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New Construction Loan for Relocation

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Meeting with financial adviser

What is a New Construction Loan for Relocation?

Many of Global Mobility Solutions’ clients have transferees who want to build a new home as part of their relocation and need a new construction loan. GMS spoke with two experts at TIAA Bank who agreed to share their advice and guidance on this topic:

Matt Canfield, Senior Vice President, Relocation and Affinity Lending

Tim Hofmann, Vice President, Construction Lending Administration Manager

New Construction Loan

A new construction loan for a transferee who will be relocating is not the same as a traditional home loan, or mortgage. These are two different lending vehicles that are used for very different purposes.

Mortgage versus New Construction Loan

A mortgage generally features the following:

  1. Finances the purchase of an existing home.
  2. Length may be 15, 20, or 30 years.
  3. Interest rate may be fixed or variable.
  4. Borrower makes principle and interest payments for the life of the mortgage.
  5. Lenders may sell mortgages to investors in the bond market.

A new construction loan generally features the following:

  1. Length is the time it takes to build a home (usually 12 months).
  2. Is similar to a line of credit for a specific amount.
  3. Borrowers/builders submit draw requests to lenders.
  4. Interest is paid only on what is drawn starting at the time of the draw.
  5. Loan remains in the lender’s portfolio and is not sold to investors.
  6. At completion, a mortgage is granted for the new home.
  7. New mortgage pays off the balance of the construction loan.

How Should a Transferee Start the Construction Loan Process?

According to Tim Hofmann at TIAA Bank, transferees should:

  1. Obtain preliminary approval from their lender.
  2. Submit an application for a construction loan.
  3. Transferees should determine if they want to lock their rate in.
    1. TIAA offers an extended rate lock option.
    2. This may be helpful if interest rates are expected to rise.
  4. Choose a contractor and a building plan

What does a Transferee Need to Obtain Approval for a New Construction Loan?

Tim shared the following three items required for approval:

  1. The contractor must be acceptable to the lender. They should have the requisite experience to build a home according to the plans.
  2. The lender will review the contractor and the budget. The budget must:
    1. Be reasonable for the proposed project.
    2. The home’s square footage/size is normal for the area.
    3. Construction costs are reasonable for the quality, size of the home, and the general area.
  3. Lenders approve credit files for the amount of the loan.
    1. If transferee will rent their former home, what is the rental?
    2. For the transferee who will carry both mortgages for the former and the new home, can they carry that debt?
    3. If transferee plans to sell the former home to help finance construction, what is the viability of having the sale occur in the necessary time?

Tim notes that there are a lot of factors to consider for new home construction. Important areas that may impact the process and the timing include:

  1. Will the new home require tearing down an older structure?
  2. Is the building lot included in the cost of the new home?
  3. Will the construction be an extensive renovation of an older structure such as a center-city townhouse?
  4. Are there specific architectural guidelines the project must follow?

Do Transferees Need to Sell Their Current Home Before Applying for a New Construction Loan?

Transferees who are relocating and who currently own a home may want to build a new home. They may want to keep living in their current home until their new home is ready for occupation. Everyone’s situation is different, and what is possible depends on a number of factors:

  1. Is there a mortgage on the current home?
  2. If yes, what is the amount of the current home mortgage?
  3. Will the transferee also be buying the land, or do they already own the land?
  4. What are the amount and terms of the new construction loan?
  5. Can the transferee receive approval for the total debt load of their current mortgage and the new construction loan?

TIAA Bank offers a unique product for new construction loans: OTC. OTC is TIAA Bank’s “One-Time Close” new construction mortgage loan (available only in AZ, CA, CO, CT, DC, DE, FL, IA, IL, IN, MA, MD, MI, MO, MT, NC, NJ, NV, NY, OH,OR, PA, SC, UT, VA, and WA.; other restrictions and limitations may apply).

With OTC from TIAA Bank, the customer only goes through one closing process. During construction, the customer and builder request draws to fund the project. At completion of the home, TIAA Bank only requires a two-page conversion. The customer is able to quickly move into their new home without having to wait for a second closing process. If the customer requires an extension, the two-page extension only requires notarization. TIAA Bank’s OTC new construction mortgage loan speeds the process for customers, and keeps them from having to go through a second, time-consuming closing.

What does this mean?

Transferees who want to obtain a new construction loan to build a home should review their current financial arrangements with a qualified lender. Transferees who have a mortgage on their current home may be able to obtain a new construction loan. However, this depends on their financial circumstances. Importantly, transferees should understand that they must receive approval for the total amount of current mortgage debt and new construction loan amount.

What should employers do?

