Taking the "Surprise" Out of Relocation Pricing

Copyright © 2015 WHR Group Inc.
TAKING THE “SURPRISE” OUT OF
RELOCATION PRICING AND FEES

Copyright © 2015 WHR Group Inc. Advancing > Lives > Forward 2
There should never be a surprise when you
review a relocation invoice, which is why the
following list of common fees will help you
better understand and negotiate a
reasonable contract for relocation services.

[While these fees vary from company to
company, they are, in general, similar across
all Relocation Management Companies.]

Service Fee: The cost charged by an RMC
for overall program administration, including
salaries, overhead, and profit.
Historically and still true
today, additional fees may
be charged, such as the
following:
> Initiation Fee
> Appraisal Service Fee
> Resale Fee
> Equity Funding Fee
Note: It is very important to
understand what additional
fees may be incurred if not
included in the service fee. Be
sure to ask to see an invoice
that illustrates all costs
associated with a move.

Referral Fees: For ages, these fees have
been captured by various entities.
Originally, real estate agents
collected fees by referring buyers to
each other throughout the country.
This income was used to offset
relocation department budgets.
Eventually, RMCs felt they were the
procuring cause of the home’s sale
and demanded that those fees be
given to them, which, in effect,
added to their bottom line.
Corporations—that pay all the costs
of relocation—felt they were
entitled to these fees. For instance,
on a $400,000 property, the referral
income can be an estimated $4,200.
Multiply that amount by two when
there is also a purchase transaction
involved, and a total fee of $8,400
can be collected. This reflects a 35%
referral fee (reasonable in the
industry).

BEWARE:
Some RMCs charge as much as a 50%
referral fee, oftentimes resulting in
diminished quality in the agent chosen and,
ultimately, poor overall performance.

Zero Fee: This term generally means there
will be no service fee charged in the
administration of the move.
However, all referral fees
collected will be realized by
the RMC. The adherence to
strict listing guidelines is
imperative for this fee
structure to survive.
On an $800,000 property, the
fee earned is $16,800. On a
$150,000 property, the RMC
still earns $3,150. Thus, there
is seldom a “zero fee.”

Fixed Fee: Generally found in government
contracts, this type of fee reflects the expected
operating costs in the resale of the property and
includes the costs found in servicing the move.
Commonly, these fees could
be in excess of 30% of the
appraised value of the
property, but the client bears
no risk in the home sale.
In this fee structure, gain or
loss in value is borne by the
RMC.

Non-compliance Fee: These are additional
fees that may be charged when the property
does not meet the stipulations of the client
relocation policy or RMC contract.
In addition, when demands are
made by an employee (and
granted by the client) that are
not consistent with the policy,
fees may be incurred.
These exceptions may allow an
RMC to charge supplementary
fees that do not conform to its
normal fee structure and can be
substantial.

Takeover, Cancellation, or Extended
Market Time Fees
These fees are self-explanatory and are often hidden in small
print in service contracts.

Mark-Up Fees: Seldom discussed but often
collected, RMCs will charge the client one
fee and pay the vendor another.
As an example, an appraisal is
invoiced to the client for $600, but
the payment is made to the
appraiser for $500. The additional
$100 in revenue provides profit for
the RMC but, as a consequence,
may result in poor performance of
the actual appraisal process.
Multiply this type of activity times
the many and varied delivery
transactions involved in each move,
and the returns may be huge for the
RMC but cause the client and
employee to suffer.

Direct Costs: These are costs directly associated with the home
purchase process. Take all the costs associated with acquisition,
marketing, maintenance, resale, and closing of a property and divide
into the appraised value of the property. The result will be the direct
cost percentage.
If the appraised value of the
property is $250,000, and the
direct costs driven by the RMC
total $45,000, the direct costs
are 18 percent.
Sometimes, RMCs will exclude
some of the costs above and
call them “indirect costs.”

IMPORTANT:
It is important to truly understand all the
costs associated with relocation transactions
and be able to compare apples to apples
when benchmarking. Be sure to ask for
which of these fees you are (or are and don’t
know it yet) being charged.

MORE FROM US:
At WHR Group, full transparency has always been a strong
operating principal. We believe in charging a reasonable
service fee while returning referral dollars (when allowed
by state law) to the client. A mark-up fee in relocation
has never been allowed at WHR, and we believe it to be
unethical when collected and not communicated to the
client. Direct costs are always challenging at any RMC,
but, historically, WHR has achieved some of the lowest
costs in the relocation industry.

Taking the "Surprise" Out of Relocation Pricing

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