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Relocation Packages Hidden Costs

If you are being provided a relocation package by your current or future employer, congratulations. Benefits provided in some relocation packages can relieve a lot of anxiety and be worth thousands of dollars.

Getting the maximum benefit from your relocation package, however, does require that you maintain control over which real estate agents assist you. Deciding who will list your home for sale is important, but selecting the buyers' agent who will help you find and buy a new home is critical.

The price of a poor home buying decision ...

Using an inexperienced or otherwise poorly qualified agent can be very costly. Not having the market information needed to an informed offer can easily result in unsuspecting buyers paying one to two percent more to purchase a home than if their agents are properly prepared and motivated. Buying a home in an area with poor prospects for market average or better appreciation, over the period of only a few years, can have an even much greater cost.

For example, let's say that based on the advice of your real estate agent you pay one percent over fair market value for a $500,000 home located in a neighborhood where homes generally appreciate at a rate one percent annually less than homes in more desirable neighborhoods. In two years, you will be about $15,000 worse off than if your agent had provided you better advice. In five years, it will have cost you more than $30,000. Additionally, you and your family may discover during this time that the neighborhood where you are living is not quite what it otherwise could have been.

So how is the relocation company compensating you for taking such risks? Typically the reimbursement of closing costs of about 0.5 percent of your new mortgage may be the only benefit you give up when you do not work with the the buyers agent the relocation company recommends. If your new mortgage finances 80 percent of the cost of a $500,000 home, the "benefit" you forego would be $2,000.

Something else you should know ...

The referral fees paid to corporate relocation companies by participating real estate agents typically amount to 35 to 40 percent of the agent's commission on the transaction. Many of these agents also pay a franchise fee, which usually amounts to an additional 20 percent of their commission, to the brokerage with which they are affiliated that allows them to participate in their brokers' relocation program as a designated "relocation specialist". These fees are in addition to both the 10 to 20 percent, and sometimes more, cut of their commissions they already pay the brokerage with which they work and all the other out-of-pocket promotion and operating expenses they incur.

The obvious question, of course, is how motivated and skilled is an agent who prices his or her services so cheaply likely to be. Agreeing to such a arrangement probably also calls into question the agent's business judgment, on which you will be relying.

What I recommend ...

Before contacting the buyers' agent selected by the relocation company to assist you, you should ask the relocation company counselor what relocation package benefits you would forego if you choose to use a buyer's agent other than someone the relocation company recommended.

To prepare for your meeting with the buyers' agent assigned by the relocation, you may want to review the questions provided on the finding right buyers' agent page on this web site. In addition to the questions listed there, you also may want to ask the agent ...

• How long have you been a real estate agent?
• What is your business experience and training?

Once these questions are asked and answered, you will have information you need to determine whether using the agent the relocation company has assigned you is a prudent business decision.

Looking for the best real estate agent to assist you in buying a home in the Dallas suburbs?

If you are looking for a professional, business-savvy buyer's agent, please call 214 725-4011 or send me an email and let's talk about how we can assist you. If you will be traveling from outside the DFW area and want us to show you houses while you are here, please call before finalizing your plans.