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HEY! HEY! HO! HO! Relo Co.s have got to go!

Obey Fist

This fall I received a listing from a floor call. The client was being relocated, jumped the gun and got an agent before the relocation company could go through the process of giving him one of their vetted agents. So I thought that I had the usual 35% fee to pay. I could handle that.

But wait...Then I found out that his relocation company had a reciprocal agreement with my companies' relocation arm and that I would owe them a fee.

But wait...Then the sellers took a buyout and my own company's relo arm raised their fee to 50% of the remaining 65%.

So lets do the math...I am now down to 32.5% of the original listing side commission....before I pay any brokerage fees on the transaction.

You can bet I didn't pay for any advertising after that came down. They could fire me if they wanted and I didn't fill out any of their obnoxious weekly updates either.

Can you believe the arrogance? Between the two companies they are taking nearly 70% of my pay and they want me to happily waste my time filling out paperwork every week on what I have done to market their property. Just say NO!

So I am sitting here thinking that I am the only one who is getting bloodied in this transaction. Then because of the soft market we get an offer in which is lower than the buyout price.

The relo company decides to take it...on the condition that the corporation behind the relocation coughs up the difference. Remember it wasn't the corporation who decided what to pay the owner in the buyout. That came from the relocation company. Then when the market doesn't support the buyout they have the arrogance to go back and demand money from their client who has already signed up under a contract with them for a period of years which cannot have been cheap to begin with!!! It was at that point that the light bulb went on. It wasn't just me who was ripped off. There must be some very unhappy HR directors and personnel out there who don't like relo-companies either.

So how does all of this greasing of wheels and outright theft work? As soon as I got a call from the first relo company they really emphasized that the get smart "cone of silence" was to descend upon my head and that in no way was the client to know that I was getting ripped off on my commission. (I obeyed...but I didn't like it.) Remember that was the client who found me!

Erik's Business Theory Number One: Any business which has to require silence about its business model is ripe for a new business model.

Rainers I have had enough. Between all of us there must be some better business models which better serve the corporations, the agents and most importantly the clients!

No more cone of silence!

Here is my weak idea to replace relocation companies. There are two things the corporations get out of this whole deal. First they get a single phone number (they can call relo and move someone anywhere in the country) and the instant buyout when necessary. For these two items they pay money-and I would bet it is a whole lot of money.

I don't think that national brokerages are the solution here. If my own brokerage treated me this way, then I have no doubt that it is "industry standard." No if we want our commissions back we will have to figure out a way to take them back on corporation at at time.

Erik's Business Theory Number Two: Anything which is justified as being industry standard means that it is bad for the employee/independent contractor and the manager feels guilty about doing it so they cannot defend it directly.

What if that single number was your number? What if individual agents made a business model out of collecting a few corporations and being that number. They call you and you are the one who arranges the referral or takes the lead yourself. You get the money and charge a more reasonable referral fee than the thirty-five percent. (Or will you let your geed take over and make your business model ripe for a shake up?)

Then there is the matter of the buyout. That is where my plan gets weak. Individual agents probably don't have a pool of resources big enough to buy homes for corporations and hold them until they sell. Maybe the wealthiest of us could swing one or two but what happens when a whole wing of a company moves out of town? What would we do then...likely disappoint the corporation and send them back into the hands of the relo companies.

Here is my thought. What if the corporation placed a pool of money in escrow which it used to purchase the homes but place them in either the title company's name or in the agent's name? The best thing would be for the HR director to be a signer for the company then the company could hold the properties until they sold. The corporation receives any profits on the sale and takes the risk for the losses. After all, my experience this fall taught me that they are already taking the risk for the losses and probably footing the bill for my commission as well.

I think this idea is progress but is also so full of holes that it makes Swiss cheese look solid. It seems to me there is lots of room for lawyers and fraud here but it is the best that I have come up with so far.

Someone else out there must have a better idea than mine but at least it is something to bouce off of.

No more cone of silence!

I am also going to post a question on LinkedIn and see if we can get some HR types to weigh in. (I will update this post when I have the question up and running so you can follow it there as well.) I want to know what they want as well so that we can make sure this is a win/win.

