Historically, relocation program managers have required transferees to submit receipts for most relocation expenses. This requires the transferee to gather, account for and then submit receipts. Someone then has to review and then approve/deny the numerous relocation expenses incurred during the relocation process. Because this is a very labor intensive process (i.e. reviewing receipts), the practice of providing transferees with a set lump sum for certain corporate relocation expenses has grown in popularity. Lump sums first began with the introduction of the Miscellaneous Expense Allowance (MEA), which set forth the idea of providing one lump sum amount to cover small miscellaneous expenses. The use of lump sums was then expanded to pay for food expenses (per diems), based on a fixed daily amount, and then lump sums were set for specific relocation features—such as the home finding trip. In this example, the home finding lump sum would be sensitized per transferee by using the number of trips and total days allowed in the policy, as well as the cost of the destination location.

Today’s tough real estate market has led to an increase in policy exception requests—primarily in the area of temporary housing. Most policies have been designed to offer specific benefits (i.e. home finding, temporary living, etc.), but now—given the state of the real estate market—more and more companies have begun grouping specific taxable benefits into one managed lump sum. A current best practice approach is to take the trio of home finding, temporary living and miscellaneous expense benefits and combine them into one managed lump sum amount—allowing the transferee to choose how they wish to spend this money, versus a “one-size-fits-all” approach. By having a managed lump sum program, exceptions decrease since transferees are empowered to spend their lump sum on the expenses which are a priority to them. And lastly, companies can share in the savings, as lump sums often cost less than providing relocation reimbursements individually.

If you are interested in incorporating managed lump sums into your relocation program or need more information, you can e-mail me at david.barlow@sirva.com .
For more information about managed lump sums, please review our white paper.

Here are a few things to remember when instituting a cross-cultural awareness program into your corporate relocation program. For a full account of information regarding this service visit our resource library.

Don't forget the family
Just as spouses should be involved in the assignment selection process, they should be involved in training for global assignments. Some experts estimate that nearly 80 percent of all failed global (international) assignments can be linked to the spouse's inability to adjust to the new environment. Each member of the family faces special issues in the expatriate environment that should be addressed.

Other cultural resources
Organizations should consider utilizing their returning expatriates for help with cultural awareness initiatives. Employees who have already completed similar assignments can act as subject matter experts (SMEs) to help new expatriates learn business customs and how to navigate foreign business circles. SMEs can also prove invaluable in helping new expatriates learn the hierarchy in companies with which they will be dealing. It's important to note, however, that companies should not rely solely on employees to provide guidance to new expatriates. Relying exclusively on veteran expatriates can be problematic if the guidance reinforces cultural stereotypes or results in the new expatriate adopting the predecessor's bad habits. While other international assignees have a role to play in helping newcomers adjust, they should not replace professional consultants/trainers.

Alternative views
Although cross-cultural awareness is important, some might argue that its importance is just a hyped up myth. In actuality, on average only 30 percent of American managers sent on international assignment lasting from one to five years receive any cross-cultural training. It can be argued that managing is simply "managing," so where it is done is irrelevant. Another point of view is that any type of short-term cultural training would be ineffective because people can't learn to work and live in a foreign culture after only a few days (or even a few weeks) of training. Others argue that an understanding of a country's culture is something people assimilate over many years based on personal experiences in that specific culture. Others will say that corporate culture takes precedence over country culture. For example, a local employee working for a "bullish" American firm in Thailand might show traits of aggressiveness and conflict, which are not traits normally associated with the Thai culture. These traits, however, may be common in the corporate company culture of the employee's organization, causing the Thai employee to act outside his or her normal cultural dimensions.

Nevertheless, in order to be successful, an expatriate must be comfortable with his or her staff, colleagues, clients and business atmosphere--regardless of location. Cultural specialists also agree that to be successful in dealing with people from other cultures, expatriates need knowledge about the cultural differences (and the similarities) among work locations. The global employee of today's business world can only benefit from gaining cultural awareness, either through direct training or personal experience, which would lead to greater professional effectiveness and company performance. Read more

If you would like more information about cross-cultural education and how it can be added to your international relocation package/program, please contact our corporate relocation consulting team.

What is a group move?
The definition of a group move is when 10 or more employees are being transferred from the same area and to the same area, at the same time, for the same business reason. Group moves are critical to the performance of the company and are of high strategic value in meeting the objectives of the business plan. If the group move is being driven by either a merger or an acquisition, the pressures only become greater as the already charged environment that a group move can create is compounded with the added factors of merging two different cultures. This reality, combined with the inherent risks that a merger or acquisition almost always adds, results in higher stakes and more pressure on corporate relocation program managers to make sure that the right group move process be in place.

