Discretionary Home Sale Benefits

November 18, 2014

One of the changing paradigms is that executives (especially senior management) ought to live within some proximity to where they work.  The rapid advance of telecommunications, and the virtual office, has made telecommuting much less controversial in many companies.  

This new reality for new hires and current employees is they may perceive that  

  • a relocation policy which presupposes a “requirement” to sell a home in the old location and buy a home  in the new location is simply outmoded or does to apply to them, and
  • where they work is the only thing that matters---where they choose to live is a personal choice and as long as they are at the work site when the company expects them to be there, then that is all that should matter.

The housing bubble burst in 2007 fueled this.  Employees who did not want to sell their homes often pointed to the fact that they would incur a loss-on-sale and/or in fact  they were “upside down” on their mortgage.  And, since  companies rarely offered loss-on-sale benefits, and none made up negative equity, companies increasingly allowed a home to be retained in the old location.  Consequently, renting that  home in the old location and then renting in the new location became very common.

Today,  many areas of the country have seen residential real estate recover part or all of the values lost.  The issue now becomes ...going forward should companies once again encourage employees to sell their homes in the old location and buy in the new location?  We think they should not. This should be an employee's choice.  However, in taking such a position it is imperative that employees understand that no special treatment will be made for commuting to and from the old work location such as 3 day weekends or other accommodations.  And employees who can sell their homes and choose not to do so should still be given a window in which to sell and when that window closes then the home sale benefit is irrevocably forfeited.   

.......the team at HR&Relo Advisors

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