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

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

Home purchase reimbursement policies can be categorized into four styles:

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

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

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

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

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

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

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

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

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

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

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