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Relocation
Resources
Relocation
Considerations
Consider this common scenario faced by many employees: Your supervisor
calls you into her office on a Friday afternoon and asks you to
transfer to the New Jersey office. She says the new job includes
a $10,000 increase in salary, and loads of potential "in the future."
She gives you the weekend to think about it. What do you say? No
doubt, a million questions start popping into your head. You've
heard New Jersey is expensive to live in. Is $10,000 enough? How
much are the houses? What will your property taxes be? What about
income taxes? What about your wife's job? Will the kids like it
there? Will you like the new job? What is the impact on your career
if you refuse the job transfer?
According to
psychologists relocation is among the most stressful events that
can happen to a person, or a family. Changing jobs, which often
occurs when relocating, is also high on the stress index. For many
people the decision to relocate involves a complex set of variables
of a financial, personal and emotional nature. These factors contribute
to the stress in varying degrees, depending upon the individuals
involved. The questions above can be broken down into two broad
categories: objective and subjective. The emotional and personal
aspects of relocation are subjective and thus difficult to model.
Fortunately this is not true of the financial ramifications, which
are more objective and easier to quantify. This article will discuss
many of the financial variables which should be considered by employers
and employees before a relocation decision is made.
When deciding
on compensation packages for transferred employees, employers often
do not consider that each employee is an individual, with unique
financial considerations. No two families are alike and a relocation
analysis must reflect differences in income tax brackets, housing
size, property taxes, spousal income, dependents, etc. Using generic
cost of living indices does not produce an accurate calculation
of the financial impact of relocating. Using only a customized analysis
will produce a true apples to apples comparison. The battle cry
of the relocating employee is "AT LEAST KEEP ME WHOLE." In other
words, the employee should not have to relocate, absorb the emotional
stress, and lose money as well. The after tax cash flow should be
at least zero.
An accurate,
individualized, analysis has other benefits for the employer. These
are:
1. If the employee
is presently living in a high cost of living area, and the employee
is moving out of this area to a lower cost of living area the analysis
will most likely show a positive cash flow, which will encourage
the employee to relocate.
2. Employers
in low cost areas will find the analysis useful in encouraging employees
to transfer into the area from higher cost of living areas, since
the analysis will probably show a positive cash flow. Lower salaries
can be justified, and demonstrated to the employee, thus saving
expenses.
3. Employers
in high cost of living areas can use the analysis for employees
moving into the area, from lower cost areas, when cost of living
concerns are negatively impacting the relocation decision, and there
is a resistance to relocation. An analysis may convince the reluctant
employee that the after tax cash flow isn't as bad as they thought.
Often, reluctant employees must relocate to high cost areas for
career advancement purposes, but want just compensation, calculated
in gross salary dollars. A confidential analysis will show an employer
how much the employee should be equitably paid, to compensate for
cost of living differences.
4. Employers
can use the analysis to make sure employees are comparing apples
to apples in their relocation decision. Many employees attempt to
upgrade their standard of living, usually through unfair housing
and community comparisons, at the employer's expense.
Most employees
and employers perform a very superficial analysis of the financial
impact of relocating. This is understandable since it is very complicated
from a tax and financial planning point of view. The typical analysis
involves a comparison of housing in the new area with the increased
salary offer, if any. Or the salary is set based upon a comparison
to other employees in similar positions. The effect upon a family's
cash flow in the first year after the move is much more complex
than this simple analysis. As a result costly errors can be made
which affect not only the family's financial health but also their
happiness as well. An employee who feels unfairly treated is not
as productive, and may seek other employment. If the employee is
worth relocating he/she is worth fair compensation. After all, if
suitable talent were available locally the relocation would be unnecessary.
Relocation mistakes result in further relocation and additional
stress for both the family and for employers. Performing a proper
analysis before a relocation offer is accepted reduces stress by
decreasing uncertainty. This allows the employee to evaluate the
relocation offer more accurately, and provides benefits to the employer
by increasing employee happiness and retention.
Before describing
the financial changes caused by relocation in more depth it should
be noted that the analysis should be performed, not just for the
relocating employee, but for the entire family. Often relocation
can cause major financial changes for spouses, companions, fiancūs,
children, dependent parents, and others. Also, all changes should
include the federal, state and local tax impact, where appropriate,
at the individual's projected marginal rates of tax.
