Seven insider tips: Don't let hidden fees blow your relocation budget

Maybe it’s already happened to you. Outsourcing your organization’s relocation function looked great on paper, but now it seems like you’re paying extra fees and premium prices at every step of the relocation process.

It feels like you’re paying luxury-car rates but getting economy-car service. Or worse, maybe you’re not even aware of how much your relocation company is making off your business – and how much more service your transferees could be receiving if that money was redirected.

But there is a way to greatly reduce the chance of experiencing the scenarios above: Next time you’re sending out RFPs (or getting proposals for your first foray into outsourced relocation services) make sure you get answers to the following seven hidden-fee questions. That way, you’ll know exactly what you’re paying for, and how you’re paying for it – once the invoices start coming through.

1. Is the relocation company receiving commissions or rebates from the suppliers it uses?
This is especially critical to know regarding the third-party company’s relationship with van lines, title companies and temporary-housing providers. With van lines, its not unusual for the relocation company to negotiate a 65 percent discount, and then pass just 60 percent on to you, the one paying for the service. And that 5 percent being held back can add up quickly. Based on today’s moving costs, the relocation company can easily end up pocketing $500 or more per move. The same thing often occurs with temporary housing – with the relocation company often receiving $200 per month per unit. Worse than the hidden fee, though, is the idea of selecting providers based on their rebates, instead of based on what’s best for you and your employees.

2. Directly related to question No. 1: Are your transferees obligated to use the relocation company’s preferred suppliers and providers, such as van lines, real estate agents, appraisers and lenders?
A lot of money is made in this industry through these relationships. Third-party relocation companies often select service providers based on the commissions and rebates the provider will pass along to them (not necessarily to you). Or, all the business is funneled to providers that are in some other type of equity relationship with the third-party company. Is this the right way to select the people who are going to be working directly with your transferees? Would it make more sense to have quality and value drive the selection process?

3. Is there a mark-up for appraisals and inspections?
This is another little industry secret, where an extra, oftentimes invisible fee is added on to these basic real estate services – before the final expense is invoiced to your organization. It’s not unusual to see companies tacking on $100 to such pass-through expenses. You need to know what the mark-up is and why it’s needed.

4. Is there a fee for policy development, policy reviews and benchmarking studies?
The relocation industry is no different than any other industry these days; it’s tough to keep up with the changes – and to stay competitive, you need to know where you stand in comparison to others in your market. So, there’s no argument that these services are critical. But does it make sense to pay extra? Especially when the typical result is that you’re being advised to pay for even more services? When was the last time a policy review suggested ways to reduce expenses while maintaining your quality of services? Shouldn’t your ability to always know where you stand in relation to your competitors be a basic component of the service you’re already paying for? It’s not unusual to see as much as $10,000 being charged for this type of development work and benchmarking.

5. Are there per-employee file charges for phone calls, faxes, overnight mail, etc?
These add-ons often appear as fine print on your invoices and can be easy to miss. It’s not unusual to see $100 worth of these charges being billed for each transferee. It’s a standard practice for many relocation companies – and that makes it a practice worth questioning – or at least being aware of.

6. Are you going to be charged separately for reports you need?
Have you found yourself in the following predicament? You get a call from your boss or a company officer at budget time, requesting some information fast. Something like: “Can you give me a breakdown on what exceptions to our relocation policy are costing us? And can you break it down by divisions and cost centers?” You call your relocation company and find out it’s no problem, the report can be generated right away. But, of course, there’s a fee. Probably a pretty big fee. It would be much better to ensure upfront that you’ll automatically have access to a deep selection of standard reports. And when the unusual requests invariably pop up – generating a customized report shouldn’t be viewed as an excuse for generating yet another fee.

7. Is there a monthly fee for properties being held in inventory?
Ideally, your third-party relocation company is doing everything it can to stop a home from ever having to enter into inventory. One of the quickest ways to lose control of your relocation budget is to suddenly have a bunch of real estate sitting around generating nothing but expenses. But should it become necessary, you need to know ahead of time exactly what those expenses will be. And one expense that might be a bit tough to swallow is an extra per-property monthly payment to your relocation company. Just consider the logic: Homes in inventory are nothing but a burden to you. But homes in inventory are generating revenue for your relocation company. Where’s the relocation company’s incentive to quickly remove homes from inventory or keep them out in the first place?

One of the most effective ways to keep relocation costs under control is to make sure your transferees’ homes are being sold quickly and fairly on the open market. Third-party relocation companies have any number of tools to help ensure that happens – but none of the tools is more effective than drawing on the talents of a highly skilled real estate professionals in the local market. The best way to identify such professionals is based on their track records – their proven expertise handling similar relocation transactions in the past. And the only way to consistently tap such talent is to make sure professionalism, experience, and value are driving the selection process – not a willingness to play the hidden fee game.

Thom Kessler has worked in numerous capacities in the relocation industry in a nearly 20-year career. RE/MAX Relocation is an independently owned and operated full-service relocation services management company conducting business worldwide. Maintaining a 95-percent client retention rate during its 19-year history, it provides organizations of any size with systems and expertise that maintain the productivity of employees during a relocation, while reducing the employer’s expenses and workload.