Selling Prices and Time on the Market of Houses Sold through Relocation Management Companies

Abstract

Employers contract with relocation management companies (RMCs) to help employees transfer from one location to another. In an efficient market, the selling price and time on the market (TOM) should not vary based on the nature of the seller. However, RMCs provide sellers with relocation package benefits that may affect TOM and selling price. This study examines a sample of 24,493 sales from 1998 to 2017, which includes 831 relocation sales. Relocation properties are more expensive, newer, and have more amenities than other transactions. The properties are less likely to be occupied during the listing period. Relocation sales of smaller properties sell 22.7% more quickly and at a 3.3% price premium in 1998–2007. TOM is 29.7% shorter for larger relocation properties in 2012–2017, suggesting more generous relocation packages for higher-level employees.

Keywords:

• Relocation
• relocation management company
• moving
• transfers

Acknowledgment

The authors appreciate the assistance of Mr. Jonathan Cohen, CRP, GMS, VP of Relocation and Business Strategy, RealtySouth.

Notes

1 Statistics reported are the most recent available. Worldwide EMC Research conducted a brief survey of 122 corporation talent mobility practitioners in spring 2019 (based on the 2018 calendar year); however, it offers highlights and it is not a comprehensive study.

2 Atlas World Group 2020 Corporate Relocation Survey.

3 Because the details of the role of relocation firms in the relocation processes are not widely disseminated and often proprietary, the authors did field research before by contacting experts in the field. This included an in-depth interview with Jonathan Cohen, relocation director for RealtySouth, a regional real estate firm based in Birmingham, AL. Mr. Cohen holds multiple relocation designations and has worked in both corporate and real estate services-oriented relocation positions. The specific details in this section are based on the interview with Cohen.

4 Although corporate tax rates were lowered in the December 2017 Tax Cut and Jobs Act, one provision removed the ability of employees to deduct unreimbursed moving expenses and mandated that employers cannot pay or reimburse the expenses on a tax-free basis.

5 2018 Atlas World Group Relocation Survey – https://www.atlasvanlines.com/AtlasVanLines/media/Corporate-Relo-Survey/PDFs/2018survey.pdf.

6 There are two separate “sales” to prevent the employee from being taxed on relocation benefits in addition to any increase in their home’s value.

7 Conversations with interviewees at relocation companies confirm that companies have become increasingly less generous with relocation companies except for the highest-level employees. Also, lower compensation to relocation companies has also reduced margins.

8 The Federal Housing Finance Agency (FHFA) Housing Price Index and the National Association of Realtors (NAR) Housing Affordability Index (HAI) are measures of housing market conditions. The two measures are strongly correlated; therefore, they are not used in the same probit and TOM models together.

9 The undesirability of maintaining older properties is muted to a great extent by robust house inspections and home warranties.

10 The predicted selling price is estimated using Equation (4)(4) $${{\mathrm{Ln}(SP}_{it})=\mathbf{\beta }\mathbf{X}+\mathbf{\delta }\mathbf{R}+\psi \ln ({\widehat{\mathit{DOM}}}_{\mathit{t}})+\epsilon }_{it}$$(4) .

11 Tests of under- and weak-identification are conducted using the Kleibergen-Paap LM and Wald F statistics, respectively, to ensure the appropriateness of the instrument. The use of this single instrument precludes the possibility that the equation is overidentified.

12 The number of listing agents’ properties sold in the past year had 23,522 observations because of the loss of the initial year (1998) used to compute the variable. For the 2SLS, the number of relocation transactions was reduced to 784. Relocation specialists have fewer listings because relocation clients likely require more time and personal attention.

13 All variables were evaluated at the mean. Binary variables have either a value of 0 or 1, and the marginal effects will differ at these values. Therefore, the marginal effects at the mean represent the effect for the whole sample rather than at 0 or 1.

14 In addition to the generalized gamma model, the Weibull model was estimated. The Weibull (p) parameter of Model 1 indicates the hazard function was slightly decreasing in duration, suggesting that the probability of the “hazard” (which in this case was the property selling) was slightly less likely to occur over time.

15 Binary variables were evaluated using $y=e^x-1,$ where $x$ is the coefficient and $y$ is the transformed value which is converted to a percentage.

16 The three RSPS time intervals were excluded from the regression because they were collinear with year sold binary variables

17 The relocation service time interval dummies chosen for the regressions in Tables 3, 4, and 5 were consistent with the premiums/discounts and trend line shown in Figure 4. A sensitivity analysis of the time intervals reveals that the findings were robust to changing the time intervals +/– one year.