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Firms Step In To Help Cover Relocation Costs
Housing Slump Prods Some To Buy Employees' Houses And Make Up for Losses
By Alex Frangos
The Wall Street Journal
Tuesday, November 27, 2007

The fallout from the housing bust is making it more expensive for workers to relocate for jobs, and that's putting pressure on employers to offset housing-related losses for transferring employees.

Large companies have long reimbursed managers for relocation costs like household shipping and moving expenses, real-estate brokers' fees and house-hunting trips. During the real-estate boom, companies didn't need to help employees with actual home sales. Homes moved quickly, and rising values often allowed employees to profit from their relocations.

But now that home prices are falling in many parts of the country -- even as business expands -- some companies are adjusting their relocation policies to provide more help to employees in troubled housing situations, including absorbing losses on home sales.

"Companies have had to change their programs and policies and step it up to keep their employees mobile," says Cris Collie, chief executive of the Employee Relocation Council, an industry group. Mr. Collie's group estimates that it cost about $62,000 on average to move an employee this year. Of that amount, $15,000 went for so-called loss on sale assistance, where companies make up the difference when employees sell their homes at a loss. Last year, loss-on-sale assistance averaged about $9,000.

Typically, employees who are transferring to a new location are encouraged to sell their home themselves, and often within a period of about 90 days. But if the home doesn't sell, some companies will often step in and offer some kind of bailout, including buying the home from the employee for an appraised price and even reimbursing for a loss if the home's value has shrunk.

Companies are also extending other moving benefits. Apartment real-estate investment trust AvalonBay Communities boosted its temporary housing allowance this year. It also added to its allowance for house-hunting trips, according to David Alagno, senior director for employment at the Alexandria, Va., company. UnitedHealth Group has extended its temporary housing program for some employees to give them more time to sell their homes, according to Tom Valerius, vice president for recruitment services at the Minnetonka, Minn., insurer.

The most generous companies are buying employees' homes from them at an appraised value, often determined by averaging two or three appraisals from real-estate professionals and reimbursing the employee the difference -- or, more often, a portion of it -- if the price is lower than what the employee originally paid. The company will then resell the house -- often at a loss. And because homes are selling slowly, some companies that offer this benefit are seeing their inventory of unsold homes climb.

Few companies, however, fully offset an employee's loss. According to a recent survey of its client companies, Weichert Relocation Resources Inc., Morris Plains, N.J., found that 68% of companies will reimburse a portion or all of an employee's loss on a home sale. But 34% of clients said they do it on a case-by-case basis, and 72% have a cap on the reimbursement, ranging from $10,000 to $275,000, according to Weichert, whose clients tend to have more than 5,000 employees and include industries such as transportation, consumer products, energy and financial services.

FMC Technologies, a Houston-based industrial material supplier that moves about 400 employees each year, currently has about 18 homes in its corporate inventory. The company provides reimbursement from loss of value to an individual manager on a case-by-case basis and caps that benefit at $20,000, but the company's losses can exceed that if the home sits in inventory too long. In one recent case, the company purchased an executive's home in New Jersey for $912,000 to expedite the employee's move to the new job. FMC sold the house seven months later for $850,000, a $62,000 loss to FMC. Sylkia Negron, FMC's head of relocation, says the company is seeing weak real-estate markets in "every part of the country with the exception of Texas."

Changing relocation policies are a throwback to the reimbursement programs of the 1980s, when companies would automatically buy an employee's home just to make the move easier and would reimburse if the sales price was less than what the employee paid originally. But during the 1990s, cost-cutting became a corporate mantra, and companies stopped automatically buying out an employee's home and placed caps on the loss reimbursements. "There used to be a lot more paternalism," says Mr. Collie.

The most expensive moves, of course, are for the highest-level employees. In October, Orleans Homebuilders Inc., Bensalem, Pa., struggling itself with the housing crunch, disclosed that it paid C. Dean Amann, an executive vice president, $153,852 for moving expenses and losses from the sale of his home, a five-bedroom residence he bought in 2000 for $619,000 in Castle Rock, Colo. The company didn't return a call for comment. 

