As the relocation industry continues to consolidate, specialists in the field are vying for corporate business, lowering costs and, in some cases, even eliminating up-front fees in order to compete.
To cover expenses, relocation companies are instead charging more to service partners to whom they refer business, especially those in the real estate industry.
According to industry sources, referral fees for agents are increasing to 40 percent of gross home-sale commission, up from the former industry standard of 15 to 20 percent.
“Relocation fees paid by the corporate client are low, and for companies who move large numbers of employees, they can be waived completely,” said Scott Sullivan, senior vice president at GMAC Global Relocation Services. “The majority of the relocation company’s revenue comes from referral fees earned from suppliers.”
This shift has led to tension between relocation companies and the real estate industry, with some real estate agents refusing to accept relocation business.
Other real estate agents, more eager for leads, are willing to cough up the fees.
Real estate agents at Remax All-Cities Realty are willing to pay 20 to 30 percent of their commission to relocation services for new clients and do not see much of a difference in handling clients referred by relocation providers, said Steve Goddard, relocation director.
After-the-fact fees are also an issue with real estate agents.
This occurs when a relocated employee starts working with a real estate agent without knowing his company has a relationship with a relocation service provider. The relocation company then swoops in to collect fees after a home sale is closed or near closing. This happens more often if the real estate agent is not one of the relocation company’s “preferred” agents.
Though GMAC kept mum on additional fees for working with non-preferred agents, Sullivan said, “We prefer to work with real estate companies and agents who are experienced in the specialized procedures required for a corporate relocation home sale transaction. We maintain a network of qualified brokers and agents who have a proven track record of success.”
There is additional pressure on relocation firms and real estate agents — the slow housing market.
With the current housing slump, a perceived loss in expected gains from selling a home makes employees more reluctant to relocate.
It has also decreased the profits for the real estate agency side and the relocation company. But the slowing housing market does make the services of relocation experts even more critical.
“It creates greater demand for the skills and services of relocation companies,” Sullivan said. “Companies can minimize the probability of employees’ homes going into inventory or staying on the market longer than they should.”