Here is a link for the conversation on LinkedIn

Erik Wecks

REALTOR, ABR

http://erikwecks.com/

Posted by Erik Wecks on 01/17/2007 05:34 PM

Comments (50)

relocation, relocation companies, relocation company

50 Comments on HEY! HEY! HO! HO! Relo Co.s have got to go!

JAN

2007

Hey Erik.

The only cure for the relocation mess is the market. As long as they can get agents to work for 35% of the commission, the rates will stay that high. You just quit. I quit in 1994.

I just tried to find an agent in NC for a RT agent and no one would take it with a 35% fee. I don't blame them. I wouldn't either. But, they'll find someone. It will just not be an experienced, efficient agent.

Of course, the buyers don't know what they're getting. It's all just one big scam.

Lenn

Lenn,

I don't think the HR personell understand what they are getting either which is why I also think part of the solution is to bring them into the conversation. Hopefully that works out in LinkedIn. Thanks for your thoughts.

Erik

Congratulations, you've just met the referral fee fairy.

Not her first visit either.

Because your brokerage firm has a contractual relationship with the relo company you're screwed.

Advice...make that a non public AND members only post.

Consumers don't like to hear this stuff.

Corporations give their employees lots of perks with relocations (obviously varies by company and depends on the position of the employee). Many are happy to receive the benefits and help during a stressful time (a big move, job and home!!!) and may not be too worried about the exact compensation a prospective realtor will receive...

Erik.... first off...... sorry to hear. I am not a realtor, but here are a few thoughts.

Sure... these companies take a piece of the pie, split this and that, and expect you to do the rest and get a little pay for it. In regards to this, I hate to say it, but they are still paying you a certain percentage. And I guess it would depend on the sales price and what your split is. Meaning.... and I have been there before. But I think many people fail to realize, something is better than nothing.

example.... let's say it's a $250,000 house. 6% of this is $15,000. 35% of this is $5,200. Now, you said you might have to give something else up? Let's just say $1,500. That still leaves you $3,700.

I think the issue at hand is that realtors expect to make a certain %. If I did a $250,000 mtg, I would be glad to make that on a deal, $3,700. I am not here pitting loan officers against real estate agents. And I know that I always looked at making more money by some realtors. But our splits are different than a realtors and we have to do more mortgages than a realtor. And our commission is based off of the loan amount, not the purchase price. we don't get our check at the table per se,,,, lol Last, there are many times where I make much less than what I started out with, because things come up and it's my job to make sure it still happens, at almost any cost.

Sorry for rambling....but most of what I am trying to say. You have to look at a relo as a lead that didn't cost you anything in the beginning. But a lead that costs you money down the road. That's why true referrals are the best. When I have to spend $5,000 a month to get leads for my loan officers, that's a cost. And I wouldn't pay the loan officer's top dollar. If they go out and get all their business on their own, then they deserve higher, because it's not costing me as much.

Erik... I am sorry that I couldn't offer any advice or another way to handle this. And I wasn't trying to be insensitive to your story. Just merely pointing out a different view, maybe giving you some ideas at cost and such. Meaning.... do they pay for your E & O? Phones? Instead, if you paid desk rental and some other things, not sure if this would be different. But it goes back to risk. I think you mentioned some of this. Who has some risk in this and in the daily transactions. Just food for thought.

PS.... Ardell makes a good point also.

And Kaushik snuck in there.... kind of what I was trying to say. I just hope I didn't bore anyone while doing it. ;o)

I used to feel the same way about taking relos, no way I would think, too much pain in the A for 60% less income!
Then I realized...
(1.) I didn't have to go out and find these customers or cajole them into buying or selling(great!,less work)
(2.) They were all extremely pre and well qualified (saved me time and money and worry)
(3.) They HAVE to buy or sell FAST (who doesn't like this in a customer?)
(4.) The amazing # of great referalls you get from them down the road!

Just My Two Cents

Hmmm....let me take this stuff a piece at a time.

First, Ardell, I do think that it matters to the public how I get paid. They don't want me to be taking more than my fair share of the pie. That I agree with. I also agree that we have a perception problem in our industry regarding how much we get paid. We are perceived as lazy and overpaid. I don't think hiding the truth about how it works helps there. I think that transparency would help.