Employers with transferees looking to build a new home as part of their relocation should direct them to speak with qualified lenders and financial advisors for guidance. They should also direct them to speak with a qualified Realtor® who can assist the employee in determining where they want to live in the new location. Employers should also review their relocation policies to determine if enhancements can be made to allow for exceptions that may arise from transferees who want to obtain a new construction loan.

Conclusion

Global Mobility Solutions’ team of corporate relocation experts has helped thousands of our clients understand how to communicate issues related to obtaining a new construction loan and various alternatives that might be up for consideration. Our team can help your company understand how best to proceed by providing guidance to transferees on obtaining information from qualified lenders and financial advisors.

Global Mobility Solutions is proud to be named and ranked #1 Overall, and #1 in Quality of Service by HRO Today’s 2019 Baker’s Dozen Customer Satisfaction Survey.

Contact our experts online to discuss your company’s relocation program needs, or give us a call at 800.617.1904 or 480.922.0700 today.

GMS is sharing public knowledge and can help companies more clearly understand new construction loans for relocations. However, GMS is not a CPA firm or a lender, and is not giving financial advice. Everyone’s financial situation is different; individuals and employers should consult their lenders and financial advisors prior to making any decisions.

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USCIS Adjusting Premium Processing Fees to Improve Adjudications and Service Processes

USCIS Adjusting Premium Processing Fees to Improve Adjudications and Service Processes

The U.S. Citizenship and Immigration Service (USCIS) will increase premium processing fees for some forms starting on October 1, 2018. The fees will increase by 14.92%, reflecting the percentage increase in inflation since implementation of the last fee increase in 2010. The increase is being done in accordance with the Immigration and Nationality Act. The Act permits USCIS to raise such fees in order to provide services.

What is the issue?

Costs for staff, technology, and supplies have increased since 2010. Using the Consumer Price Index for all Urban Consumers as a benchmark, the increase on average is 14.92% over this time frame. At the same time, the demand for immigration services that USCIS provides has significantly increased. Without an increase in the premium processing fees, USCIS will be increasingly unable to continue providing services.

What are the forms subject to increases in premium processing fees?

Premium processing fees are additional fees that petitioners can pay for the option of requesting a 15-day processing time for specific requests. Petitioners must also pay the basic form filing fee as well as any other required fees.

Forms subject to increases in premium processing fees include:

Form I-129, Petition for a Nonimmigrant Worker – this form is for petitioners filing on behalf of a nonimmigrant worker to come to the United States temporarily to perform services or labor, or to receive training, as an H-1B, H-2A, H-2B, H-3, L-1, O-1, O-2, P-1, P-1S, P-2, P-2S, P-3, P-3S, Q-1 or R-1 nonimmigrant worker. Petitioners may also use this form to request an extension of stay in or change of status to E-1, E-2, E-3, H-1B1 or TN, or one of the above classifications for a foreign national.

Form I-140, Immigrant Petition for Alien Workers – this form is used to petition for an alien worker to become a permanent resident of the United States.

What does increasing premium processing fees mean for the USCIS?

USCIS will be able to hire additional staff, as well as make significant investments in technology. As a result, this will allow the agency to provide adjudications and premium processing services quickly and more efficiently than is currently possible.

What should employers expect?

Employers should expect that premium processing fees for Form I-129 and I-140 will increase by 14.92%. Currently, the fee is $1,225. Starting on October 1, the fee will increase to $1,410.

What should employers do?

Employers should review their hiring plans and determine any current budgetary impact related to increases in premium processing fees for Form I-129 and Form I-140. Employers should also review future budgets to ensure they reflect the increased fees.

Conclusion

Global Mobility Solutions’ team of global relocation experts has helped thousands of our clients with their country-specific employment, visa, and residency requirements. We can help your company understand how to respond effectively to the USCIS’s increase in premium processing fees. Learn how your company can mitigate the impact of increases in premium processing fees from Global Mobility Solutions, the relocation industry and technology experts who are dedicated to keeping you informed and connected. Contact our experts online or give us a call at 800.617.1904 or 480.922.0700 today.

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EU Blue Card and Single Permit Directive Allow Non-EU Citizens to Work in EU Countries

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Within the European Union (EU), the EU Blue Card program allows non-EU citizens to work in EU countries. Applicants for the EU Blue Card must meet specific criteria before they can obtain the card. Employment portals such as the EU Blue Card Network lets applicants submit applications as well as create profiles that can be searched by EU employers so they can offer employment contracts. Additionally, the European Job Mobility Portal provides an overview of job opportunities in the EU, as well as tips on how to apply for jobs and information on living and working in all EU countries.