Why do group moves fail?
In a series of internal reviews with subject matter experts who have had extensive experience in assisting our clients in planning and managing a wide range of corporate group moves, a number of reasons repeatedly rose to the top as to why a group move may fail:

• Announcing the move without adequate preparation or involvement
• Not having clearly defined objectives
• Lack of time and/or poor planning
• Losing control of the relocating transferees
• Not understanding the unique needs and dynamics of the group
• Not bringing outside resources in early enough
• Political pressure to use non-qualified suppliers
• Lack of senior management endorsement and involvement

How do you avoid the pitfalls? This topic will be covered in our next post. For more information about this subject or to view the complete white paper, visit our resource library.

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.

The Worldwide ERC Foundation for Workforce Mobility and Thunderbird School of Management recently released findings from a study, which identifies the attributes that determine the "success potential" of an assignee during his/her international assignment. With a growing number of companies sending their employees on short-term assignments, this study may be highly valuable to those who are involved in the candidate selection process.

The study determined that much of the success rate is based on the assignee's ability to possess a "global mindset" -- which is defined as "individual attributes that enable an expat to successfully influence those who are different from him/her." The research points to three components that make up the global mindset, which includes, intellectual capital, psychological capital and social capital...read more.  

The five cultural dimensions (individualism vs. collectivism, power distance, uncertainty avoidance, masculinity vs. femininity, and time orientation) provides valuable insights into the cultural practices of different countries. This is the type of information that global relocation managers need in order to better understand cultural similarities and differences while on an international assignment. The ability to effectively communicate with people from all over the world is also key to a global manager's success. An expatriate will have to interact with all types of people in the assignment location, i.e. employees, customers, shareholders, regulators and vendors. Effective cross-cultural communication requires finding integrated solutions and compromises that allow decisions to be implemented by members of diverse cultures.

Cross-cultural training will provide relocating employees with a starting point for the preparation of working overseas or long distances, addressing cross-cultural communication and cross-cultural conflict resolution. For example, by knowing whether a society is individualistic or collective, an global manager would benefit by knowing what to do in cases of decision making, offering incentives or even scheduling meetings.

Knowing the cultural dimensions of the society he or she is working in, the expatriate will have a point of reference when investigating what to expect with respect to all management practices.

Depending on assignee needs, there are a variety of cross-cultural training programs available. Prices typically start at $1,500 to $3,500 for one to two day programs, and increase as the duration and complexity of the services increase. These costs are miniscule, however, when compared to the overall cost of a global relocation assignment, and could save your organization from absorbing the financial burden of a failed assignment due to the assignee's inability to adjust to his or her new location. Read more.

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."

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. With relocation costs per employee homeowner topping $70,000 in recent years (according to averages reported by Worldwide ERC), effective management of expenses can easily exceed several million dollars annually for a company. Because all relocation services funnel through the expense management function, to be appropriately recorded and paid, this function is a significant responsibility for those managing the relocation program. As a result, corporate relocation managers and/or payroll managers should consider several key issues when evaluating the effectiveness of the expense management process in their companies...read more.

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.

Over the past few years, a trend has developed with regards to the localization of expatriates. An increasing number of organizations are either adding localization as a new element to their global mobility program or expanding on existing policy and practices—the main driver of this trend is cost containment.

As a refresher—localization is the process when an employee is moved off of the expatriate package and integrated into the host country on local terms of employment.

What Triggers Localization
Localization is usually triggered by a pre-defined limit to assignment length, most commonly three to five years. It is best to proactively address this threshold either in a global assignment policy and/or in the expatriate’s letter of assignment. By communicating a location policy early on in the assignment process, an organization can reduce unplanned or ad-hoc localizations, reduce expatriate demands and negotiations, and reduce the overall “shock” factor to employees.

What Approach to Take
There are a few different approaches to recognize when managing localizations. The first and most common approach is a straight localization, which entails immediately eliminating all expatriate benefits, e.g. housing, COLA, home leave, etc., on the effective date of localization. To execute a straight localization, it is important that the organization has a clearly defined localization process, and re-communicates the process and policy to the expatriate as early as possible. Not surprisingly, moving from a full benefit package to no additional assistance can cause great strain on the employee, especially if they have family accompanying them on the assignment.

The second approach is to phase out the expatriate package over a pre-determined length of time. The transition over to a “local” package can take anywhere from six months to two years. For example, many companies continue to pay a reduced housing allowance for six to twelve months after the effective date of localization. Other provisions that tend to be phased out in exceptional cases include education assistance and home leave.

