Did they really need to buy the Executive’s house?
The Co-op Group (UK food shops & banking) is under fire for allegedly spending over £1million to relocate a senior executive, Steve Murell.
That sounds like an awful lot of money to spend on relocation assistance, doesn’t it? However, Co-op Group allegedly spent £900,000 of it buying Mr Murell’s house to facilitate his relocation to the new work location in the UK.
It used to be commonplace for Employers to “buy” the home of an executive or VIP new hire (the latter, I understand, was the case here) in order to encourage them to relocate to the new work location where they can then purchase a new home without having to wait for their former property to sell through the normal process.
Buying out & re-selling an Employee’s home is a complex process that can be very costly for the Employer. And it can be embarrassingly costly if they pay too much for the property, which can easily occur.
Nowadays it’s an outdated approach. The modern approach is to provide home sale assistance that involves a relocation company taking over the whole project of getting the property sold for the executive as quickly as possible, at the market value, & through the normal market process.
The big advantage, for both the executive and the Employer, is that there is professional management of the home sale process. The right relocation firm will get the job done quickly and efficiently. The relocating executive always remains in control of all key decisions – especially whether to accept or reject an offer from a purchaser.
Often a sale is achieved while the family is still in situ. If the family needs to relocate, a home can be rented at the new location pending the sale. Meanwhile the property is fully managed by the relocation firm in addition to continuing to drive the selling effort via the normal market.
Most important, this modern method saves the Employer a lot of money. A key difference is that the Employer does not run the risk of losing a ton of money on the onward sale because they never get involved in buying an Employee’s home.
As Saunders 1865 we’ve been operating this modern model successfully since we first introduced it to our North American corporate clients in 1990.
Indeed, I have managed home sale programmes for major Employers (including a number of global banks) over the past 25 years. I have seen Employers waste a great deal of money by overpaying when they buy homes off their executives & VIP new hires. These VIP Employees are savvy negotiators who know how to get the best possible price for their property when negotiating with their Employer. I have seen Employers cave-in to an executive rather than accept proper advice. The financial consequences can be dire.
I don’t know whether The Co-op Group overpaid for Mr Murrell’s home. I could only judge properly by evaluating the due diligence that was undertaken at the time of the buyout. The criticisms I have read lack one vital piece of info, namely what did the Employer eventually sell the home for.
But I do think it highly likely that the Employer’s objectives could have been more economically achieved by providing a modern home sale assistance programme, instead of the outdated home buyout model.
I would be very interested to hear the views of other relocation & HR professionals. Please email me at firstname.lastname@example.org
Tony Coe, CEO & Founder, Saunders 1865 VIP Relocation Services
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