After all if the public will be mad at me for talking about money why is it that the relocation companies command that I hide how it works for them? They want me to keep it a secret that they are taking 70% of a commission for doing little work. That should be something that the public should want to know. After all it is the relocation company who is taking their money without earning it. Whatever the starting commission rate between the seller and myself is our business and is always negotiable. Isn't it good to inform them that the person they chose to help them isn't getting the money?

Which brings me to Jeff... Jeff I am not exactly sure where you are going with everything you say but your math is off. You assumed that I was able to keep the full commission in your example. Actually I do not participate in dual agency because it is a nightmare for the consumer and basically a dishonest way to line our pockets. It doesn't serve their interests at all. Because this is my opinion I will always be splitting my commission with a selling agent. In the real life example I gave you from this fall I split my commission 60/40 with a selling agent.

So lets redo your numbers.

6% of 250,000 is $15,000 dollars. However my side of the sale only starts off with 60% of that number bucause I have to pay the buyer's agent. So my side of the table starts off with $9000 dollars. Then I end up before brokerage fees earning $3150. You are about right that I pay brokerage fees of about 1500 on this transaction. Leaving me with a check for about $1650 dollars before my milage and all other personal business expenses including, flyers, newspaper ads etc. And actually my brokerage is one of the least expensive brokerages in town and pays for more marketing then just about anyone else. I am not a fool with my money--I have had a look around. :-)

And I think that the public deserves to actually hear the real financials of a situation like this because they need to understand that I am not a fool with their money either. Again, I think that showing them how it ends up should upset them because all the hands in the pot cannot lead to an efficient system. That is the whole point of my suggestion. I want to see a more efficient relocation system where the local corporation works with a local agent to meet their relocation needs.

That's outside the box thinking and it is intended to lower costs for the conusumer not pad my wallet

Kaushik,

I think you make an excellent point. The relocation company gives excellent service to the family being moved. That is good! The problem I have is that I can do many if not all of the same things for the employee without having the middle man who is increasing their costs! In a competitive world like real estate that will translate into lower commissions and more economic efficiency which helps the consumer.

Relocation companies certainly don't lower costs in our industry and they do not benefit the consumer.

They also don't benefit the corporation because they are getting jobbed financially as well. So if all of us who come in contact with the relo company are losing why are we all so afraid to talk about the money? Yes it is the consumer's money. All the more reason they shoudl know exactly how it is spent.

Transparency cures many ills.

Erik

Debbie,

I understand! I needed the paycheck this fall. It has been a slow market and for those of us under ten years experience it can really go in waves. So the idea of an easy sale even if I give much of it away is attractive.

And yes! yes! yes! to the referrals.

I think that what has changed my mind is the fact that with or without a relocation company the client is still they same--well qualified, motivated and loyal. What you say about the client is true but the truth of it has ntothing to do with the relocation company.

Debbie wouldn't it be better if you or your office was working with a few directors of HR in your community to serve them directly without losing 60% or 70% of the commission. Besides with a local contact won't the seller and the corporation be better served? I can give better service than a relo company based half way accross the nation.

That is what this post is about. Giving the best to consumer and creating more efficiency in our industry.

Erik

Eric,
Yes, of course I agree they could be better served by working with a few local HR's directly and without us having to lose the 60-70%. But when the referall originates from the Relocation Co and is given to me, (I don't have to go out and find this person myself) I'm happy to do it.

Your case is different because you already found him and qualified him yourself. This is the situation that is NOT FAIR with a RELO company and your particular situation is the kind of thing with RELO's that does BURN ME UP!!! Because you have already put so much of the work into it, and you found him yourself, it is totally unfair that some relo co, from accross the country that doesn't have to do the real work - gets such a big piece of the pie!

This is probably why My broker keeps telling us to watch out for this and find out from the git go if a customer has relo benefits, so we don't invest too much into it and then get burned, by surprise, after the fact. I am always wondering why she keeps talking about this. Hey, now I know because of your post. Boy AR is GREAT for learning things, isn't it?

