Different relocation companies have different ways how they work, but the core methodology more or less remains the same. Let’s walk through specific details for RealRelocation company (name changed for legal purpose), which can give a good idea of working of relocation companies.
RealRelocation has a complicated structure on how things work with selling with them. Sellers have two options on selling:
a) Buyout: RealRelocation does 3-4 appraisals and an inspection on the property, to decide a price for the house, which is the buyout price. It is in RealRelocation’s benefit to make this price as low as possible. This price is not revealed to the seller. Seller has to fully pick this option, and then only this price is revealed to the sellers. Whatever is the price, sellers are bound to agree with it. Buyout price is usually much lower than the market value. This reason and lack of transparency are the main reason why buyout is not an attractive option to sellers. If seller chooses this option, then RealRelocation brings the house on market and sells it with a goal of selling it higher than the buyout price. Mostly this is RealRelocation’s preference, but is lesser preferred by sellers.
b) Listing Home on Market: In this case, the house is brought in market using a listing agent and the standard practice is used (open house etc). New buyer will buy the house from RealRelocation, and RealRelocation buys it from the seller, however the main decision maker here is the seller. Seller decides on which offer to pick, price, negotiations etc. Listing agent is required to send a weekly report about traffic/traction on the house to RealRelocation. There are continuous conversations happening between seller and RealRelocation. Listing agent is not directly involved in these conversations. In between this listing, sellers may be given a buyout options and sellers can anytime choose to opt for it, but as mentioned above, the buyout price is not known to the sellers, is usually low – and thus is not an attractive option. RealRelocation continuous to have conversation with seller and sometime even building pressure to chose the buyout option.
Listing agent’s role: As compared to regular deals (non-relo company deals), Listing agent here make much lesser money. This is because, RealRelocation eats a huge chunk of listing agent office commission (~47%). In one case listing agent got only 0.75% on a 3% deal.
What happens if a deal falls through and house comes back on market?: Until all the contingencies are satisfied, Sellers owns the house and is the main decision maker. They are in a situation similar to they would be if they chose the regular route of not using relo company. – RealRelocation is not too bothered about what seller choses. However, since listing agent is lesser motivated to make the deal happen, don’t expect listing agents to go above and beyond to make deal happen, or even give something from their commission to sellers.
What happens if the house doesn’t sell? – RealRelocation can bring in the buyout option, which sellers can choose, but sellers can not chose when to go for that option.
Do buyers have higher negotiation power if relocation company is involved?
– If the house is owned by sellers, then the chances of getting a certain discount (buyer’s leverage) is similar or slightly lower than regular situations, as seller is the decision maker. [Chances are slightly lower only because listing agent has lower motivation]
– If the house is owned by relocation company, then chances of getting a discount (buyer’s leverage) is higher than regular situations as relocation company is paying the holding cost, and they are decision maker as well.
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