What are the specific criteria that citizens must fulfill to request an EU Blue Card?

There are several specific conditions that non-EU citizens must meet before they can request an EU Blue Card:

  1. Citizenship outside of the EU
  2. Have post-secondary education (degree) or at least five years or more professional experience
  3. Obtain an employment contract or binding employment offer from an EU employer that is at least one year in length
  4. Work as a paid employee; self-employed workers or entrepreneurs are not eligible for the EU Blue Card
  5. Annual gross salary must be at least one and a half times the average national salary (except when the lower salary threshold applies)
  6. All necessary travel documents are in order
  7. Health insurance is in place for yourself and any relatives who come to the EU with you
  8. Proof that you fulfill the legal requirements to practice your profession, if the industry regulates your profession

How did the EU Blue Card program originate?

The European Commission believes that workers with a high level of skills from outside the EU are crucial to maintaining the EU’s economic competitiveness. Several sectors of the EU economy are dealing with a shortage of skilled employees, lowering the EU’s ability to compete in the international market. Since 2009 the EU Blue Card Directive creates a common admission criteria and helps speed the procedure for hiring skilled foreign nationals. A new EU Blue Card Directive in June 2016 further simplifies and streamlines the processes. The EU Immigration Portal created a new EU Blue Card website to provide a user-friendly portal as well as current information for applicants.

What should employers do?

Employers seeking to hire non-EU citizens should review the program’s requirements. They should also investigate EU Blue Card job portals and networks that will allow them to search for qualified applicants to help fill job openings.

Conclusion

Global Mobility Solutions’ team of global relocation experts helps thousands of our clients with country-specific employment requirements. We can help your company understand how to use the EU Blue Card program and job networks to search for highly skilled foreign nationals to fill your job openings, and help you design a relocation policy that appeals to qualified job seekers. Learn best practices from Global Mobility Solutions, the relocation industry and technology experts who are dedicated to keeping you informed and connected. Contact our experts online or give us a call at 800.617.1904 or 480.922.0700 today.

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United States Internal Revenue Service Could Deny or Revoke Over 362,000 Passports

Blue United States of America Passport Isolated on a White Background.

The Fixing America’s Surface Transportation (FAST) Act signed by President Barack Obama on December 4, 2015, includes a provision regarding a United States Passport and delinquent tax debt. This provision requires the Internal Revenue Service (IRS) to collaborate with the State Department. As a result, the IRS may deny or revoke the passport of any US taxpayer with seriously delinquent tax debt.

What is the issue?

The IRS has issued Notice 2018-1 “Revocation, Limitation, or Denial of Passport in Case of Certain Tax Delinquencies” to provide clarification on the issue.

  1. Section 32101(a) of the FAST Act adds new Code Section 7345. This requires the Treasury Department to notify the State Department if a certification is made that an individual has a “seriously delinquent tax debt.”
  2. Code Section 7345(a) provides that if the Treasury Department receives certification by the IRS Commissioner that an individual has a seriously delinquent tax debt, they must send this certification to the State Department for action and may include denial, revocation, or limitation of the taxpayer’s passport.
  3. Under Code Section 7345(b)(1), a “seriously delinquent tax debt” is an unpaid, legally enforceable, and assessed federal tax liability of an individual. The amount must be greater than $50,000, and for which:
    • A notice of federal tax lien is on file under section 6323, and
    • The taxpayer’s right to a hearing under section 6320 exhausts or lapses; or
    • A levy issues under section 6331.

Additionally, Code Section 7345(f) requires the $50,000 amount to adjust for inflation each calendar year beginning after 2016.

What is the need for Code Section 7345?

The basic concept of Code Section 7345 is to increase revenues. Prior to Code Section 7345, a taxpayer who was seriously delinquent on their tax debts faced limited consequences. Often residing outside of the country, such taxpayers had little incentive to pay their tax obligations in a timely manner.

Who does Code Section 7345 affect?

Code Section 7345 affects taxpayers who have seriously delinquent tax debt with no arrangements to settle. An important point to note is that this tax debt does include penalties and interest. A somewhat manageable $20,000 tax debt can quickly grow to over $50,000 when the amount includes penalties and interest. This in turn will trigger the possible passport denial or revocation. As a result, approximately 362,000 Americans could be at risk of losing their passport. Importantly, taxpayers who are in bankruptcy, subject to tax-related identity theft, or are working with the IRS to create a payment plan will not face passport denials or revocations.

What should employers expect?

Employers should expect that their United States citizen employees on assignment outside of the United States either permanently or on temporary basis are subject to Code Section 7345’s requirements. Employees denied a passport renewal or who have their passport revoked will not be able to move between countries.

