Stephanie Armour
USA Today
Laurie and Chris Topness, right, and daughters, Linzy, left, and Katy, relocated to San Jose, Calif., from Seattle in August. His employer helped with financial assistance such as closing costs and Realtor commissions.
The offer was too good to turn down. Just after selling his home and moving to a new place, Joe Cashen landed a marketing job with Nissan North America. The catch? He would have to sell his newly purchased home and move his wife and two young daughters from Los Angeles to Nashville.
Two years ago, amid the feverish housing market, such a relocation would have been simple.
But the real estate slowdown means there’s no such thing as an easy move anymore: Slumping prices have put a sudden chill on employees’ ability to relocate for a job and employers’ ability to get new hires to move. Cashen’s house languished on the market for more than three months, and he was eventually forced to take a $90,000 loss.
“I was incredibly anxious. I was supposed to move to Nashville, and the clock was ticking,” says Cashen, 38, who sold his California home in 2006 after dropping the asking price three times. “It was quite a stressful time. We had to just get rid of it.”
Gone are the days when companies could move employees and new hires around like puppets on strings. Now, the sluggish housing market is creating hassles for employers and employees struggling to move and to sell homes in what has quickly turned into a buyer’s market.
Employers are sweetening incentive packages to get workers to move and, for the first time in years, fielding questions from leery job candidates about what sort of relocation benefits the company provides. Employees are turning down relocations, selling their homes at a loss, spending months in corporate housing while they wait for properties to sell, or in some cases, renting out their homes and becoming long-distance landlords. It’s a major shift from just a couple of years ago when employees were eager to move and cash out on their appreciating home values.
Forty-six percent of companies say recruiting employees is becoming more difficult as the housing market turns tepid, according to a 2006 survey by Prudential Relocation.
Three in 10 of those who turned down a relocation did so because of housing and mortgage concerns, according to a 2006 survey by Atlas World Group. That decision can come at a price: More than half of companies had an employee decline a relocation, and 35% of employers say turning down a move hinders an employee’s career.
It’s been a startling change for companies that must move employees because of corporate growth or local talent shortages. At Petco’s corporate headquarters in San Diego, job candidates today want to know about relocating. The company is also doing more to supplement temporary-housing costs for employees who are transferring.
“It’s becoming more and more of an issue. They don’t want to sell their homes at a loss,” says Mardi Montague, director of talent acquisition at pet store Petco Animal Supplies. “It’s (a) huge (cost) for us to supplement this for them, and savvy candidates are asking about (relocation benefits) on the front end. That hasn’t been a question before.”
Montague says she has run into all sorts of unusual situations. She recalls that one relocating employee has had a home on the market for a year, she says, and another spent seven months in temporary housing while waiting for a property to sell, traveling back and forth between the temporary living quarters and home every three weeks.
From L.A. to Nashville
At Nissan North America, getting employees to move has also brought some hurdles. The auto giant recently moved its headquarters to Nashville and tried to get about 1,300 employees to transfer from the Los Angeles area. Nissan had hoped that about half of the current staffers would move. In reality, about 43% agreed to uproot themselves.
The company offered a number of incentives: identifying lenders that would help ease the process; paying for each employee and a guest to go to Nashville to check it out; bringing in local experts from Nashville to talk about issues such as schools, churches and synagogues; and setting up a resource room where employees could learn about the Nashville area.
Some long-term employees nearing the end of their working careers, who hope to someday retire in California, opted not to sell their homes and rented them out instead. Others sold, some at a profit and some at a loss. Everyone who moved was relocated by late summer, Nissan spokesman Fred Standish says.
“We wanted to be sure that when employees made a decision, they were making it with a lot of data and were very confident. We wanted to eliminate pangs of regret,” Standish says. “The housing market certainly had an impact.”
Sales of existing homes fell from 7 million in 2005 to 6 million in 2006, according to the latest figures from the National Association of Realtors. For a number of relocation companies, the slowdown in the housing market is an ominous sign that relocation business could suffer or that employers they bring on as clients have to do more to entice workers to move.
