No need to fear relocation real estate transaction
Purchasing a home that is being sold through a Relocation Management Company (RMC) can be a daunting experience for anyone who is unfamiliar with these types of real estate transactions. And, since relocation transactions are fairly common in the Houston area, it’s important for both home buyers and their agents to have a working knowledge of the process.
RMCs are third-party firms that companies hire to manage all aspects of their employees’ relocations. This includes the home-sale process for transferring employees.
So, when an RMC is involved in selling an employee’s home, there are some very specific procedures that must be strictly followed by all parties. Typically, the listing agent for the property works closely with the RMC and conveys all instructions and required documents to the buyer’s agent for dissemination.
It’s important to note that there are some definite distinctions between a relocation transaction and a non-relocation transaction.
One of the first noticeable differences in a relocation transaction is that the RMC is listed as the seller on the sales contract as opposed to the employee/homeowner.
“This is generally an arm’s length transaction, where the third-party relocation management company steps in to purchase the home from the transferee, and then resells it to buyer,” said Tess Chaney, relocation director for Martha Turner Sotheby’s International Realty.
In other words, two separate sales transactions take place. The first transaction is between the homeowner and the RMC, and the second is between the RMC and the ultimate buyer for the property.
The reason that it is structured as two independent sales for the same property is because doing so minimizes the tax burden for both the employer and the employee.
A relocation addendum is also something that RMCs usually require, which is an addendum to the original sales contract with the buyer. This is important to understand, because if any part of the addendum is in conflict with any provision in the contract, then the addendum overrides the contract.
“Since the relocation addendum supersedes what is being stated in the contract, the buyer’s agent really needs to know where each of the paragraphs of the addendum apply within the original contract,” said Chaney. “The agent also needs to know which parts of the negotiation and transaction will be altered as compared to what the original contract says.”
When it comes to negotiating the offer, Chaney added that the transferee is normally involved in that part of the process, and that the terms of the contract are determined between the transferee and the buyer.
The area that tends to cause confusion or frustration has to do with the additional required paperwork that is presented to the buyer, and the longer timeframe that it can take for the contract to be executed.
Chaney said that the best approach is to try and manage the expectations of the buyer up front.
“The buyer just needs to be aware of everyone who is involved in the transaction. We make it very clear to the buyer’s agent that once the terms of the contract are agreed upon, that it could take up to another 72 hours of review time to make sure that all of the documentation is in order before the RMC executes the contract,” Chaney said.
She added that a critical aspect of her role as relocation director and the role of her relocation department is to work hand in hand with the RMC and the other parties involved is to facilitate a successful transaction.
“There are specific things that each RMC requires, as well as paperwork that is specific to their company,” Chaney said. “So, the way that our department is structured is that we have one coordinator who is dedicated to a specific RMC, so that they really understand what’s needed, and can quickly get things in order to make it a smooth process for everyone.”
She said that there are instructions, checklists, additional disclosures, documents, and inspection reports that are provided by the RMC that must be delivered to the buyer for review and signature.
And, while a relocation transaction might seem heavy on the paperwork, it’s important for the home buyer to understand that each one of those documents is just a required part of the relocation transaction.
“If the buyer reads the relocation addendum and all of the additional paperwork and can be counseled on what it all means, then this isn’t necessarily a scary process; it’s just slightly different from a non-relocation transaction process,” Chaney said.