What should employers do?

Employers who have US citizen employees on permanent or temporary assignment outside of the country should communicate Code Section 7345’s requirements to these employees. The IRS has remedies in place for taxpayers with seriously delinquent debt to prevent the loss of a passport. However, those employees must take action or face the denial of a passport renewal, or revocation of their current passport.

Conclusion

Global Mobility Solutions’ team of global relocation experts has helped thousands of our clients with their country-specific employment, visa, and residency requirements. As a result, we can help your company understand how to respond effectively to Code Section 7345’s requirements. Learn how to respond to IRS and State Department passport enforcement issues that may impact US citizen employees on permanent or temporary assignment. Global Mobility Solutions’ relocation industry and technology experts are dedicated to keeping you informed and connected. Contact our experts online or give us a call at 800.617.1904 or 480.922.0700 today.

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India’s Economic Growth Continues and Becomes Sixth-Largest in World, Surpassing France

Mumbai skyline view from Marine Drive in Mumbai, India

According to the World Bank’s data for 2017, India’s economic growth has now pushed the country forward to become the world’s sixth-largest economy. With a 2017 Gross Domestic Product (GDP) of $2.597 trillion, India’s economy surpasses France’s 2017 GDP of $2.582 trillion. India’s economic growth is further enabled by its surplus of highly skilled professional workers. According to the Centre for Economics and Business Research, India is on track to also surpass Britain in 2018, becoming the world’s fifth-largest economy.

Where is the growth in India?

India’s economic growth is accelerating across several sectors of its economy. The growth of India’s population adds further accelerant to its rapidly expanding economic growth. Sectors experiencing the greatest growth rates include:

  • Agriculture
  • Banking and Insurance
  • Business Investment
  • Construction
  • InfoTech Industry
  • Manufacturing
  • Mining
  • Real Estate
  • Retail/Consumer Spending

What does this mean?

As Global Mobility Solutions has previously noted, Korn Ferry’s study “Global Talent Crunch” highlights the skilled talent shortage that is impacting countries and specific industries around the world. This same study, however, notes that India is the only country in the analysis that will maintain a surplus of skilled talent through 2030. India’s economic growth is accompanied by a surplus of skilled talent that will provide the nation with a highly vibrant economy and bright prospects for continued success. The government of India will have more resources to invest in infrastructure improvements. Therefore, the population of India will benefit from plentiful job opportunities throughout the nation, across several industries.

What should employers expect?

Employers should expect India’s economic growth will continue to increase. If they are currently selling to India-based customers, this business should be on track for future expansion. Additionally, India offers good prospects for business investment and joint ventures. Employers should examine their business objectives to see how their company can benefit from India’s continued economic success. Since India also has a significant surplus of highly skilled workers, employers should expect that the country will be a good source for talented workers.

What should employers do?

Employers should review their business objectives and hiring plans related to their projects in India, or that result from sales trade with customers based in India. They should also examine the India government’s policies related to work permits and visas, so they can understand and respond to future growth and investment activities in this country. Employers should review their relocation policy to ensure it is designed to attract transferees and new hires from India’s skilled labor force. They should also examine the work permit and visa guidelines in the countries in which they have business locations that would benefit from relocating India-based transferees and new hires.

Conclusion

Global Mobility Solutions’ team of global relocation experts has helped thousands of our clients with country-specific employment and visa requirements. As a result, we can help your company understand how to gain the most benefit from India’s economic growth and favorable business prospects. Learn best practices from Global Mobility Solutions, the relocation industry and technology experts who are dedicated to keeping you informed and connected. Contact our experts online or give us a call at 800.617.1904 or 480.922.0700 today.

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Japan’s Labor Reform Law Helps Corporate Japan Rethink Work Styles

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The government of Japan introduced a labor reform law in June. The law will change Japanese working behaviors that are detrimental to workers and their health. Several high profile examples of workers harmed by overworking led to the creation of the labor reform law.

What is the issue?

The Japanese work culture is famous for its focus on overworking employees. This culture is popularly known as “karoshi,” a Japanese word that means death from overwork. It is ingrained in corporations and is expressed in several ways:

  • Employees who stay late receive praise for their hard work
  • Companies frown upon employees who depart work before their supervisors
  • Most employees feel guilty for taking paid holidays and vacations

One of the most well-known examples of karoshi is the death by suicide of Matsuri Takahashi, a 24-year old employee who put in a lot of overtime at Japan’s largest advertising firm, Dentsu Inc., on Christmas Day in 2015. She had not been able to sleep much after working over 100 hours of overtime a month in the time leading up to her death.

