Robert Freedman is the former director of multimedia communications at NAR.
Moves for Tough Times: How the Relocation Business Is Changing
Relocation specialists are succeeding today by offering transferees more options than just buying a home.
January 1, 2009
Two years into the economic slowdown that in some cases has cut their business by a third, residential relocation specialists are struggling to get their arms around ways to rebuild their business. Both sides of the traditional relocation operation—corporate transfers and broker-to-broker referrals—have been hit hard by the economic slowdown.
Relocation leads off the Internet are down about 30 percent this year, says Sheila Barr, relocation director for Patterson-Schwartz Real Estate in Hockessin, Del. As a result, the brokerage, which has approximately 400 associates in six offices, cut its relocation staff by 20 percent.
Relocation business at Esslinger-Wooten-Maxwell, REALTORS®, in Miami, with 750 associates in 11 offices, is down about 10 percent, says Sherrie Porter, vice president of relocation. And at Mel Foster Co., Real Estate, in Davenport, Iowa, with about 375 associates in 11 offices, relocation is down a few percentage points, the company's president, Bonnie Sparks-Gray, says.
How hard the companies have been hit is directly related to the strength of their markets. Charlotte, N.C., an area that has held up well throughout the downturn, has seen little drop in relocation business, says Donna Jill ("DJ") Stephan, relocation director for Allen Tate, REALTORS®, in that city. Going forward, though, the pressing challenges facing big Charlotte-based banks like Wachovia and Bank of America could impact the market.
Tight Times Mean More Alternatives
Not only are the big companies, which account for much of the corporate relocation market, scaling back their transfers and thus decreasing business, but they're also expecting brokerages to provide a wider mix of service options—rentals, guaranteed buyouts, lease-to-own—rather than just straight property sales.
"They want a hybrid approach today," says Stephan. "They want companies to provide incentives to help sell or to help with the loss on the sale—sometimes paying for a rental or maybe a temporary furnished apartment. They're dusting off policies we saw 10 or 15 years ago when sales were in a similarly difficult environment."
Many companies are also becoming more stringent about when and how they offer relocation help to transferees. A few years ago, when homes usually sold quickly, "companies would pay all the expenses for relocating employees or new hires to sell their house and pay the closing costs when the transferee bought a new house; then at the end of a few years, the employee would return and the company would pay again," says Barr. Such a scenario was common even if the transfer was expected to last only two or three years.
That formula still works today for hard-to-replace transferees such as scientists and top executives. In such cases, corporations are still willing to guarantee the sale even at the risk of a loss.
"We had a transferee whose company had bought his house in a guaranteed buyout for $645,000 and we had a buyer for that amount to take the house off the company's hands. But the highest appraisal that lenders would accept was $560,000," says Porter of EWM. "We thought the deal would fall apart, but the corporation was willing to accept an $85,000 loss. They thought that was better than letting the house go into inventory."
One company that Barr works with has replaced home purchase assistance with a rental allowance for transferees who expect to be gone for no more than a few years. But to sweeten the pot, the company promises to provide purchase assistance if the transferee ends up staying in the new location. "They're hedging their bets," says Barr.
For brokerages, the key to thriving in this environment is maintaining property management expertise to handle both incoming and outgoing relocations flexibly.
On the outgoing side, "We're seeing more transferees calling us and saying, 'I have to move, and I don't want to sell my property in this market; can you rent my property for me while I'm gone?'" says Barr. "That's a growing segment of our business."
On the incoming side, brokerages need to stay current on local rental options and think creatively. "We represented a new condo development in downtown St. Paul that wasn't selling, so we put a couple from Colorado in one of the units on a six-month lease arrangement, then got that extended to 12 months," says MacKenzie.
Building New Connections
Beyond their corporate business, relocation companies are facing other challenges. On the consumer side, brokerages are finding that relocating buyers are much more cost-conscious and are eschewing traditional residential brokerages and their broker-to-broker referral networks in favor of online discount operations. To retain their competitive advantage, relocation companies are turning to new forms of networking, including social networking. They're also upping their emphasis on customer service.
"I'm aware that if consumers hit our Web site they've probably hit five other Web sites, too," says Porter. "But these consumers are still in the fact-finding stage. So the business will go to the company that builds the relationship with them, not the one who attracted them first because they're highest in the search findings."
Barr says that her staff's goal is to get back to the consumer immediately and manage the relationship until the time is right for a referral to one of the brokerage's associates. At her company, associates pay no fee to receive online leads.
"The challenge with the single practitioner who has a great Web site is with the follow-up required to cultivate many online leads," says Barr. "Their Web content might be great, but how quickly can they get back to the customer? And will they be willing to maintain ongoing contact for months before the prospect is ready to buy?"
Meanwhile, brokerages are stepping up their efforts to encourage their associates—particularly their newest ones—to think more about relocation. "We've stepped our training way up and to get our new associates thinking about friends who might be contemplating a future move," says Porter. "New associates often don't even think of this piece of the business."
EWM is also developing blogging platforms for their associates and encouraging them to leverage social media networks to cast a wide net for future relocation business. "One of our associates got on Facebook, reconnected to three old friends, and got two real estate deals out of it," says Porter. Relocation specialists manage the out-of-area leads that associates develop through social media until the consumer is ready to move; then the associate takes over.
Using Old Skills for New Owners
Although specialists in the relocation field say they expect transfers to remain a solid piece of their brokerage business even during the economic downturn, relocation volume won't really pick up until the economy improves. In the meantime, many relocation divisions, including those at Patterson-Schwartz and EWM, are putting their expertise at property management to work by managing local REO properties on behalf of banks.
"We have an expertise in working with corporations when they have to buy out the house of one of their relocating employees," says Barr. "We are also accustomed to going in and 'neutralizing' a house by removing the wallpaper, painting, cleaning up the yard—everything it needs to get it ready to sell or rent. When banks take over foreclosed properties, they need essentially the same thing."
With the economy facing so many challenges, the REO management side of their operations will no doubt stay robust through 2009. But by maintaining their flexibility during the downturn, relocation specialists continue to succeed doing what they do best: sending relocation business to their associates and making transferees' moves as smooth as possible.