So, if we dispense with the traditional Home Sale program as a “guaranteed safety net”, can we re-think home disposal as part of an overall risk management strategy?

Imagine a Risk-Partnership model based on the establishment of a negotiated “Base Price”, and a property marketing strategy that is as risk-neutral as possible for both employee and employer.  Working together, the parties each assume a part of the risk and both have a responsibility to mitigate losses (and possibly share in gain), promoting a more collaborative approach to decisions on marketing and helping reduce costs and policy exceptions.  Could this model potentially:

– Reduce risk and the cost of relocation under a traditional Guarantee Home Sale Plan?

– Establish property pricing more closely based on market reality?

– Educate employees on the true cost of relocation, leading to more ‘reasonable’ discussions around benefits & exceptions?

– Increase the number of property sales before resorting to takeover proceedings?

– Reduce legal fees, the number of properties in inventory and hence costly carrying costs?

 The answer is YES!

What if … a Risk-Partnership model could include obtaining one appraisal and/or opinion(s) of value followed by a frank discussion with the employee and negotiation when considering a transfer?

Its components could look something like this:

Establishment of Market Value (MV):

Use of external information on historical market (appraiser) and current market (brokers) conditions and price points

Monthly updates of information and use of forecasting adjustments based on actual local market fluctuations

Property Base Price (BP) Establishment:

Employee-Employer negotiated amount derived with a formula that may include:

– a percentage of Market Value (MV) based on estimated vacancy for a period of time

– a factor for property condition upon vacancy

– forecasting based on market drivers

Property Listing:

Employee-Employer approved listing schedule and marketing plan

Property Disposal/Sale:

Joint Employee-Employer approved negotiation of offers and conditions, both before and after eventual property takeover

Final payout to employee:

A negotiated final payment, notwithstanding that documents were provided earlier to the employee to ensure mortgage financing at destination could be obtained

 

This methodology is based on a realistic and collaborative “If…, Then…” discussion, requiring that employers take a more active role in the management of the relocation portfolio. This approach will appeal to corporations wishing to better define their in-house/outsource model, bringing some decision-making “back inside” for greater influence on outcomes.

Corporations not wanting to take on more active roles internally can give their relocation service providers “freedom to operate” parameters to address the discussions with employees.

If guaranteed home sale plans and home disposal costs account for an average 38% of total relocation spend, isn’t it time to think about more effective ways to manage these benefits and employee expectations?

Is this something worth exploring?