Working 80 hours or more of overtime each month is seen as the threshold level where employees have an increased chance of dying. Many Japanese companies have employees working at this level or even higher. In addition to stress and suicide, other health effects of karoshi include heart attacks and strokes.

What does the labor reform law require?

Japan’s labor reform law:

  • Requires employers to limit overtime work to less than:
    • 100 hours per month
    • 720 hours per year
  • Ensures equal pay for equal work
  • Skilled professional workers with high wages are exempt from working-hour regulations
    • This group includes product developers, financial traders, bankers, consultants, and researchers

Several Japanese companies had already starting taking steps to reduce their reliance on overtime prior to the law’s enactment. They also had been trying new programs to make it easier for employees to take paid holidays. The new law now requires all employers to make specific efforts to reduce overtime.

What should employers expect?

Employers should expect they must comply with the new labor reform law. Several companies have noted positive effects related to their efforts to reduce overtime. For example, SCSK Corporation states that its profits have doubled over a six year time period while they had implemented programs to reduce overtime. Management recognized that healthy and rested employees contribute more to the company’s bottom line performance since they can provide value-added services to customers.

In addition to helping protect employees from karoshi, the new labor reform law creates working environments that are more favorable to women, mothers, foreign workers, younger workers, and mature workers. As Japan continues to face a decline in its working population, the government recognizes that anything it can do to help companies provide better working hours and conditions will in turn draw a larger pool of prospects into the labor market.

What should employers do?

Employers should examine their working culture, policies, and programs to be sure they comply with the new labor reform law. They should develop human resource information systems that will allow reporting on statistics required by the new law.

Conclusion

Global Mobility Solutions’ team of global relocation experts has helped thousands of our clients with country-specific employment requirements. We can help your company understand how to comply with Japan’s new labor reform law. Learn best practices from Global Mobility Solutions, the relocation industry and technology experts who are dedicated to keeping you informed and connected. Contact our experts online or give us a call at 800.617.1904 or 480.922.0700 today.

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Spain’s Changing Economy Leads to Relocation Opportunities

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Madrid, Spain financial district skyline at twilight.

Since undergoing a massive retrenchment from 2008 through 2013 when it lost 9% of its Gross Domestic Product in real terms, Spain’s changing economy has recovered and is now transforming into a global technology power center. As of 2016, exports have risen dramatically, with many companies selling throughout the European Union and beyond.

What is causing the change?

Mariano Rajoy, Spain’s Prime Minister from 2011 through 2018, instituted several reforms designed to help the country recover from its economic crisis. These reforms included reducing redundancy pay from 45 days per year worked to 33 days, and moving wage bargaining to the company level, thus making the labor market more flexible. Also, the financial system was addressed by closing under-performing banks that had made excessively risky property loans, and public finances were reformed by cutting the country’s budget deficit.

Mr. Rajoy’s digital agenda led to expansion of Spain’s fibre-optic network for high-speed data transmission, now covering 76% of the population, the highest percentage across all of Europe. Infrastructure investments in Spain have improved transportation and rail networks. Outside of Spain, the global economic recovery has increased demand for Spanish products and services, as well as improved traditional leading sectors in Spain such as tourism and travel.

What does this mean?

As Spain’s changing economy improves and continues its technology-driven transformation, the demand for highly skilled professional workers is increasing. Although the country has several leading universities and a number of technology industry startups, the demand for highly skilled workers is outpacing the number of qualified employees. Spain has a number of registered unemployed workers, but the skills gap is wide for positions in the new economy. Nearly half of job openings through 2030 will require a high level of skills and qualifications. Employers in Spain may benefit from relocation programs designed to attract and retain new hires with specialized skills and experience.

What should employers do?

Spain’s changing economy is driving growth across several industries, leading to a high level of demand for skilled workers. Employers should examine their relocation policy to determine if it is in line with Spain’s requirements for work visas. Consulate of Spain offices in cities such as Los Angeles offer forms, guidance, and assistance for work visas.

Conclusion

Global Mobility Solutions’ team of global relocation experts has helped thousands of our clients with country-specific employment requirements. We can help your company understand how to design your relocation policy so it supports transferees and new hire relocations critical to your company’s ability to grow in Spain’s changing economy. Learn best practices from Global Mobility Solutions, the relocation industry and technology experts who are dedicated to keeping you informed and connected. Contact our experts online or give us a call at 800.617.1904 or 480.922.0700 today.

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European Union Member States Must Recognize Residency Rights of Same Sex Spouses

Amazing London skyline with Tower Bridge during sunset

A new rule from the European Court of Justice, located in Luxembourg, requires European Union (EU) countries to recognize the residency rights of same sex spouses. The rule applies even if the countries do not authorize marriage between persons of the same sex. These countries may not obstruct the freedom of residence of any EU citizen. They cannot refuse to grant their same sex spouse, who is a national of a country that is not an EU Member State, a derived right of residence in their country.