Another approach is the lump sum approach. This involves the expatriate immediately transferring to local employment. A lump sum payment, however, is offered to the employee to alleviate some of the financial strain of localization. The lump sum can be used to cover education costs of children, assist with home finding and purchase, or to ship household goods from the home country. A lump sum approach is ideal for organizations that like to remain flexible and give their employees the freedom to decide how they want to utilize the localization assistance.

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.

The complex and rapidly changing socioeconomic and political climate in China, together with a massive shortage of skilled workers, makes human capital and global workforce development particularly challenging. As a follow-up to SIRVA's China Urban Index, released in 2006, SIRVA Relocation recently completed a study to address the lack of readily available relocation data and trending on mobility policy and practices in China. The results are documented in "The SIRVA China Mobility Report."

Thirty-seven leading global companies contributed to this unique SIRVA research initiative, the results of which have formed a valuable benchmark framework for human resources professionals to observe current key mobility policy and practices in China. This benchmark report on key findings and trends represents SIRVA Relocation's analysis of the most up-to-date data spanning seven industry sectors in both Tier 1 and Non-Tier 1 regions in China. 

Substantial differences in infrastructure and accessibility exist between Tier 1 and Non-Tier 1 regions, which companies must evaluate when creating policies to introduce employees to these varied conditions. 

Below is a check-list of key findings for this study.

Key Findings
Current Assignments: While all participating companies reported traditional international short- and long-term assignments, there is an emerging trend of new assignment types. Twenty-eight percent of companies have domestic short- and long-term and permanent one-way assignments and 33 percent of companies report permanent one-way moves into Tier 1 and Non-Tier 1 locations.

Emerging Trends and Associated Challenges: As companies in China look to expand their business with locally or regionally hired resources, rather than high-cost, international long-term assignments, it is anticipated that future permanent one-way assignments will increase more than any other assignment type. Companies have found permanent one-way assignments to be the most challenging, contradictory and controversial, making it difficult to establish a framework for policies and practices.

As a result, assignment terms and conditions are handled on a case-by-case basis due to lack of benchmarking data and experience among human resources professionals and global mobility managers. Consequently, inequalities are widening in remuneration packages as talent becomes more valuable, so new models will have to be developed to mirror evolution in emerging assignment types.

Domestic relocations are new to China. Like regionally hired permanent one-way moves, they are predicted to increase. These moves, which originate and conclude in China, are used predominantly in Non-Tier 1 cities where there is significant growth.

Cross-cultural Awareness: Most companies provide cross-cultural awareness programs to transferees: however, few companies currently enforce mandatory sessions. SIRVA expects more companies will emphasize cross-cultural training to ease the transition into Chinese culture and create an understanding of language and customs.

Assignment Administration Outsourcing: 70 percent of companies surveyed outsource assignee administration and between 86 and 92 percent outsource various assignee support services. However, companies outsource contract preparation and international compensation. SIRVA is witnessing an increased trend in companies consulting with external providers for mobility policy development due to a lack of available resources and global mobility expertise in-house.

Assignment Representation across Industries: The following graph provides a snapshot of industries and assignment types in Tier 1 and Non-Tier 1 locations. Click here to view the graph.

Of the surveyed companies, IT/telecom and petrochemical industries show the highest representations of assignee population in Tier 1, followed by manufacturing and pharmaceutical.  IT/telecom and petro-chemical industries also show the highest representations in Non-Tier 1 regions, followed by manufacturing and automotive.

The study also indicates the majority of assignments in Tier 1 and Non-Tier 1 regions are long-term and short-term assignments, followed by permanent one-way moves. 

For more information you can visit http://chinaindex.sirva.com/study.asp

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.

• 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.

According to the latest forecast by the National Association of Realtors® (NAR), over the next few months, existing home sales in the United States are expected to hold fairly steady, then rise later in the year and continue to improve in 2009. NAR reports existing home sales for 2007 totaled 5.65 million, but projects home sales to edge up to 5.70 million this year and reach 5.91 million in 2009, which is still well below the 6.48 million units sold in 2006.

New construction home sales will continue to decline. According to the Association, new-home sales were reported at 770,000 for 2007, and are projected to decline to 669,000 this year before rising to 730,000 in 2009, but well below the 1.05 million in 2006.

In an early January speech, Daniel H. Mudd, chief executive of the mortgage finance company Fannie Mae, said home prices would "perhaps begin to gain modestly" in 2010. However, The National Association of Realtors (NAR) has a more positive prognostication that by the end of 2008 or early in 2009 most markets will start seeing appreciation once again.      