The analysis
should compare the old salary with the change in family salary,
wages, and business income. It should not include changes that would
have occurred anyway had the family not relocated, since this would
obscure the real cost, and would be unfair to the employer. The
change should be net of federal, state, and local (city) income
taxes, as well as social security taxes. A common problem experienced
by many families, sometimes called the "trailing spouse" problem,
occurs when the spouse of a relocated employee experiences great
difficulty finding employment in the new area. The analysis should
be able to analyze the projected decrease in the spouse's income
for the first year after the move.
Another area
often neglected by relocating individuals is the change in wealth
caused by changes in automobile expenses. This can be caused by
changes in commuting distances, automobile insurance rates, personal
mileage (for example to return home to see friends and relatives,
or to access qualified medical care), tolls and parking, use of
a company car, or an increase or decrease in amounts paid by employers
for business use of your personal car. Some of these changes have
tax effects and some do not. Most people underestimate how expensive
it is to operate an automobile, probably because the major portion
of the expense is depreciation (a non-cash item), and because the
expenses are paid gradually.
Changes in job
benefits are often a factor if the employee is changing employers,
and occasionally when transferring within the firm. Items to consider
here include changes in medical insurance, life insurance, plans,
and other perquisites such as day care.
Changes in state
and local income taxes should be included, net of federal tax effects.
The family's income should be recalculated using the tax laws of
the new state, and city (if there are city income taxes). Consideration
must be given for employees choosing to live in one state and work
in another, such as the millions of people who live in New Jersey
and work in New York. In such cases they will pay non-resident income
taxes in the state they are working in. Most states have reciprocity
agreements to prevent double taxation, which permit residents to
deduct taxes paid to other states.
Changes in housing
costs are, of course, a major item. It is important to make valid,
meaningful, comparisons when comparing housing costs between areas.
For example, comparisons should be made which compare the same size
houses (square footage). Also included should be the real estate
taxes, and rent, if the individual is not buying. Of course, the
federal income tax impact of these changes should be included. Another
factor to be considered is the change in interest rates caused by
exchanging the old mortgage for a new one. If the employee is buying
a cheaper house in the new area he/she may incur federal and state
capital gains taxes. This tax should not be included in the analysis
because it occurs only once, and should not be part of the calculation
of ongoing salary. Of course, the employee should be reimbursed
for this tax, since the relocation caused the imposition of the
tax. Likewise, if the relocation causes the family to have to sell
investment real estate, a partnership, or stock in a closely held
business then there will be capital gains or losses incurred because
of the realization of gains or losses on the sale of these assets.
Distance or increased job responsibilities may require that these
investments be sold. If the family wishes to compare owning vs.
renting, or renting vs. owning, the analysis should be able to do
this, although it may not be a fair comparison for negotiation purposes.
Finally, the
analysis should not include the cost of moving household belongings,
travel expenses including meals and lodging for the family, temporary
living expenses in the new area, pre-move house hunting trips, real
estate agent's fees, legal fees to buy and sell houses, points to
payoff an old mortgage or secure a new mortgage, and redecorating
expenses. These expenses are one-time expenses which will not repeat
in future years, and therefore should not be included when calculating
salary. Of course, the employee should be reimbursed for these expenses,
but if the purpose of the analysis is to show gross salary equivalents
then moving expenses should be excluded, since they are not recurring.
Most employers will pay some or all of these expenses, but it is
wise to be specific about what will be reimbursed. The reimbursement
of deductible expenses is not taxable, while the reimbursement of
non-deductible expenses is completely taxable. Therefore the employee
must be reimbursed for federal, state, local, and social security
tax impact on the portion of the reimbursement which is non-deductible.
This is called a 'tax gross-up' payment. Since the tax gross-up
payment is also taxable the calculation becomes a little complex.
Many employers do not calculate this amount correctly. They usually
do not reimburse for the state, local and social security tax impact,
and they assume all taxpayers are in the same tax bracket.
This article
has highlighted the important financial variables which should be
considered when making salary offers to employees who are relocating.