Erik Relo companies are scum, I am with you. I have been screwed multiple times in my career by these fools. I can't believe there are agents and mortgage brokers in this thread defending them. They obviously have never been down the same road we have.

Debbie,

I understand! and I am not even saying that I wouldn't choose to work with a relo company if the lead came my way and I understood upfront what the costs were. I am not even saying that you ought to change the way you do business. I just want to inspire you to think about how you could approach even one HR director in your market to find out if you could beat the relo company for the contract with them. Remember it is the HR department who is calling the relo company with the name of the client and then they are calling you.

Wouldn't it be better if the HRdirector called you first instead then you could negotiate a reasonable commission with the HR director and give better service to the client. It would be a win/win/win situation. Right now with the current set up I see it as a lose/lose/lose.

Don't kid yourself. You are quite capable of getting that client yourself. You don't need the relo company you can make a better income doing it. I totally udnerstand the security that they offier you and I would guess that they are a significant portion of your income. That is fine! Let me say that again. That is fine. But I would really encourage you not to let it keep you from dreaming about something different that is better for all.

Along the way there is no need to bite the hand which is feeding you. Just slowly build a different base and move out from under their thumb. Just dream with me!

I love AR as well. It is really a great community full of great people.

Erik

Jennifer,

I am a little surprised at the response myself. The idea here was to do some public dreaming in the name of the public interest but as I think about it I probably underestimated how valuable a steady stream of leads is. It can be very difficult to find leads and it takes risk. The relo company offers a fix for that but at a price.

Like I said to Debbie, I don't blame anyone for choosing the security they offer. The only thing I want to see is for us as a real estate community to challenge them over the long term because in the end they aren't serving anyone well.

Let just dream a little here and not be so worried all the time....Fear is our enemy!

Erik

Erik,

Here's the deal on relocation companies.

They're here to stay. Corporations use them because they have the manpower and expertise to manage an employee relocation which is a very expensive proposition. It costs around $80,000 and more to move one mid level employee from point A to point B. Upper level executives relocation can run well into 6 figures.
The corporations are their clients; not the employees. Most often employees jump the gun and call a Realtor before they fully understand their company relocation policies.
Most legitimate relocation firms belong to an umbrella group called the Employee Relocation Council (ERC)
A lot of real estate firms have blanket agreements with ERC members to handle their transferees. The real estate companies agree to pay referral fees to any ERC members who is a signatory to that agreement no matter what the prior relationship might be or have been with a real estate licensee associated with that firm. The brokerage firm is the agent; not the individual licensees.

Calling the HR directors is not going to do you any good; they've already received their marching orders from the executive suite.

Having said all the above it is possible to avoid paying referral fees of any kind or at least negotiating them downwards if you have to pay.

In Tennessee where I practice we have laws prohibiting "after the fact" referral fees. If you have a prior agency relationship with a consumer, listing or buyer agency agreement, it is illegal for anyone to even ask you for a referral fee or any kind.

This is void if your company has any sort of blanket agreements with relcoation companies; that would make them contractually obligated to pay and your broker is not going to go around his agreement for your benefit.

In Tennessee it is also illegal for anyone to threaten to withhold any relocation benefits from an employee because of a prior agency relationship or to counsel that employee how to get out of an agency relationship.

Even if you do have a prior, non-agency relationship with a transferring employee it is possible to negotiate any referral fees downward if the referral fee fairy pays you a visit after you have started working with the employee.

The ERC has a mechanism in place to resolve disputed between real estate licensees and a member firm. Accordig to ERC statistics over 70% of disputes are resolved in favor of the licensee (no referral fees paid).

You need to study some, especially at the ERC website and their coalition dealing with after the fact referral fees. Know your enemy and you can defeat them more easily.

Glad you pointed out that Jeff, the lender, was way off in his numbers.

Several relo companies don't allow dual agency plus they limit the commission amount. They require a WHOLE lot of extra paperwork that no one reads - I actually had a relo counselor tell me that she never reads that stuff! Then if our broker takes an additional cut, it's really not a profitable business unless the home sells rather quickly.