Why is this rule needed?

Prior to the new rule, several EU member states did not offer legal protection for same sex spouses. These countries include Bulgaria, Latvia, Lithuania, Poland, Romania, and Slovakia. They also did not offer residency rights for same sex spouses of EU citizens.

Who does this rule affect?

This new rule affects same sex married couples who reside in the countries of Bulgaria, Latvia, Lithuania, Poland, Romania, and Slovakia.

What should employers expect?

Employers should expect that all non-EU citizens who become residents by marriage to an EU citizen will now have full residency rights applicable to all EU citizens. This includes employment rights and health benefits for which they were previously not eligible. As a result, some employees may want to add their same sex spouses to their health benefit coverage, if applicable.

What should employers do?

Companies that have current EU citizen employees should take notice. Most especially if these employees reside in the countries of Bulgaria, Latvia, Lithuania, Poland, Romania, and Slovakia. Companies should review their employee’s eligibility under the new rule for benefits coverage. They should also review the eligibility for all other related services for their employee’s same sex spouses. EU citizen employees and their family members within these countries should also take notice. They should understand the impact of the EU’s new rule affording residency rights for same sex spouses.

Conclusion

Global Mobility Solutions’ team of global relocation experts has helped thousands of our clients with their country-specific employment, visa, and residency rights requirements. We can help your company understand how to respond effectively to the EU’s new rule. We can explain the impact of residency rights for same sex spouses in these specific countries. Learn how to navigate the changing residency landscape in the EU from Global Mobility Solutions, the relocation industry and technology experts who are dedicated to keeping you informed and connected. Contact our experts online or give us a call at 800.617.1904 or 480.922.0700 today.

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Why Companies Should Encourage Transferees to Buy Instead of Rent

Happy couple in front of their new home
Shot of a happy young couple holding the keys to their new home

Why should your company encourage transferees to buy instead of rent? Our team of global relocation experts review thousands of relocation policies on a regular basis. We work with our clients to incorporate best practices, so they can gain a competitive edge with their relocation policies and attract the highest caliber of talent.

Consistently, many relocation policies have not offered home purchase benefits to current renters. Instead, current renters received benefits that directed them to remain as renters. Recent consultation with several clients provides new insight into this practice.

Many clients are now offering home purchase benefits to current renters, to encourage transferees to buy instead of rent. This trend is increasing, as clients are learning that home purchase benefits for current renters return several benefits back to the client in terms of employee retention. As we examine this trend, a new best practice is appearing in relocation policies.

There are 7 distinct benefits for clients when they encourage transferees to buy instead of rent:

1. Transferees establish strong roots in a neighborhood and community.

Think of the time you may have taken a job and moved to a new location. You may have spent time finding a new home and exploring neighborhoods. Your family members may have expressed what was important for their needs as well. Factors may include nearby schools, or amenities like parks and shopping centers.

Each facet of a community becomes a part of a transferee’s life. As a result, those who put down strong roots by establishing home ownership are more likely to remain committed to their neighborhood, their city, and their employer.

2. Transferees can personalize a home so they can settle in comfortably, so encourage transferees to buy.

Transferees who buy can easily personalize a home to meet their distinct preferences. Everything from painting their front door to match a favorite color to decorating interior spaces to their liking can lead to greater transferee satisfaction with their living arrangements. Satisfaction with their home is more likely to lead transferees to feel satisfied with their relocation as well.

Renters, on the other hand, often are limited to moving into an apartment, and cannot easily customize the space. Even if they do some customization such as interior painting, they often must return the apartment to its original condition if they were to vacate. Renters face a strong disincentive when it comes to personalizing their living space. Living in a space they cannot personalize often makes renters feel as if they are nomads. The end of their lease is already defined, which seems to put a mark on their time in a specific location. This may lead transferees to believe they can easily move to another apartment, or another position.

Corporate talent acquisition should work in tandem with employee retention so relocation policies offer home purchase benefits. This will help encourage transferees to feel as if their relocation is permanent, and not a temporary state.

3. Monthly mortgage costs are consistent year to year, while rents can increase dramatically.

One of the benefits to buying a home versus renting is the stability of mortgage payments. Monthly costs for a mortgage tend to be consistent year to year, defined by the terms of the mortgage upfront. As a result, this allows buyers to know their monthly housing costs and provides for better budgeting and financial planning.