An analysis based upon a superficial comparison of cost of living
indices does little to reduce the very significant stress associated
with relocating and changing jobs. The analysis must be individualized
to each family, since families have different financial profiles
such as different incomes, house sizes, etc. Relocation can be a
significant financial planning tool when relocating to a lower cost
of living area, which can increase cash flow and provide significant
lifetime benefits which will help employees achieve their financial
goals. A thorough analysis will not only reduce pre-move stress
by eliminating financial uncertainty but will increase post-move
happiness for all involved.
This article
has highlighted the important financial variables which should be
considered when making salary offers to employees who are relocating.
An analysis based upon a superficial comparison of cost of living
indices does little to reduce the very significant stress associated
with relocating and changing jobs. The analysis must be individualized
to each family, since families have different financial profiles
such as different incomes, house sizes, etc. Relocation can be a
significant financial planning tool when relocating to a lower cost
of living area, which can increase cash flow and provide significant
lifetime benefits which will help employees achieve their financial
goals. A thorough analysis will not only reduce pre-move stress
by eliminating financial uncertainty but will increase post-move
happiness for all involved.
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Top Ten Relocation Headaches
1. Not having
enough details & demographics about your new hometown
Gather as much
information as possible about your new destination, from sources
such as your employer’s relocation package, local Chamber of
Commerce newcomer packages, location magazines and your Realtor.
2. Not having
your home priced and ready to show for selling
Check your home
thoroughly for all needed repairs before listing it for sale. Pay
attention to details such as gapped caulking, chipped tiles, paint...it's
often these little things that potential buyers will notice. Also,
have the home professionally cleaned, including carpets. If you
haven't had your home appraised in the last two years, do it before
putting the home up for sale. Also, have one or two Realtors give
you a Comparable Market Analysis. This will show what other comparable
home in your neighborhood have sold for recently. Over pricing your
home at the outset will result in slow showings and a delay in selling.
3. Poor research
of what your money can buy in your new city
Many factors
such as differing salary, cost of living, taxes and housing prices
affect what the same dollar can buy in different parts of the country.
Resources such as the Chamber of Commerce, Realtors, the professional
mortgage lenders associations and Runzheimer Reports can give you
this information.
4. Not getting
a mortgage pre-qualification letter before house-hunting
While pre-qualifying
with a mortgage company doesn't provide final loan approval, it
does give you a realistic price guideline and shows sellers that
you are a serious and qualified buyer.
5. Not protecting
yourself with the best home inspection possible
This goes for
both the home you're selling as well as the one you're buying, although
who pays for the inspection (buyer or seller) is negotiable in each
separate contract. A good inspector should be: A member of the ASHI
(American Society of Home Inspectors); bonded, licensed and insured;
able to provide references; up front about their fees and what is
included (are termite inspections extra, for example.) Your Realtor
or mortgage loan officer can recommend a certified inspection company.
6. Setting
up the best interim housing between destinations
When you first
arrive in your new town, you'll most likely need to have temporary
housing arrangements until you can close and move into a new home,
or find a permanent rental. This may be anywhere from a few days
to a few months. If you foresee needing interim housing for less
than 30 days, the easiest option is a suite hotel geared for extended
stays, such as a Residence Inn or Lexington Suite. For a month or
longer, corporate apartments or homes are much roomier, more comfortable,
and usually 20-60% less than paying a daily or weekly hotel rate.
7. Moving
your household and "stuff" safely from point A to point B
Depending on
the size of your household and the distance of the move, you may
want to consider hiring a moving company. Obviously, doing it yourself
can save quite a bit of money; however, the time factor, experience
of professional movers and the insurance they provide your contents
may make hiring the better choice.
Moving companies
can give you either a binding or non-binding estimate. Binding means
that the cost is held to exactly the estimate they give; this means
that they will actually physically inspect your home before giving
the estimate. A non-binding estimate is only an approximation and
no guarantee that the final billing won't be more. However, federal
law sets a ceiling of no more than 10% additional charges over the
estimate. You will also want a moving company that can guarantee
the pickup and delivery dates.