IMO, if an agent doesn't have any other business, it's OK to take a relo as it's better than nothing. But, if it takes away from regular clients, then they're definitely not worth it. As Lenn says, it's often the "less experienced" agents or the very big teams (with asst's)who bother with them.

So is the seller being well taken care of? I don't think so. They don't get the agent they really want. The agent is likely to underprice the listing to get it sold quickly. (Buyers know that they can low ball the price and have a chance at getting it.) The relo company cajoles them to accept the offer to get it sold and get moving. The seller thinks the relo company and their corporation are paying the moving expenses, but as you found out Erik, a big chunk of those moving costs are being paid by you. That's why they require secrecy.

I am not sure why you say that relocation companies are here to stay? Who made the number of 80,000 that if good information as long as it doesn't come from the ERC. I imagine that the ERC isn't exactly paying this either.

So if the corporations are paying this expensive cost and it could be reduced by getting rid of the expensive middle man wouldn't that be something they would be interested in?

Again, I have yet to see a service that I couldn't provide a corporation as an agent thus reducing their costs.

What is up tonigth folks...Aren't we business people? Or has our industry so sheltered us from competition that we cry the sky is falling when we face it. Lets get in the game. The Relo industry wants our money (and by extension our clients money) and so do the internet real estate companies like Zillo. Are we going to let them dictate the terms of the fight to us? Or are we going to get in the game and come up with new paradigms for ourselves and stay in business.

Erik's Rule of Business 3: If you don't change you are out of business.

Lee, at one point everyone would have said that IBM was here to stay and that they would rule the business world. Then came Microsoft. Now comes Google to challenge them by taking the office online. This is about dreaming not about settling.

Why does it cost so much to move an executive? Its realy a rediculous thing to say that it has to cost over 100,000. What if we could reduce that cost by 20 percent? Wouldn't the "marching orders" from the board room change then?

Remember when United and American owned the skys. Well then this little tiny startup called Southwest Airlines with this crazy idea of cattle car seating came along. Of course it was going to fail because no one would accept not having a seat assingment..... Hmmmm. Now they rule the world.

I still am surprised at the lack of dreaming.... It really doesn't hurt. Honest!

Lee you are right that I haven't checked out the ERC site. I will do that. It will help me dream better.

Erik

Thanks Elaine,

Kind of wierd that everyone want to defend an industry that preys on the consumer, their client (the corporation) and us. What's up?

Erik

I'm not going to defend the industry. Corp relos reduce the amount of the service to the consumer. (You won't advertise; I don't blame you).

Corp relos have no business hijacking a Realtor's commission. If they want to provide an employee benefit, they should hire the Realtor on their own, then negotiate for the fee.

Erik,

It costs so much to relocate an employee because those costs typically include several trips to the destination city to look for housing, selling benefits on the leaving end, moving costs for household goods, and buying costs on the destination end as well as some significant miscellaneous costs.

Typically the higher level employee involved, the more expensive house he has, more household goods, higher fees to sell his current home (I once had a relo listing that had a $12,000 redecorating bill to neutralize some very funky decor), carrying charges while the house is on the market, higher costs for him to buy on the other end.

All those numbers add up very fast.

Even if you could save one corporation a few bucks there are literally thousands of corporations in thousands of cities moving employees. What corporations want is one stop shopping for all cities; not just yours.

(Last comment for the evening. I will pick it up in the morning. I want to spend some time with my wife before we turn in.)

Jim,

I want to be the one stop shopping for the corporation. Obviously I cannot be that one stop for every corporation in America. However, I can be that one stop for "A Corp" located in my town. My goal isn't to take on the industry as a whole but to reinvent the image of the real estate agent for the HR director and the board room so that they feel like they have a choice rather than getting taken to the cleaners by national relo companies.

While we may never destroy relo completely, I think that we could make a good dent in their business if we worked together to develop stragegies which worked with individual local corporations in order to wean them off of relo. If a whole bunch of us learned how to get this busines back on an individual basis we could make a change and drive down the cost of relo. For me its just another market like FSBOs, expireds or a farm. And it is a lucrative one at that. Motivated, high end buyers. Sounds good. Its no wonder relo companies want not only a piece of the pie but the whole pie while we eat the crumbs. Everyone improves with competition. Thats all I want here is good competition for them.

