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Taking the "Surprise" Out of Relocation Pricing

WHR Group Employee Relocation
WHR Group Employee Relocation

This document discusses various fees that may be charged by relocation management companies (RMCs) to help clients better understand relocation invoices. It outlines common fees such as service fees, referral fees, zero fees, fixed fees, non-compliance fees, and direct costs. It emphasizes the importance of understanding all potential fees to allow for accurate comparisons between RMCs and avoiding unexpected charges.

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Copyright 息 2015 WHR Group Inc. TAKING THE SURPRISE OUT OF RELOCATION PRICING AND FEES
Copyright 息 2015 WHR Group Inc. Advancing > Lives > Forward 2 There should never be a surprise when you review a relocation invoice, which is why the following list of common fees will help you better understand and negotiate a reasonable contract for relocation services.
Copyright 息 2015 WHR Group Inc. Advancing > Lives > Forward 3 [While these fees vary from company to company, they are, in general, similar across all Relocation Management Companies.]
Copyright 息 2015 WHR Group Inc. Advancing > Lives > Forward 4 Service Fee: The cost charged by an RMC for overall program administration, including salaries, overhead, and profit. Historically and still true today, additional fees may be charged, such as the following: > Initiation Fee > Appraisal Service Fee > Resale Fee > Equity Funding Fee Note: It is very important to understand what additional fees may be incurred if not included in the service fee. Be sure to ask to see an invoice that illustrates all costs associated with a move.
Copyright 息 2015 WHR Group Inc. Advancing > Lives > Forward 5 Referral Fees: For ages, these fees have been captured by various entities. Originally, real estate agents collected fees by referring buyers to each other throughout the country. This income was used to offset relocation department budgets. Eventually, RMCs felt they were the procuring cause of the homes sale and demanded that those fees be given to them, which, in effect, added to their bottom line. Corporationsthat pay all the costs of relocationfelt they were entitled to these fees. For instance, on a $400,000 property, the referral income can be an estimated $4,200. Multiply that amount by two when there is also a purchase transaction involved, and a total fee of $8,400 can be collected. This reflects a 35% referral fee (reasonable in the industry).
Copyright 息 2015 WHR Group Inc. Advancing > Lives > Forward 6 BEWARE: Some RMCs charge as much as a 50% referral fee, oftentimes resulting in diminished quality in the agent chosen and, ultimately, poor overall performance.
Copyright 息 2015 WHR Group Inc. Advancing > Lives > Forward 7 Zero Fee: This term generally means there will be no service fee charged in the administration of the move. However, all referral fees collected will be realized by the RMC. The adherence to strict listing guidelines is imperative for this fee structure to survive. On an $800,000 property, the fee earned is $16,800. On a $150,000 property, the RMC still earns $3,150. Thus, there is seldom a zero fee.
Copyright 息 2015 WHR Group Inc. Advancing > Lives > Forward 8 Fixed Fee: Generally found in government contracts, this type of fee reflects the expected operating costs in the resale of the property and includes the costs found in servicing the move. Commonly, these fees could be in excess of 30% of the appraised value of the property, but the client bears no risk in the home sale. In this fee structure, gain or loss in value is borne by the RMC.
Copyright 息 2015 WHR Group Inc. Advancing > Lives > Forward 9 Non-compliance Fee: These are additional fees that may be charged when the property does not meet the stipulations of the client relocation policy or RMC contract. In addition, when demands are made by an employee (and granted by the client) that are not consistent with the policy, fees may be incurred. These exceptions may allow an RMC to charge supplementary fees that do not conform to its normal fee structure and can be substantial.
Copyright 息 2015 WHR Group Inc. Advancing > Lives > Forward 10 Takeover, Cancellation, or Extended Market Time Fees These fees are self-explanatory and are often hidden in small print in service contracts.
Copyright 息 2015 WHR Group Inc. Advancing > Lives > Forward 11 Mark-Up Fees: Seldom discussed but often collected, RMCs will charge the client one fee and pay the vendor another. As an example, an appraisal is invoiced to the client for $600, but the payment is made to the appraiser for $500. The additional $100 in revenue provides profit for the RMC but, as a consequence, may result in poor performance of the actual appraisal process. Multiply this type of activity times the many and varied delivery transactions involved in each move, and the returns may be huge for the RMC but cause the client and employee to suffer.
Copyright 息 2015 WHR Group Inc. Advancing > Lives > Forward 12 Direct Costs: These are costs directly associated with the home purchase process. Take all the costs associated with acquisition, marketing, maintenance, resale, and closing of a property and divide into the appraised value of the property. The result will be the direct cost percentage. If the appraised value of the property is $250,000, and the direct costs driven by the RMC total $45,000, the direct costs are 18 percent. Sometimes, RMCs will exclude some of the costs above and call them indirect costs.
Copyright 息 2015 WHR Group Inc. Advancing > Lives > Forward 13 IMPORTANT: It is important to truly understand all the costs associated with relocation transactions and be able to compare apples to apples when benchmarking. Be sure to ask for which of these fees you are (or are and dont know it yet) being charged.
Copyright 息 2015 WHR Group Inc. Advancing > Lives > Forward 14 MORE FROM US: At WHR Group, full transparency has always been a strong operating principal. We believe in charging a reasonable service fee while returning referral dollars (when allowed by state law) to the client. A mark-up fee in relocation has never been allowed at WHR, and we believe it to be unethical when collected and not communicated to the client. Direct costs are always challenging at any RMC, but, historically, WHR has achieved some of the lowest costs in the relocation industry.