8. Having
a trailing spouse who needs to relocate into a new job
As of the year
2000, 65% of all households have two incomes, creating a significant
burden when losing one income as a result of relocation. Typically,
27% of companies provide spouse employment assistance; if yours
is one of them, take advantage of it. If not, try to begin establishing
a network before you arrive, contacting any friends or acquaintances
in your new city; subscribing to the newspaper; contacting recruiters,
placement firms and career counselors; contacting the chamber of
commerce and employment commission; and joining organizations, especially
networking ones. If a job still hasn't been landed by move time,
consider volunteering or joining a temporary agency - great full
time careers have been started from both. If your spouse will definitely
be securing employment after the move, but has not done so at the
time of the actual relocation, then qualifying for financing can
sometimes be a problem. But don’t worry, we offer financing
that allows for a "trailing spouse income" when the spouse
fully intends to secure employment shortly after the move. Certain
restrictions apply, so be sure to talk to your loan officer in advance.
9. Finding
the best new schools for your children
Concerns about
family and children is the second most frequently cited reason for
reluctance to move. There are many ways to find out all the information
you need to make a wise decision. If you haven't decided on a particular
area of town, the chamber of commerce can give you a wealth of statistics
on all local school districts, as well as private schools. If you
have decided on a particular area, your Realtor can get you a school
district information package.
10. Concerns
over your children making a smooth transition
In addition
to educational concerns, we also worry about the emotional effects
of a major move on our children. They may be resisting the move;
may even be angry. Will they adapt well...will they make new friends?
Probably the best way to ease the way is to involve the kids in
the move. Provide them with the same information about your new
town that you have. Rent or buy videos about your destination to
watch as a family. There are also many excellent books geared to
children of all ages.
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Relocation
Issues for Kids
Every year,
one out of five American families move. One of the most important
issues to anyone with kids is their reaction to the news that they're
moving, and their adjustment to the new home. Being informed is
very important to children. One of the worst mistakes we can make
as adults is to assume that kids don't care or won't understand
the details. keeping them "in the loop," consulting them about choices
whenever possible, and including them in the family game plan will
work wonders toward their adjustment.
Other factors
depend on the child's age:
Preschool
Children
Kids under the age of six may worry about being left behind, or
being separated from their parents. If you go on an orientation
or house-hunting trip beforehand without the children, it's important
to reassure kids this age that you will be back; bring something
unique back to them from the new town. It's very important for them
to express their feelings and fears about the move. Give them a
job to do -- have them be responsible for boxing up their favorite
toys, and "labeling" their boxes with crayons and stickers.
Ages 6 to
12
Elementary age kids are usually most concerned with how the everyday
routines of their lives are going to change. Showing them pictures,
videos and magazines of their new home will help a lot, especially
if you can find new places in advance for the things they like to
do. If your children take dance lessons, find and share information
about the new dance studio they can go to. If they take karate,
or play soccer...even if their favorite thing to do is go to the
park or the pizza parlor, find these places in your new neighborhood
and get brochures, pictures or videos.
Teenagers
These kids are most concerned with fitting in. They may react angrily
to the move, even insist they're not going. This is usually due
to the total lack of control they have over everything important
in their lives, friends, school and jobs, being disrupted. These
children can be very worried about making new friends, and what
will be different in the new school. They are curious about the
clothing, hairstyles, bicycles, cars, etc. that kids in the new
city will have. Pictures of all these things are very helpful, so
if you take an orientation trip be sure to take many detailed photos/videos
of the schools they will be attending.
Other tips
for making the transition
- Give young
children an entertaining travel kit for the move.
- Give older
children a diary for recording the trip and move.
- Give children
of all ages a special address book and stationary set for keeping
up with old friends.
- Take videos
of the new home if the kids won't get to see it before the move.
Arrive well before the movers so kids can explore and become acquainted
first.
- Give children
a chore to do, such as working on their room (younger), supervising
little siblings (middle), and painting or arranging furniture
(older kids).
- Take a break
with the family as soon as possible to explore the museums, sights
and recreation in your new city.
- Arrange a
visit to new schools and a meeting with the teacher before the
actual first day of attendance.
- Encourage
the children to bring new friends home.
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Home
Buyer Checklist
The Home Buyer
Checklist identifies some of the important factors to consider when
choosing a home. In addition to an affordable sales price, you will
also want to be sure that the neighborhood and house meet the needs
of your family. Take this checklist along when you go shopping for
your house. It will help you evaluate the neighborhoods and assess
the availability and condition of various features of up to three
homes in a side-by-side comparison.