Renters could face a rent increase as soon as their lease expires. There are many reasons why landlords would increase rent, including higher property taxes, inflation, or higher building maintenance costs. They might just want to make more money, and if demand for rentals in the area is high, then rent increases are easy to implement because those who move are easily replaced with other renters. Increases in rent could be exceptionally high. Therefore, renters need to make a decision on a regular basis if they want to absorb the cost of the rent increase, or take on the additional expense of searching for a new rental, and paying to move their belongings.

Overall, transferees who rent often are subject to somewhat volatile conditions that can impair their job performance. If they must worry about their housing options in the face of rent increases on a regular basis, transferees certainly cannot easily focus on corporate objectives.

4. Home mortgages are similar to saving plans and investments, and owners can more easily move up to a larger home at a later date.

There are numerous benefits to home ownership, and transferees can gain greater satisfaction with their relocation with home purchase benefits. Home ownership lets transferees build financial equity, and a home is an investment that will increase over time. Homeowners have tax benefits they can claim as well. Mortgage interest, property taxes, and other items may provide tax deductions on an annual basis. As a home gains value over time, and as the homeowner builds greater equity each year as their mortgage balance declines, homeowners have a built-in savings and investment vehicle in real estate they can use in the future.

Employers benefit if they encourage transferees to buy instead of rent by reinforcing the high value homeownership returns to the transferee, cementing their interest in staying in a location.

5. In many markets, rentals are extremely competitive to secure and the costs exceed homeownership. Security deposits can often exceed a home purchase down payment.

Brooklyn

Several markets have seen the cost of rentals rise far beyond the cost of homeownership. A recent example can be found in Brooklyn, New York. A three bedroom, one bathroom apartment at 378 Grand Avenue is listed on Zillow at $3,900 per month (not including renter’s insurance costs).

A house located at 575 Jerome Street with five bedrooms and two bathrooms is listed for $599,000. Using a mortgage calculator, over a 30 year time period at a rate of 3.92%, with a mortgage balance of $575,000, taxes of $6,000, insurance of $1,500, and Private Mortgage Insurance (PMI) of 0.5%, the monthly mortgage costs for the house are $3,583.27.

In Brooklyn, a renter at 378 Grand Avenue can get a receipt for the rent they pay each month. Also, they may face a rent increase at the end of their lease. A homeowner can get more space, tax benefits, and an equity-building investment vehicle with a home on Jerome Street. It is easy to see how offering home purchase benefits can help transferees feel more satisfaction with their relocation.

Denver

Another recent example can be found in Denver, Colorado. A three bedroom, three bathroom apartment at 2590 Welton Street is listed on Zillow at $3,855 per month (not including renter’s insurance costs). A house located at 90 N. Lincoln Street with three bedrooms and two bathrooms lists for $610,000. Using similar parameters as the other example, with a mortgage balance of $585,559, taxes of $6,000, insurance costs of $1,500, and PMI of 0.5%, the monthly mortgage costs for the house are $3,637.59

6. If a transferee does not commit to their new community, they often view their opportunity as a job and not as a career.

Companies go to great lengths to acquire highly skilled talent. Often companies design relocation packages to highlight the benefits of an employment opportunity, to encourage prospects to accept job offers. In reality, it is in the company’s best interest to have the transferee think of the opportunity as a career offer. Finding and acquiring talent can be challenging.

Companies should have a career plan for the new hire, so they view the opportunity as a career, not as a job. This perception helps transferees commit to staying with their employer. Home purchase benefits let transferees commit to staying in their new community. Transferees that commit to their community are more likely to commit to their career.

7. A transferee who buys is more committed than a transferee who rents. Also, if a client offers home purchase benefits, then the employee knows the company is more committed to the employee.

A company can reinforce employee retention by showing employees they commit to them and their future. Employers should encourage transferees to buy instead of rent. This sends the message that the company wants the transferee to stay. If a company gives the impression to a transferee that they are temporary by only providing rental assistance, the transferee will get that message and feel as if they are a temporary employee.

Employers that give the impression to the transferee that they want them to join their company and their community by putting down roots and buying a home, will have transferees who believe they are part of the company’s future. In talent acquisition and employee retention, the message from the company should always be one of acceptance, inclusion, and permanence. Acquiring highly skilled talent is a difficult challenge. Companies that are successful in this endeavor should make employee retention efforts even more successful by offering home purchase benefits to transferees.

Rent Versus Buy Calculator Will Help Encourage Transferees 

Global Mobility Solutions has a wide range of online tools and resources for clients and transferees. GMS’ Rent Versus Buy Calculator is an easy to use, step-by-step program. This program compares the cost of renting versus the cost of buying a home. Employers that encourage transferees to buy instead of rent can use this online tool to encourage homeownership. This in turn helps the transferee make the decision to buy in their new community. This decision will help the transferee feel like a part of the company. As a result, they will be more willing to stay with the company on a long term basis.

