How to make relocation less of a financial disaster
With the housing market in a slump, Kjell Hegstad knew he probably would lose money selling his home in Houston when he decided to accept a job in Wilmington.
"I got a five-year-old house - brand new. I basically had to give it away," said Hegstad, 46. "I could sit on it a year and get 10 percent. But I priced it to move."
Now Hegstad, an executive at ING Direct, is staying at an apartment provided to him by his employer for 90 days. His ING relocation package includes assistance selling and buying a house, an opportunity to use ING mortgage products and coverage of real estate agent fees.
Like Hegstad, today's job seekers who own a house and are willing to relocate must contend with a lot more than securing a new job. Selling a house takes longer and buying a new one is not always affordable. An individual relocating, as either a new hire or a transferee within a company, must weigh the risks of not being able to sell a home quickly, selling it at a loss or worse, ending up with two mortgages.
"It's very challenging," said Bill Humphrey, senior vice president and managing director of CRP, a New Castle, Del., company that handles more than 10,000 corporate relocations a year. "Volumes are slightly down because when you are moving someone and they paid 'X' on their home, and they are breaking even or losing, then they say they are not moving."
It's not an ideal time to move, but if a worker can't resist because of the appeal of the new job, there are ways to make the process less painful.
Ask about the company's relocation policy but don't begin negotiating until you have a job offer, experts say.
"The best way to maximize the help the company will give you is to do very, very well in the interview," said Jeff Zinser, principal owner of Right Recruiting in Blue Bell, Pa. "If you come across in the beginning of the process as too focused on how much you are going to get to move, the company can misinterpret your motivation."
The relocation assistance can range from a couple of hundred dollars to ship your belongings to outright purchasing your home. There is no "standard" relocation package.
Last year, companies spent an average of $62,185 to relocate an existing home-owning employee and $55,165 to relocate a new hire, according to Worldwide ERC, a Washington, D.C., nonprofit that represents corporate relocation companies.
The trick is matching relocation incentives with your needs.
"Do they buy your home? Do they pay for temporary housing? Do they pay for a house-hunting trip? Those are the three big questions from the standpoint of money," said Michael Devane, who recently moved from Albany, N.Y., to Landenberg, Pa., to work at W.L. Gore & Associates.
Devane, who is married with three children, had to make sure he could afford the move and that it would be worthwhile for him to uproot his family. He said the decision wasn't too difficult because Gore offers generous relocation packages.
After his home languished on the market for more than 60 days, the company offered to purchase it based on the average price of two independent appraisers. His house was on the market for $435,000. He ended up selling it to Gore for $410,000.
The company also found him a temporary living space in Pennsylvania, where he decided to build a new home, and paid for his family's move and travel expenses to check out the new neighborhood and scout schools.
Most companies offer more limited relocation packages.
"For the new employee, companies will pay the closing cost for selling the house, but very seldom are they going to buy the house - that would be for someone that is desperately needed in a critical job shortage area," said Cris Collie, chief executive officer at Worldwide ERC.
Some companies offer to lend at a low interest rate about 90 percent of the equity earned in the employee's old home as down payment for their new one. Others, such as restaurant chains, just cover household shipping costs and 14 days of temporary residence.
Still, companies have began to modify their relocation policies, often adding more money in assistance, to adjust to current market situations.
No matter how generous the package, the person moving will have many unexpected out-of-pocket expenses, so it helps to create a budget before the move. Also, experts advise that you keep track of your travel-related expenditures so that companies can reimburse you.
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