For a printer
friendly PDF, click here.
Home
Buyer Checklist
Property
Address
Asking
Price
Real
Estate Taxes
The
Neighborhood
Near
Work
Near
Schools
Near
Shopping
Near
Expressways
Near
Public Transportation
Near
Doctors/Dentists
Near
Churches
Garbage
Collection
Street
Lights
Sidewalks
Streets/Alleys
Well
Maintained
Traffic
Volume
Parks
Neighbor's
Property Well Maintained
All
Utilities Installed
Neighborhood
Covenants/Restrictions
Near
Trains/Airport Area
Zoned
Residential
Near
Industry
Proposed
Special Assessments
Environment
Concerns/Influences
The
House
Age
of House
No.
of Stories
Wood
Frame
Brick
Frame
Wood
& Brick Frame
Aluminum
Siding
Roof
Condition
Foundation
Condition
Overall
Exterior Condition
Garage
Size
No.
of Bathrooms
No.
of Closets
No.
of Bedrooms
Oil
Heat
Gas
Heat
Electric
Heat
Hot
Water
Heat
Insulation
Central
Air Conditioning
Energy-Conservation
Features
Age
of Heating System
Age
of Water Heater
Capacity
of Water Heater
Age
of Electrical Wiring
Plumbing
condition
Estimated
Water Bill
Estimated
Heating Bill
Estimated
Electric Bill
Living
Room
Fireplace
Separate
Dining Room
Family
Room
Drapes
- No. of Rooms
Carpeting
- No. of Rooms
Kitchen
Eating Area
Refrigerator
Stove/Oven
(Gas/Electric)
Garbage
Disposal
Dishwasher
Broken
Windows
Storm
Windows/Screens
Washer/Dryer
Outlets
Laundry
Space
Finished
Basement
Attic
Sump
Pump/Drainage
Connected
to Sewer System
Patio
Backyard
Fence
Landscaping
Property
Boundaries
Security
(dead bolts, detectors)
Building
Code Compliance
Ability
to Expand/Enlarge House
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Selecting
A "Relo" Professional
To begin your
search for the right person to represent you in a home sale, you
need the advice of someone familiar with the area where you are
moving. Please contact me, Hayes
Hyman, and I can match you with a real estate professional that
best fits your situation. Or, you can ask a colleague or friend
for a recommendation, preferably someone who has used the real estate
agent's services. You want an agent who is familiar with home sales
in your price range and in your neighborhood. It is essential that
you feel comfortable with the agent during an interview since comfort
level and good communication are very important. During your interview,
don't hesitate to ask the agent about the number of homes the agent
has listed and actually sold. The length of time the agent has been
in business is not necessarily the best yardstick.
Make sure to
ask about their commission fees as well. These fees will average
6 percent to 7 percent, but they may be paid by your employer if
they have a relocation policy that provides support for your relocation
expenses. Remember, the agent you choose is going to be one of your
main sources of information, in addition to your mortgage loan officer.
A good agent will advise you and guide you in many ways. Look for
a representative who is pursuing sales, returning telephone calls,
aggressively working in your best interest and whose only job
is real estate.
Interview
Checklist
How often will
you promise to call or write me with activity on the home?
I would like
to have a list of your satisfied clients (of comparable properties)
as references.
Describe your
history of real estate sales. Most agents sell just 30 percent to
60 percent of their listings before the listings expire.
What percentage
of the asking price, on average, have you received for the homes
you've sold during the last year?
What is the
average number of days your listed homes stayed on the market?
Why should I
pick you over all other agents?
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Before Relocating
One Month
Before Moving
• Obtain
an IRS Change of Address form, call 1-800-829-1040.
• Gather
moving supplies, boxes, tape, rope.
• If moving
far away, make any necessary travel arrangements like airline, hotel,
and rental car reservations, or plan your travel route if driving.
• Call
a moving company or make truck rental reservations to move yourself.
• Finalize
real estate and apartment rental needs.
• Place
legal, medical, and insurance records in a safe and accessible place.
• Give
your mailers your new address (using Address Change Notification
Cards):
Friends and
family members
Banks, insurance
companies, and other financial institutions
Charge card
and credit card companies
Doctors, dentists,
and other service providers
State and Federal
Tax authorities and any other government agencies as needed.
