Curious about how relocation companies work? Well, in this article – you’ll know more! And while you’re looking to buy a house, it could give you some of the answers you’re looking for.
Different relocation companies have different ways how they work, but the core methodology more or less remains the same.
Let’s walk through specific details for the RealRelocation company (name changed for legal purpose), which can give a good idea of how relocation companies work.
RealRelocation has a complicated structure on how things work with selling with them. Sellers have two options on selling:
Buyout
RealRelocation does 3-4 appraisals and an inspection on the property, to decide a price for the house, which is the buyout price. It is in RealRelocation’s benefit to make this price as low as possible. This price is not revealed to the seller. The seller has to fully pick this option, and then only this price is revealed to the sellers. Whatever the price is, sellers are bound to agree with it. Buyout price is usually much lower than the market value.
This reason and lack of transparency are the main reason why buyout is not an attractive option to sellers. If the seller chooses this option, then RealRelocation brings the house on the market and sells it with a goal of selling it higher than the buyout price. Mostly this is RealRelocation’s preference, but is less preferred by sellers.
Listing Home on Market
In this case, the house is brought to market using a listing agent and the standard practice is used (open house etc). The new buyer will buy the house from RealRelocation, and RealRelocation buys it from the seller, however the main decision maker here is the seller. Seller decides on which offer to pick, price, negotiations etc. A listing agent is required to send a weekly report about traffic/traction on the house to RealRelocation.
There are continuous conversations happening between sellers and RealRelocation. The listing agent is not directly involved in these conversations. In between this listing, sellers may be given buyout options and sellers can anytime choose to opt for it, but as mentioned above, the buyout price is not known to the sellers, is usually low – and thus is not an attractive option. RealRelocation continues to have conversations with sellers and sometimes even building pressure to choose the buyout option.
What is the role of the listing agent?
As compared to regular deals (non-relocation company deals), listing agents here make much less money. This is because RealRelocation eats a huge chunk of the listing agent office commission (~47%). In one case the listing agent got only 0.75% on a 3% deal.
What happens if a deal falls through and the house comes back on market?
Until all the contingencies are satisfied, Sellers owns the house and is the main decision maker. They are in a situation similar to they would be if they chose the regular route of not using relo company. – RealRelocation is not too bothered about what the seller chooses. However, since the listing agent is less motivated to make the deal happen, don’t expect listing agents to go above and beyond to make the deal happen, or even give something from their commission to sellers.
What happens if the house doesn’t sell?
RealRelocation can bring in the buyout option, which sellers can choose, but cannot choose when to go for that option.
Do buyers have higher negotiation power if the relocation company is involved?
If the house is owned by sellers, then the chances of getting a certain discount (buyer’s leverage) is similar or slightly lower than regular situations, as the seller is the decision maker. [Chances are slightly lower only because listing agent has lower motivation]
If the house is owned by a relocation company, then chances of getting a discount (buyer’s leverage) is higher than regular situations as the relocation company is paying the holding cost, and they are the decision maker as well.
Thinking about buying a house and moving but still not convinced? Get in touch with Flyhomes and we will clarify all your doubts!