SIRVA does suggest companies put the appropriate controls in place to reduce risk and manage program performance at both the departure and destination locations. The following 12 best practices will help companies provide the policy framework so that transferees price and market their homes so they have a greater probability of selling their homes to an outside buyer and not have them go into inventory.

• Use qualified agents:  Use a network of qualified brokers, such as those found in SIRVA's Preferred Broker Network, to ensure transferees receive the right expertise and the best value when selling their home in the current real estate market. Using a qualified and "relocation experienced" broker is critical because if a home is listed at an incorrect price or without adequate marketing support, it is unlikely to find a timely buyer at the optimal sales price.

• Require two broker price options/broker market analyses: Multiple broker price options will help establish the most accurate selling price, which is key to quickly selling a home. Because market activity steadily falls after the first few weeks a home is on the market, pricing realistically from the beginning will attract more potential buyers.

• Delay appraisals: Delay appraisals to provide the opportunity to market a home before incurring appraisal costs. This provides more data for appraisers to use in value determination, sets more realistic value expectations, and lowers home sale cost and risk.

• Support mandatory marketing periods: Require transferees to list their homes and market them effectively for a mandatory period of time (at least 60 days) in order to increase, not only the number of amended-value sales, but also the opportunities to generate outside sales with no appraisals needed.

• Establish list-price caps:  Establish list-price caps to prevent over-listing during the property's initial exposure to the market, which is one of the most common reasons a home sits on the market. Make sure that your company's policy language specifically states that a home may not be listed at more than 105% of the average of the two most-probable sales prices from the broker market analyses. More and more companies are now going to 104% or even 103%. The list price should also be adjusted based on changes in market conditions and/or receipt of the appraised value offer.

• Modify a BVO/BVX to AVO/AVX:  In down real estate markets, some homes simply will not sell-even when transferees do everything right. Offer a guaranteed buyout after 90, 120 or 150 days to ensure the home will not be on the market past a certain time frame. This will eliminate delays in a transferee's relocation schedule, diminish transferee frustration from not selling his or her home or even prevent a cancelled relocation.

The other six best practices will be posted later today, so stay tuned. 

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.

fundamentals of relocation webinar
Thursday, May 22, 2008
1:00 p.m. EST (10:00 a.m. PT)

Speaker: David Barlow, SCRP, GMS, Senior Vice President, Client Support Services, SIRVA
Duration: One hour

This "relocation 101" webinar is designed for new relocation professionals, procurement managers and supply chain managers who would like an overview of relocation fundamentals, and for anyone who wants to stay current with the latest policy trends and best practices.

This session will provide a brief history of the industry, and a broad overview of the relocation process, including a review of the terms and concepts most common to relocation policy development and implementation. The discussion will include household goods and temporary living options, the home sale process based on IRS Revenue Rulings, and industry trends such as lump-sum benefits and high-cost area assistance.

Register at https://van.webex.com/van/j.php?ED=91994767&RG=1

Details for joining the session will be included in the registration confirmation e-mail

fundamentals of relocation webinar
Thursday, May 22, 2008
1:00 p.m. EST (10:00 a.m. PT)

Speaker: David Barlow, SCRP, GMS, Senior Vice President, Client Support Services, SIRVA
Duration: One hour

This "relocation 101" webinar is designed for new relocation professionals, procurement managers and supply chain managers who would like an overview of relocation fundamentals, and for anyone who wants to stay current with the latest policy trends and best practices.

This session will provide a brief history of the industry, and a broad overview of the relocation process, including a review of the terms and concepts most common to relocation policy development and implementation. The discussion will include household goods and temporary living options, the home sale process based on IRS Revenue Rulings, and industry trends such as lump-sum benefits and high-cost area assistance.

Register at https://van.webex.com/van/j.php?ED=91994767&RG=1

Details for joining the session will be included in the registration confirmation e-mail

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.

fundamentals of relocation webinar
Thursday, May 22, 2008
1:00 p.m. EST (10:00 a.m. PT)

Speaker: David Barlow, SCRP, GMS, Senior Vice President, Client Support Services, SIRVA
Duration: One hour

This "relocation 101" webinar is designed for new relocation professionals, procurement managers and supply chain managers who would like an overview of relocation fundamentals, and for anyone who wants to stay current with the latest policy trends and best practices.

This session will provide a brief history of the industry, and a broad overview of the relocation process, including a review of the terms and concepts most common to relocation policy development and implementation. The discussion will include household goods and temporary living options, the home sale process based on IRS Revenue Rulings, and industry trends such as lump-sum benefits and high-cost area assistance.

Register at https://van.webex.com/van/j.php?ED=91994767&RG=1

Details for joining the session will be included in the registration confirmation e-mail