Residential real-estate broker Andy Tarbutton typically wouldn’t turn down an opportunity to market a home just because a job transfer prompted the sale.
But the ripple effects of the woeful housing market are causing agents and the corporate community to rethink the way they handle relocations.
Not long ago, employees weren’t usually opposed to making a move to better their careers, because they were almost certain to turn a profit on their homes. Now, they’re afraid they’ll lose equity.
“My sellers are nervous about what the appraisal process will tell them about the fair-market value of their homes,” said Tarbutton, whose primary territory with Keller Williams Realty is the upscale Village of West Clay in Carmel.
Indeed, home prices nationally fell 3.2 percent in the second quarter, the steepest decline since Standard & Poor’s began its nationwide housing index in 1987.
A survey by the Washington, D.C-based Worldwide Employee Relocation Council further underscores the uneasiness. It found 55 percent of employers in 2006 expressed some resistance to moving employees, compared with 46 percent the previous year.
That figure could climb even higher, given the gloomy picture painted by certain economic indicators.
A report earlier this month from the National Association of Realtors showed pending sales of existing homes fell in July 16.1 percent from a year ago, the lowest level in nearly six years. Locally, the outlook is almost as bleak. Pending sales for June dropped 10.1 percent from a year ago, according to the Metropolitan Indianapolis Board of Realtors.
For Tarbutton, the money and time invested in shopping an executive-level house is becoming riskier than ever, prompting him to decline some offers to serve as the seller’s agent. Historically, that would have never been the case, he said. Tarbutton’s sales volume in 2005-2006 totaled $31.3 million, ranking him seventh in IBJ’s most recent All-Star Solo Agents list.
To put his concerns into perspective, Tarbutton might spend $1,500 over four months to list a home. But now there’s no guarantee a house will sell in that time frame, particularly in the slower-moving, high-end market. So, the company requesting the transfer buys the home instead and hands it to another real-estate firm to resell, leaving Tarbutton in the lurch.
The scenario could become reality in at least one instance. The home of Jessica Whidden, who received a promotion from a pharmaceutical company and transferred to Delaware, has been on the market since early August. The $434,900 asking price has yet to generate any interest. If it doesn’t sell in 90 days, the company will take ownership, and Whidden and Tarbutton both will lose out.
For Whidden, she can collect a bonus, typically between 1 percent and 3 percent of the home’s value, if it sells within three months. That can be a strong motivator in an underperforming market.
There’s no doubt a company prefers to avoid an expensive buyout. Besides paying the mortgage until the property sells, a corporation is on the hook for utility, lawn care and closing costs, among others.
“If there weren’t relocation packages like this, there is no way people would be Quiring Associates Inc. “In the past, employers were less willing to put money on the table because it would sell. Now employers, particularly at a higher level, are using that as a recruitment perk. In a tight market, that can be a big incentive.”
Sue Lerchen, a vice president at F.C. Tucker Co. Inc., concurred. Her sales activity has remained steady, she said, because most companies do, indeed, have programs that protect transferring employees from the burden of an existing mortgage.
“It’s traumatic for the family, anyway,” she said. “To make it financially traumatic won’t fly. I think the human resources people are tuned into that.”
Despite the housing downturn, transfers at WellPoint Inc., the state’s largest public company in terms of annual revenue, remain steady, WellPoint spokesman Jim Kappel said.
The insurer continues to provide a relocation package that includes allowances for closing costs, house-hunting trips, rental assistance, and, yes, sometimes purchasing an executive’s home.
But Susan Van Hoosen, director of corporate sales at Century 21 Scheetz Co., the corporate relocation division of Century 21 Realty Group Cos., offered an alternate perspective.
She said corporate buyouts have fallen out of favor with many companies and, as a result, new arrivals to the city are opting to rent rather than buy. Some choose that route, anyway, to ensure the transfer is successful before committing to buying a house. But more are waiting because they are hamstrung by existing homes that are difficult to sell.
“It’s still a buyer’s market,” Van Hoosen said. “However, it’s not preventing our corporate clientele from bringing folks in. They’re still willing to make the move, but they are choosing to rent.”
At any rate, current market conditions are causing frayed nerves.
“The sellers are not saying, ‘How much can we list this for?’ They’re saying, ‘I need this to sell in the next 90 days,'” Tarbutton said. “They are much more motivated and realistic in wanting to price their houses aggressively.”