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Taking the "Surprise" Out of Relocation Pricing

  • 1. Copyright 息 2015 WHR Group Inc. TAKING THE SURPRISE OUT OF RELOCATION PRICING AND FEES
  • 2. Copyright 息 2015 WHR Group Inc. Advancing > Lives > Forward 2 There should never be a surprise when you review a relocation invoice, which is why the following list of common fees will help you better understand and negotiate a reasonable contract for relocation services.
  • 3. Copyright 息 2015 WHR Group Inc. Advancing > Lives > Forward 3 [While these fees vary from company to company, they are, in general, similar across all Relocation Management Companies.]
  • 4. Copyright 息 2015 WHR Group Inc. Advancing > Lives > Forward 4 Service Fee: The cost charged by an RMC for overall program administration, including salaries, overhead, and profit. Historically and still true today, additional fees may be charged, such as the following: > Initiation Fee > Appraisal Service Fee > Resale Fee > Equity Funding Fee Note: It is very important to understand what additional fees may be incurred if not included in the service fee. Be sure to ask to see an invoice that illustrates all costs associated with a move.
  • 5. Copyright 息 2015 WHR Group Inc. Advancing > Lives > Forward 5 Referral Fees: For ages, these fees have been captured by various entities. Originally, real estate agents collected fees by referring buyers to each other throughout the country. This income was used to offset relocation department budgets. Eventually, RMCs felt they were the procuring cause of the homes sale and demanded that those fees be given to them, which, in effect, added to their bottom line. Corporationsthat pay all the costs of relocationfelt they were entitled to these fees. For instance, on a $400,000 property, the referral income can be an estimated $4,200. Multiply that amount by two when there is also a purchase transaction involved, and a total fee of $8,400 can be collected. This reflects a 35% referral fee (reasonable in the industry).
  • 6. Copyright 息 2015 WHR Group Inc. Advancing > Lives > Forward 6 BEWARE: Some RMCs charge as much as a 50% referral fee, oftentimes resulting in diminished quality in the agent chosen and, ultimately, poor overall performance.
  • 7. Copyright 息 2015 WHR Group Inc. Advancing > Lives > Forward 7 Zero Fee: This term generally means there will be no service fee charged in the administration of the move. However, all referral fees collected will be realized by the RMC. The adherence to strict listing guidelines is imperative for this fee structure to survive. On an $800,000 property, the fee earned is $16,800. On a $150,000 property, the RMC still earns $3,150. Thus, there is seldom a zero fee.
  • 8. Copyright 息 2015 WHR Group Inc. Advancing > Lives > Forward 8 Fixed Fee: Generally found in government contracts, this type of fee reflects the expected operating costs in the resale of the property and includes the costs found in servicing the move. Commonly, these fees could be in excess of 30% of the appraised value of the property, but the client bears no risk in the home sale. In this fee structure, gain or loss in value is borne by the RMC.
  • 9. Copyright 息 2015 WHR Group Inc. Advancing > Lives > Forward 9 Non-compliance Fee: These are additional fees that may be charged when the property does not meet the stipulations of the client relocation policy or RMC contract. In addition, when demands are made by an employee (and granted by the client) that are not consistent with the policy, fees may be incurred. These exceptions may allow an RMC to charge supplementary fees that do not conform to its normal fee structure and can be substantial.
  • 10. Copyright 息 2015 WHR Group Inc. Advancing > Lives > Forward 10 Takeover, Cancellation, or Extended Market Time Fees These fees are self-explanatory and are often hidden in small print in service contracts.
  • 11. Copyright 息 2015 WHR Group Inc. Advancing > Lives > Forward 11 Mark-Up Fees: Seldom discussed but often collected, RMCs will charge the client one fee and pay the vendor another. As an example, an appraisal is invoiced to the client for $600, but the payment is made to the appraiser for $500. The additional $100 in revenue provides profit for the RMC but, as a consequence, may result in poor performance of the actual appraisal process. Multiply this type of activity times the many and varied delivery transactions involved in each move, and the returns may be huge for the RMC but cause the client and employee to suffer.
  • 12. Copyright 息 2015 WHR Group Inc. Advancing > Lives > Forward 12 Direct Costs: These are costs directly associated with the home purchase process. Take all the costs associated with acquisition, marketing, maintenance, resale, and closing of a property and divide into the appraised value of the property. The result will be the direct cost percentage. If the appraised value of the property is $250,000, and the direct costs driven by the RMC total $45,000, the direct costs are 18 percent. Sometimes, RMCs will exclude some of the costs above and call them indirect costs.
  • 13. Copyright 息 2015 WHR Group Inc. Advancing > Lives > Forward 13 IMPORTANT: It is important to truly understand all the costs associated with relocation transactions and be able to compare apples to apples when benchmarking. Be sure to ask for which of these fees you are (or are and dont know it yet) being charged.
  • 14. Copyright 息 2015 WHR Group Inc. Advancing > Lives > Forward 14 MORE FROM US: At WHR Group, full transparency has always been a strong operating principal. We believe in charging a reasonable service fee while returning referral dollars (when allowed by state law) to the client. A mark-up fee in relocation has never been allowed at WHR, and we believe it to be unethical when collected and not communicated to the client. Direct costs are always challenging at any RMC, but, historically, WHR has achieved some of the lowest costs in the relocation industry.