The biggest thing I have to provide "A Corp" is a referral to a well qualified relo expert in Knoxville if they want to move someone there. I think I know one. :-) In fact, I think that I could provide experts in just about any city in the states. That makes me "A corps" one stop source for their relo needs. Between the two of us I think that we could figure out how to give that exec a top notch experience in Knoxville and save the corporation money at the same time. That would be good for them and good for us.

Erik

That's a great post. I changed my opinion about five times when reading the comments. Then I came back to my original idea: Things happen!

Erik - the consumer needs to know how relos work. We had our wrists slapped a couple of months ago because we chose not to prepare the very tedious BMA (Broker's Market Analysis) for the relo company until they signed a listing agreement. We were sure that we were only there for the relo to get their 3 BMA's but the sellers had already chosen the agent. The BMA would take about 5 hours of work and we would not get a penny.

The reason the consumer needs to know how relocation companies work is because when selling, a lot of relo agents will not market their property adequately because they cannot incur the expense. We know a lot of relocation agents locally that take relo listings for exposure and do a disservice to the sellers.

Ines

I really don't react well to fists saying OBEY pointed in my face :)

JAN

2007

Rick & Ines: You are so-o-o right-on on the BMA and last paragraph. Regarading the wrist-slapping, we'll probably all have little check marks next to our names once this post hits the internet.

Elaine - that really cracked me up!! We're done...and it's a good thing!

Ardell,

That is the way I felt this fall when the relocation companies tried to dictate to me how I was to manage my relationship with the customer. It isn't good for them at all.

Erik

Rick and Ines and Elaine,

Thanks so much for being willing to "go on record" about the truth of relocation companies. They are not good for our industry and I think that those of us who are getting done with them need to expose their greed.

Erik

Erik - the reality is that they offer a good package to the actual seller. They guarantee a certain buy out amount, they put them in a rental for a few months and cover their expenses, they even loan them money to put down in another property while their house is being sold. The consumer is usually happy, and someone has to hold the short end of the stick (that's us, The Realtors). I think for newer agents that are starting out, relocations may be the way to go because they have no other business, but most experienced agents and top producers will refuse these listings because of what these entail.

On AR we've had many discussions on what affect the aggregators (Zillow), minimum-service-brokers and rebaters will have on our business. What we've not discussed is what affect they'll have on the relo companies. In today's world, it would seem that relo's "old-fashioned" way of doing business, will be challenged as well. Will the DOJ challenge them if they discriminate against minimum-service-broker's as options for their clients to use? Of course, I can't imagine an MSB wanting a relo since it conflicts with their business model, but nevertheless, it's an interesting thought.

Jim makes some great points, and I know for sure he is very knoledgeable about this situation. I just got screwed by another parachuting relo company last week. Even though my time and marketing procured the lead. They made my clients "an offer they couldnt refuse".....LOL as usual. With 35% coming out of my pocket.

Rick and Ines,

I hear you. They do a great job for the person being moved. I think that is why they are still in business. The thing is I would be willing to bet they are not paying for these expenses. The corporation is probably paying for them. The question becomes...

What would you do for a highly motivated, well qualified, upper end client? Wouldn't you be willing to do all the things which the relocation company does without charging the price that the relocation company does?

I would....The trouble will be what Jim Lee pointed out last night...we have to somehow convice someone in the executive suite to take a chance on us as agents and we can't blow it or it is over....

About agents starting out. I agree the trick is not to let that kind of business make you lazy because if they "addict" you to their easy leads next thing you know their charge will move from 35% to 45% and you won't be able to move becasue you are too scared to find clients on your own which is hard work.

Erik

Elaine,

That is an interesting question about the DOJ. I wonder...

Erik

One way to deal with this issue is legislatively.

Our state association of Realtors was instrumental in getting one of the strongest "after the fact referral fee" laws in the US passed several years ago.

Once you get a consumer signed up to either a listing or buyer agency agrement in Tennessee it is illegal for a relocation firm or anyone else to even ask you for a referral fee.

Get your local associations to start lobbying your state association to get a similar law passed.