When State Auto Financial Corp. moved its chief executive, Robert Restrepo, to its headquarters in Columbus, Ohio, the housing market complicated the process. Mr. Restrepo's 10-bedroom mansion in Worcester, Mass., wouldn't sell, so the company bought the home from him for $1.8 million, according to federal regulatory filings. A company spokesman declined to comment. Several companies have disclosed offering similar executive perquisites this year, including Qwest Communications International Inc. and Univision Communications Inc.

For the vast majority of workers who get limited or no relocation benefits, the results are a direct hit to the pocketbook. About 6.4 million people moved in 2005 for job-related reasons, according to the Census Bureau. About 500,000 of those moves received some sort of benefit from an employer, according to Internal Revenue Service statistics.

Appliance maker Whirlpool Corp., Benton Harbor, Mich., will move about 450 people this year and recently was trying to sell 11 homes it acquired from upper-level employees. To assist employees to unload their homes before Whirlpool has to buy them, it offers buyers free appliances and $1,500 in decorating allowances. Whirlpool will make an offer based on an appraised price only after the employee has tried to sell the home for 30 days. Employees then have 90 days to accept the company's offer, during which time employees can continue to try to sell their homes.

The company is less generous with lower-level managers and new employees. That's put employees such as Jim Thompson, a 36-year-old procurement manager, in a bind. Mr. Thompson had been trying to sell his house in suburban Detroit since February, when he started working at Whirlpool. But the last three houses that sold in his neighborhood were in foreclosure and went for $30,000 less than he was seeking. He dropped the price three times from the low-$300,000 range, to $265,000, before it finally sold this past Wednesday. He said he likes the new job, but "the transition has been difficult because of the housing."

Until the money from the sale clears and he can buy a new house, he's renting an apartment closer to his job from a relative, but it still means a 150-mile round-trip commute. Susan Zandarski, relocation manager for Whirlpool, says the company pays closing costs for new employees, but "except at high levels, we try not to buy the homes. It may get into a situation where we'll have to backpedal on that," she says.

Sean Mulford, a cotton commodities trader is also dealing with a difficult move. When Lansing Trading Group bought the company Mr. Mulford worked for, he was asked to move from Charleston, S.C., to Overland Park, Kan. "We had to move out here if we wanted to stay employed," he says, though he also saw it as an opportunity. He's camping out in a corporate apartment while his wife and kids are in Charleston trying to sell the house.

Lansing's policy doesn't include a home buyout program. Mr. Mulford has dropped his home's price already but is getting ready to throw in the towel and lower it below the level of what he put into it. "It's the same thing as holding a commodity. If I have a long position in cotton and I can't sell, there's something wrong with my price. It's too high -- time to cut."

While the cost of taking homes into corporate inventory isn't going to send a business into financial peril, on a per employee basis, it adds substantially to compensation costs. Alana Middleton, director for relocation services at PricewaterhouseCoopers, says she has made several trips this year to expedite the sales of expensive homes her company acquires -- those valued at $800,000 or more. For a move where PricewaterhouseCoopers doesn't buy the property, it costs the company 8% to 10% of the home's value to make the move, as it pays for brokers' fees and moving costs. If the company is forced to purchase the home, the cost goes up to about 25% of the home's value, Ms. Middleton says. At any one time PricewaterhouseCoopers has a half-dozen to a dozen homes in its inventory.

The company moves about 325 employees a year domestically, of which 125 will involve a home sale. If an employee loses money on a sale, it will reimburse some of the cost depending on the situation. The company doesn't disclose exactly how much it will reimburse a loss.

Ms. Middleton says it does everything it can to avoid taking a home into its inventory, including offering employees bonuses to sell their homes themselves and encouraging them to set realistic prices, given the decline in home values.

The mentality among many homeowners, she says, is "the house down the street is worth less, but mine's not."

--Conor Dougherty contributed to this article.

Write to Alex Frangos at