Kathy Trachta, director of global business consulting for Paragon Relocation Resources, a global relocation firm, says employers are getting leery.
“We have such a concern about this in our industry. It’s not pretty,” says Trachta, in Irving, Texas. “People need to move for jobs but can’t because we are in a buyer’s market. This issue is really hot right now. Clients are calling and saying, ‘What are we going to do?’ “
It’s also a real concern for Atlas, says Greg Hoover, senior vice president and chief marketing officer. “When housing starts are off, we see our business down,” Hoover says. “People are building fewer new homes because people aren’t buying and selling and moving as much. In September and the first part of October, it was like walking into a room and flipping a switch.” He says the same trend is continuing.
Some relocating employees are asking the companies that are transferring to do more, he says, such as paying to move two cars instead of one or paying to move household pets.
But companies are trying to control expenses, so it’s also becoming personally costlier for employees to relocate for a job. The percentage of firms offering full reimbursement for a relocation declined significantly: 69% of employers offered full reimbursement of relocation expenses for transferees in 2005, compared with 58% in 2006, according to the 2006 Atlas survey. And 56% of companies offered full reimbursement to new hires in 2005, compared with 43% in 2006.
Nudging workers
More employers are taking a variety of steps to nudge employees and new hires into relocating. About 20% of companies are now requiring employees who move for a job to use an approved real estate agent to better the odds of securing a home sale. And 15% are increasing the amount of time that relocating employees stay in temporary housing because of the extra time it takes to market and sell a home now, according to a survey by Prudential.
Other tactics include restrictions such as limiting the price an employee lists a home for and reviewing the amount of money that a company will reimburse an employee for any loss he or she takes when selling a home (known as a loss-on-sale program). Some will help new hires find rentals or pick up rental tabs.
When Melissa Kojan, 53, and her husband, Jim Riche, 54, an executive producer for TV commercials, decided to relocate for work from New York to Los Angeles, they were renting. They began to start looking at houses around September 2006. Their lease agreement was due to expire, but they had yet to find a home in Los Angeles, so her husband’s company stepped in and covered the cost of their New York rental when they moved.
“It removes the risk for us and enables us to move forward,” Kojan says.
But for companies, the extra costs can add up fast.
“A lot of our customers are very concerned about the real estate market. They’re new to a down market,” says Michael Nimer, senior vice president at Prudential.
“The more savvy companies are watching it on a regular basis,” he says. “People were buying like crazy over the past years, and now they’re selling for less than what they bought (a house) for. There is more reluctance to move today. They’re afraid to move. We see people thinking about renting or turning down jobs.”
Loss-on-sale programs
Cartus, a Danbury, Conn.-based global mobility and workforce development company, notes that employers should expect higher costs for temporary housing and other out-of-pocket expenses, such as covering higher loss-on-sale amounts.
Adds Pandra Dickson, senior vice president of corporate real estate services with Dallas-based Ebby Halliday Realtors: “A lot of corporations have implemented loss-on-sale programs since the market declined. It’s a huge cost to their bottom line.”
It may be a hit to the corporate bottom line, but the relocation benefits during the more anemic housing market can be a critical factor in prompting employees — especially those with family or deeply entrenched roots in an area — to move.
It was a key factor for Chris Topness, 36. His employer, Wyndham Worldwide, asked him to uproot from Seattle to San Jose, Calif., to take a job as senior vice president of sales and marketing for WorldMark by Wyndham, part of the Wyndham Vacation Ownership division.
Topness’ family, including his wife, Laurie, 36, daughters Linzy, 17, and Katy, 2, moved in August.
His company helped with financial assistance such as closing costs and Realtor commissions, an allowance for shutting down and setting up new utility services, and assistance with flying to San Jose.
“I wouldn’t have made the move without this,” Topness says. “Without the relocation deal, I wouldn’t have even thought about it for five minutes.”
