Beware of the Trojan Horse

By

Daniel T. Bloom SCRP

You are anxious to provide the best relocation services to your employee base, so you contract with a relocation management company to assist with the purchase of their old residence. For many of the third party relocation management companies, the fee that you get charged is based on the amount of referral fees that they are able to collect on the process.

There is no problem in theory with the above scenario. The problems become apparent when the third party vendor tries to collect the referral fee through the back door. This practice is known as ATF or after the fact referral fees. Here is how they work.

Mary Smith is being relocated to Minneapolis, so she contacts the broker who sold them the home and asks for assistance in selling the property. Everything goes along as it always has. The agent places the home in the MLS and holds open houses. After a reasonable time of marketing the property, the agent brings Mary Smith a contract, which is accepted. That outside buyer goes and gets their mortgage and they schedule a closing. Twenty-four hours before the closing the agent receives a phone call from the third party relocation management company demanding to be paid a referral fee on the sale of Mary Smith's property. The conversation usually goes on to say that if the agent does not pay the fee the deal will not close.

As an employer, who is trying to assist your employees, you need to understand the animosity that the above scenario creates within the real estate community. Most brokers have no problems with paying a referral fee that is legitimately earned. Because of the above scenario, several states have passed laws that restrict the payment of referral fees to those transactions where services are clearly paid for. They further have stated that no employer shall withhold benefits based on the refusal to pay referral fees after a deal has been consummated.

Some strategies for you as employers to avoid this problem easily identified:

Know what your vendor is saying - Be well aware of what the third party vendor is saying

To your transferees and their brokers of choice.

Relocation Benefits need to be separated - The payment of referral fees or non-payment

of referral, fees should not have any affect on the deliverance of relocation benefits.

Know the laws in the states - More and more states have enacted laws that govern this

area. Specifically Kansas and Kentucky with five other states having legislation

pending.

Keep abreast with the changes in the referral fee arena through the Real Estate Coalition

for Cooperative Business Practices. They can be found at http://coalition.erc.org

Daniel Bloom is President of Daniel Bloom & Associates;Inc, a company who specializes in providing custom designed relocation services to corporations nationwide. By going to our website at http://dbaiconsulting.com you are welcome to join our relocation-issues mailing list. Ask your peers about your relocation questions. You can contact Dan Bloom at dan@dbaiconsulting.com or by phone at 727-581-6216.