CapRelo Blog

How does a loss on sale relocation work?

Posted by Nicole Overholt on Tue, Dec 11, 2012

money-for-mortgage.jpgLoss on sale relocation features are at the forefront of competitive corporate relocation policies. Transferring employees need and appreciate this relocation feature, so employers whose policies lack this provision risk higher turnover of valuable employees and increasing difficulty attracting talented new hires.

A recent survey by the Worldwide Employee Relocation Council® (WERC) indicated that loss on sale was a primary concern for the majority of transferees. Seventy percent of respondents cited the current home sales market as the most important reason many employees are hesitant to relocate.

Find out more about Real Estate Considerations for Your Executive Relocation Policy in our free article.

The financial risk of a home sale to the transferee and the benefits to the employer make loss on sale provisions vital to competitive relocation policies. Employers should consider the following for their loss on sale provisions.

Loss on Sale Provision Considerations

  • Homeowners fear losing equity on rapid home sales. Offering a promotion and compensation increase, including a loss on sale provision, will motivate current or new employees to relocate, if they fear losing equity on the sale of their homes.
  • Loss on sale provisions increase relocation program costs, but deliver long term returns to employers. Depending on local markets, your loss on sale provision could increase your relocation program costs. Designing a clear "loss on sale formula," that specifies benefit limits, can help you control the cost of the program. But the most positive result for employers is reducing turnover and having the best employees in the right jobs at the right location.
  • Clearly state all loss on sale features. This facilitates transferees’ understanding of how the process and features work. Clear communication also lowers transferee stress levels, an important company consideration. Less stressed transferees will lead to quicker productivity after relocation.
  • Types of benefits you offer to new hires as an incentive to relocate. Depending on your industry and the type of candidate you recruit, you should consider tailoring your loss on sale benefits to your specific needs. Become familiar with the relocation programs your competition offers. To help you attract the candidates you want, your loss on sale feature should at least equal the benefit your competitors provide.

How Loss on Sale Works

  • Reimburse transferees for loss incurred due to the sale price of their home. This helps assuage transferees’ fear or trepidation about losing money on a home sale. Your most valuable company assets, your employees, are worth this investment.
  • Employee payback provisions. This feature helps reduce turnover and protect the employer from transferees leaving the company after collecting loss on sale reimbursements. Set a reasonable time period that the transferee must continue working for the company after relocation, or pay back reimbursement monies. This feature helps control your corporate costs.
  • Have a maximum reimbursement amount to further manage employer loss on sale costs. Capping loss on sale reimbursements controls costs while still delivering the benefit your transferees and new hires want.
  • Your policy should clearly state which type of employees qualify for loss on sale assistance. Case-by-case implementation can cause administrative headaches or negatively affect corporate culture. Create specific guidelines for qualification. For example, you might offer this feature to all exempt employees or only those executives over a specific authority level or title.

Partnering with a professional relocation firm to design a custom loss on sale program can enhance your relocation policies, keep them competitive, reduce staff turnover, lower your administrative responsibilities and control employer costs. Loss on sale features are more important to transferees and often reduce costs associated with other relocation features.

Although loss on sale provisions create initial cost, the payoff is in lower turnover, better quality new hires, improved operational efficiency, and better financial management. Loss on sale features create cost only once, but generate positive returns over the long term.

 

Real Estate Considerations Article

 

Topics: Corporate Relocation Costs, loss-on-sale relocation policy, executive relocation package

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