What Should Employers do to Encourage Transferees to Buy Instead of Rent?

Employers should work with an RMC that has the qualifications, knowledge, and experience to ensure their relocation policies provide home purchase benefits to transferees who are current renters. As a result, this will promote stronger employee retention as transferees put down roots in communities and gain greater satisfaction with their relocation.

Conclusion

Global Mobility Solutions’ team of global relocation experts has helped thousands of our clients design relocation policies that reflect best practices to promote employee retention. We can help your company understand how to leverage home purchase benefits for current renters to encourage transferees to buy and help ensure successful relocations.

Global Mobility Solutions is proud to be named and ranked #1 Overall, and #1 in Quality of Service by HRO Today’s 2019 Baker’s Dozen Customer Satisfaction Survey.

Learn best practices from Global Mobility Solutions, the relocation industry and technology experts who are dedicated to keeping you informed and connected. Contact our experts online or give us a call at 800.617.1904 or 480.922.0700 today.

Request your complimentary relocation policy review

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What are the Critical Questions to ask a Relocation Management Company?

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Many companies approach their relocation program without a full understanding of what questions they should ask of a Relocation Management Company (RMC). Knowing which critical questions to ask is highly important for a company to get a full understanding of how the RMC will manage their relocation program. Missing critical questions can lead to a large gap in expectations and performance. It is in each party’s best interests to be sure the most important questions are asked, and answers returned for review and decision-making.

Global Mobility Solutions’ team of global relocation experts have identified 28 critical questions that they believe companies should ask an RMC. Answers to these questions will provide the company with the most critical knowledge they need in order to make confident and fully informed choices for their relocation program’s design and functionality.

The following five critical questions are representative samples of the types of questions that you should ask an RMC.

Five Representative Critical Questions:

1. What is your service delivery model?

Fully understanding the RMC’s service delivery model is of paramount importance to understanding how the RMC will manage your company’s relocation program. Purchasing relocation management is a much different process than sourcing parts or equipment. Ensuring the right fit for the right reasons is the most important factor when sourcing employee-facing services.

2. Describe your supplier network. Do you own or are obligated to provide business to your suppliers?

It is important to understand if the RMC owns their suppliers, or are in some way obligated to provide business to their suppliers. If this is the case, transferees may not have the ability to choose the provider they want for their relocation process. In some cases, fully qualified suppliers who would provide lower costs might not be able to provide services.

3. How do you ensure competitive pricing from your supplier base?

This is one of the critical questions that will provide great insight into how the RMC operates. In some cases, RMCs will provide for competitive pricing by opening up bidding to multiple suppliers. In other cases, an RMC will try to explain that they can provide competitive pricing by leveraging their own network and spreading costs over a large number of transferee relocations. Be sure you understand what these different responses actually mean. Either the RMC ensures competitive pricing by promoting competitive bidding, or they do not promote competitive bidding.

4. What metrics and service level agreements do you track and report on?

Service level agreements (SLAs) should be a standard part of an RMC’s quality program. Service quality promises might include on time delivery guarantee of household goods, or specific performance guarantees based on transferee ratings. SLAs might cover real estate services, household goods moving, destination services, and financial and reporting services.

5. How do you utilize technology in your approach to relocation management?

RMCs should have technology to complement their service models. Companies, their transferees, and their candidates should expect a seamless relocation experience. Look for RMCs that can provide a superior, proprietary, cross-platform, online relocation management suite. Systems should provide clients and their transferees an array of decision-making, tracking, and expense management tools, with anywhere, anytime access 365 days a year and 24 hours a day.

What should companies do with the answers they receive?

Companies should compare the answers they receive from each RMC to ensure they provide the desired result. Information should be complete, and the answers should be direct and clear without any cause for confusion. Good responses will help the company determine how the RMC will manage their relocation program. Companies should be sure to ask all 28 Critical Questions in order to get the best overall responses.

Conclusion

Global Mobility Solutions’ team of global relocation experts has helped thousands of our clients with their relocation programs. We can help your company understand which critical questions to ask of an RMC. These questions will help ensure you address the most critical relocation program points. Learn how to choose the best Relocation Management Company from Global Mobility Solutions, the relocation industry and technology experts who are dedicated to keeping you informed and connected. Contact our experts online or give us a call at 800.617.1904 or 480.922.0700 today.

Download the 28 Critical Questions to ask an RMC when submitting an RFP

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