Field Guide to
After-the-Fact Referrals and Affinity Relationships

"Other states, such as Alabama, Colorado, Idaho, Illinois, Kansas, Louisiana, and Tennessee, also require reasonable cause for referral fees. In Idaho, a written contract concerning the referral fee must exist before the seller signs the listing agreement, or the buyer signs the representation agreement or a purchase offer.

Iowa similarly prohibits requesting a referral fee after a listing agreement has been signed or a purchase offer has been accepted.

Further, to protect relocating consumers from companies that threaten to reduce benefits if a referral fee isn't paid, many states-such as Alabama, Idaho, Kansas, Kentucky, Louisiana, New York, and Tennessee-have passed laws prohibiting such interference in client-licensee relationships. Other states, including Connecticut, Illinois, Kansas, and Kentucky, prohibit counseling a client to amend or terminate an agency agreement in order to receive a referral fee."

You guys need to do some homework and figure out the best course of action for you.

I know for a fact you can fight relocation company fees and often beat them and certainly get them negotiated down because I've done it on several occasions.

One bad thing that could hurt you is if your company has some sort of blanket agreement with 1 or more relocation companies which is a pretty common arrangement.

For instance I know my firm has several blanket agreements so if one of their relocating employees comes to any of us we have to pay or give up the prospect. Since my relocation department gets a piece of the action too I usually just give them up because I'm not willing to pay 60% of more of my commissions in referral fees.

Erik - This could be a very interesting Niche. I am sure that by getting the big executives directly without having a middle man, the relocation services we would offer would be superior to that of a relo company. It's a matter of having the contacts and doing your homework, as Jim points out.

Our company does have a blanket agreement and we end up giving them a 40% referral fee, sometimes they change our split and they cap our commission.....what else, take my first born child? Jim, we have also been willing to give them up because after all is said and done, we end up not making a penny after all the marketing and time is taken into consideration.

I hate Relos also and have been burned by them as well. However I've burned them a few times also. When the client contacts you before the Relo does..get the client to sign a Buyers Representation agreement. Then when the Relo calls you have a chip in your pocket that they aren't going to be expecting!

Love business theory number 1! Sounds a lot like my theory about greater transparency throughout the whole industry...

And I believe that RELO companies are horrible in every regard. They take most of the money only to hinder then entire process (i.e. it took one relo company 3 weeks to get a signed ratified contract back to it's own listing agent as well as me and delayed settlement because of it).

For a fine example of such companies, just look at Cendant - billions in fines and prison for the former CEO.

Wow! Thanks for the great conversation everyone.

Jim,

I am not sure that I like the legislative route. It still seems to accept the relocation business model as an accpetable model if placed within appropriate limits. Legislation to protect my commission still doesn't seem to me to serve the consumer as well as a different way of doing business would. However, since we both agree that we will never eliminate relocation completely this may be a necessary option if this way of doing business becomes prevelant.

As you and Rick and Ines have pointed out we need to do our homework if we are going to win over CEOs that is what I want this conversation to be about. Thank you so much Jim for the links to your blog and other places. I will definitely use them and do my research. I hope that others will join me. Its time to chip away at this business.

I also think that it is time that we try to get some consumer advocates and others to pay attention to the problem. Has anyone ever heard Clark Howard talk about relocation companies? One thought I have had is writing him an email which presents the problem to him. As long as this stays an in community conversation the public (including the CEOs will not be aware that there is a problem or a solution.)

Erik

Erik,

The legislative route is a proactive approach several states took to put a stop to abuses by relo companies that did not actually refer a buyer or seller but simply "parachuted" into the transaction, often just a few days before closings and demanded to be paid.

If we're going to get into the relocation business on our own we need to think about some central point of contact that would then do follow up and parcel out the business to the appropriate Realtors in the appropriate locations.

There are some costs associated with doing relocation business as well. Often if a company takes a house into inventory they want the real estate firm (or individual Realtors) to pay for onoing utility bills, lawn mainenance, and other assorted costs.

Typically they will reimburse you at the end of each month but it's extra bookkeeping plus the cash float.

Lots of things to consider before contacting any companies to offer our services.

