11. Require mandatory home finding assistance
12. Develop home sale programs that fit your company’s risk profile

Which of the SIRVA Dozen has been the most helpful for reducing real estate risk in your company?

As a kick-off to my blog, A Closer Look at Global Relocation, I wanted to introduce myself and explain what I plan to discuss over the next couple months.

As a global relocation services leader, I am in contact with a variety of global mobility customers and providers on a day-to-day basis and I’ve found that there are some topics that seem to be of interest to most professionals whenever they relocate employees—be it the U.S., China or anywhere else in the world. Since I have been able to benchmark and study these highly relevant topics, I thought it would make the most sense to start this blog with some of this information. With that said, I will be initiating a discussion on barriers to assignment acceptance and how to overcome them, then I will be covering the latest trends in relocating to and within China and the true cost of an expatriate assignment, how to measure and track—all of which I feel will instigate a solid discussion on the challenges and barriers facing global mobility programs and introduce some best practices for overcoming these obstacles.

Are there any other topics that you feel would be relevant to cover? I am open to suggestions.