IRS
• Save
moving receipts (many moving expenses are tax deductible).
• Make
maps of your new neighborhood to familiarize yourself and your family
with your new area.
• Plan
your moving budget
Two Weeks
Before Moving
• Inform
gas, electric, water, cable, local telephone and trash removal services
of your move.
• Sign
up for services at your new address.
• Get new
cable service for your new home.
• Inform
long distance phone company of your move. Sign up for long distance
service at your new address.
• Recruit
moving-day help.
• Confirm
travel reservation.
• Arrange
to close or transfer your bank account, if appropriate.
The Day Before
Moving
• Set aside
moving materials like a tape measure, pocket knife, packing boxes,
tape and markers.
• Pick
up rental truck.
• Check
oil and gas in your car.
• If traveling,
make sure you have tickets, charge cards, and other essentials.
Packing Tips
• Keep
the following items, supplies and accessories on hand:
Keep all financial
records together in a labeled container that you can access at any
time, not to be packed in the movers transfer truck. Include items
needed for your new mortgager, such as
- Statements
for 3 months of all checking, savings, investment and retirement
accounts
- Last 2
pay check stubs
- Last 2
years W-2 forms
- Last 2
years tax returns
- Relocation
package for your employer
- Offer to
hire/relocate letters from employers
- Contract
on sale of your home
Boxes, all sizes
Bubble wrap
or other cushioning material
Marking pens
Tape measure
Furniture pads
or old blankets
Packing tape
and scissors
Money and credit
cards
• Label
each box with the room in the new home to which it should be delivered.
• Number
the boxes and keep a list of what is in each box.
• Clearly
mark fragile items.
• Pack
a bag of personal items you'll need during the move (change of clothes,
toiletries, medicine, maps, food, and drinks). Keep it in an easy-to-find
place when you pack.
• Keep
a medical kit accessible.
• If you
have children, pack a bag of games and activities for the trip.
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After
Relocating
During the
First Week After Moving
• Locate
police and fire stations as well as hospitals and gas stations near
your home.
• Scout
your new neighborhood for shopping areas. You may need furniture,
tools, or house wares unexpectedly.
• Call
the Department of Sanitation in your new town to find out which
day the trash is collected. Also ask whether your new community
has recycling programs.
• Seek
out new service providers such as a bank, cleaners, veterinarian.
• Register
to vote. Call your local board of elections for specific registration
information. Ask them how to notify your previous voting district
of your change of address.
• If you
have moved into a different state, contact the Department of Motor
Vehicles to exchange your driver's license.
• Call
your Chamber of Commerce for helpful information on: schools, cable
service, cultural events and community activities, Libraries and
parks, and availability of emergency calling services, such as 911.
• Provide
your new doctor and dentist with your medical history. You may need
to request your file from your previous doctor/dentist.
• Transfer
insurance policies to an agent in your new community. You may also
wish to make a detailed list of your belongings, their value, and
your coverage.
• Give
your new home a good cleaning.
• Moving
can be stressful. Watch for effects on family members and pets so
you can give comfort and a helping hand.
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Moving
Your Household
Depending on
the size of your household and the distance of the move, you may
want to consider hiring a moving company. Obviously, doing it yourself
can save quite a bit of money; however, the time factor, experience
of professional movers and the insurance they provide your contents
may make hiring the better choice.
Moving companies
can give you either a binding or non-binding estimate. Binding means
that the cost is held to exactly the estimate they give; this means
that they will actually physically inspect your home before giving
the estimate. A non-binding estimate is only an approximation and
no guarantee that the final billing won't be more. However, federal
law sets a ceiling of no more than 10% additional charges over the
estimate. You will also want a moving company that can guarantee
the pickup and delivery dates.
Back
to top
Setting
up the Best Interim Housing
When you first
arrive in your new town, you'll most likely need to have temporary
housing arrangements until you can close and move into a new home,
or find a permanent rental. This may be anywhere from a few days
to a few months. If you foresee needing interim housing for less
than 30 days, the easiest option is a suite hotel geared for extended
stays, such as a Residence Inn or Lexington Suite. For a month or
longer, corporate apartments or homes are much roomier, more comfortable,
and usually 20-60% less than paying a daily or weekly hotel rate.
Back
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