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What is a Relocation Package?

[an error occurred while processing this directive]Moving is a disrupting experience. But imagine being told by your employer on Friday that you need to report to a new job on the other side of the country in just one week.

Fortunately, many employees who work for large corporations receive a relocation package of benefits from their employer along with their transfer orders. In a hot job market, some workers who are recruited away from a current employer are able to negotiate relocations benefits as part of their new employment contract.

What sorts of benefits are included in a relocation package? Although the specifics differ from one company to the next, the benefits often include: assistance with financing a home purchase in the new location, help with all or part of your closing costs on the new home, reimbursement for inspection fees, help with closing costs on the home being sold and a guaranteed buyout of that home if it isn't sold within a certain time.

With a guaranteed buyout, the company who's transferring an employee arranges to buy the employee out of his home at a certain price. Or, the employer may contract with a third party relocation company who arranges for the corporate buyout. Either way, the transferees are assured that they will have the equity from the home they're leaving and relief from those mortgage payments so that they can make the move in a timely fashion and with as little disruption as possible. When the real estate market is slow, a corporate buyout can be a huge benefit.

Not all transferees are thrilled with corporate buyouts. A common complaint is that the buyout price is too low. To arrive at a buyout price, the relocation company hires two or three appraisers to complete appraisals of the property. These appraisals are usually averaged to come up with the buyout price. Like refinance appraisals, buyout appraisals are often on the conservative side. If the appraisals are too high and the house ultimately sells for lower than the buyout price, the employer or the relocation company will lose money.

First Time Tip: Since your buyout price is dependent on the strength of the appraisals, make sure that your relocation company hires appraisers who are knowledgeable about your local market. The relocation company may give you a list of acceptable appraisers and ask you to select two. Ask a local real estate agent whose opinion you trust to look at the list and tell you who are the best appraisers. If the agent doesn't recommend any on the list, ask him or her to recommend several appraisers to you. Submit these names to your relocation coordinator.

Relocation companies are often affiliated with real estate brokers who market their relocation properties. However, transferees are usually allowed to list their home with any real estate agent initially, as long as that agent agrees to sign the listing over to the relocation company at any time. This gives the transferees an opportunity to sell their home for more than the buyout price. Some relocation packages include a bonus to transferees who successfully sell their own home.

Buyers of relocation properties should be aware that negotiating the purchase of a relocation property is often handled differently from an ordinary home sale. The seller may actually be the relocation company. In this case, a representative of the relocation company will have to sign all sale-related documents. This can take more time than usual.

The Closing: The relocation company might insist on an "as is" sale. If so, be sure to have the property thoroughly inspected before buying it.