Yep! I hear you. I think right now I would like to try and do some informational interviews with corporations to find out what they need. Then come back later to this forum and others with information.

Erik

JAN

2007

Jim Lee should be given bonus points from AR just for his responses on this blog and would love to see his week in review!

JAN

2007

Teri,

I so agree. He provided me with some great resources and I love that he really has addressed how to deal with parachuting referrals. That is another part of the industry which I don't like.

Erik

JAN

2007

Erik, I pretty much agree with you about ReLo's... THE ojnly reason in my book is if it comes at a slow time it is better than watching the paint dry and the possibility for later business fomr the new clinet and their friends...

You touched ionb another point that I agree with too. That is avoiding Dual Agency! I do not mean to impunge anyones honor but in a transaction, that is complicated anyway in Dual Agency the tail waggs the dog! I do not want to be put in the position where the issue of money could become a issue. I also do not want to put in a position where I can't negotiate. Believe me in Dual Agency you CANNOT negotiate. You know too much and you cant harm your clientS interests... so no deal for me.

Yep... If we as real estate agents do not clearly understand that we must make sure our business plan is friendly to the consumer who pays for it we will go the way of the electric typewriter and be replaced by something which is consumer friendly. Dual agency almost never serves the consumer's interests.

Erik

FEB

2007

Congratulations Erik, you're (in)famous! This blog has hit Inman News this morning. Now I'm going to have to read all the other responses.

Well my hope is that talk about relocation will help the industry and consumers. Consumers need to know how this affects them.

Erik the (in)famous

Rick,

I found it interesting that I was completely wrong about the other side of the deal. According to Inman, the corporations are not paying anything for relocation services. That means that our job of reclaiming the business will be much much harder. The corporations have no financial incentives to leave relocation companies behind. That does change the game.

We then have to retake the ground that we can based upon service to the employee (such as a better price for their home) rather than on financial grounds that makes it difficult.

Erik

Here is a link to the article if you haven't read it. Inman relocation article

In January 2007, ERC posted the updated policy on the collection of referral fees. Back in the late 90's, the president of ARELLO (The Association for Real Estate License Law Officials), Mike Gorham, CO, formed a task force to research the issue of after the fact referral fees. ERC participated in the task force at that time. The task force came up with several recommendations which resulted in a policy on the collection of referral fees. There is background information located on the ERC site under the Coalition tab.

The link to the current version of the policy is http://www.erc.org/coalition/tax_legal/referral_policy.shtml

In addition, as mentioned previously,ERC developed a complaint mechanism "The Interchange". There is no fee to use this system and you do not need to be a member of ERC or support ERC's Coalition. The relocation management companies listed on our site as supporters of the Coalition have agreed to follow the policy and to participate in "The Interchange" complaint system. ERC acts as a facilitator but does not arbitrate the submissions to the site. However, we do track them and most complaints are found in favor of the licensee.

The link to The Interchange: http://www.erc.org/coalition/tax_legal/interchange.shtml

One last link - to get a better understanding of the tax and legal issues involved in a relocation transaction there is an excellent course available through ERC's Training Institute www.erctraininginstitute.com. For a very small fee, anyone can take the course, Relocation: Assisting Corporate Transferees. The course explains the role of the relocation management company, the expenses the corporations pay - which includes the tax on the benefits they receive, etc. It is a three hour on-line course and even has CE credit in some jurisdictions.

Sandy,

Thank you for your very helpful information and for continuing our conversation.

Erik

FEB

Very interesting thread... thanks for sharing!

I'm relatively new to real estate, so when a client contacted me and I started corresponding back and forth, I thought they were my clients. Later they found out that their company that was relocating them from India to the U.S. required them to use their relo department. So my questions are:

1) Are they truly "required" or is it just likely in their best interest to use the relo company's agent?

2) I thought the game was over and my clients were lost, but looking through this thread is sounds like I still could have found them a home and received a much lower piece of the commission. How does that work? Am I supposed to call their employer? Find out who the relo company is?

3) From what research I've been able to do, it sounds like the only way to combat this is to get a client to sign an Exclusive Buyer's Agency Agreement. Is that everyone's take on this? Are there other strategies?

Thanks in advance!!

-Tre

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