Relo Companies. Scam or Yes Ma’am.

Cartus relocation company is a CROC! (that is an opinion, for more opinions Google Cartus sucks).

Actually many “relocation” companies that are supposed to help the employee are just fronts for making profit. And they have such a compelling pitch! How could an eligible buyer actually decide to bypass them? EASILY!

I’ll explain exactly why you might want to bypass your relocation company AND how you can use PART of their system to your benefit and ditch the other part.

Why am I picking on Cartus? Cuz I was robbed. I got this email the other day:

Hi, I’m moving to Virginia with my job in a month and my fiance and I are a big Frank fan! {Name Omitted} recommended you to us. We love the website and reading/listening to your blog. And, we’d like to go with your realty firm when we purchase a place in Northern Arlington this summer. Fortunately for us, my company (XYZ) is willing to pay Realtor’s fees and closing costs but I need to approve you as a realtor/realty before they will allow us to get started.

I added the emphasis.

1) Fortunately for us. Wow, the company is so gracious. They really care about their employees. Consider it a benefit like healthcare. They will pay Realtor fees and closing costs! (end sarcasm here)

Ok, first of all when you are buying, there are NO “Realtor fees” (sidenote: ha, I wonder if they pay for the bogus Realtor Admin fees which the Washington Post, link, just covered and cited my blog) per se because the Realtor fees are paid by the SELLER. But it surely makes for a good BS pitch in the brochure. Why not also add: free keys! As for the “closing costs” I’ll get to that shortly…

2) Approve you. Approve me for what? Make sure I’m good? Knowledgeable with people that are relocating? Maybe a quiz or a check for references? No. None of this happened.

I knew the “approve” the agent sounded fishy. I warned the buyer… I said “I bet they are up to something.”

Finally Cartus contacts me. I get an email that effectively said: You are approved when you agree to give us 40% of your commission. (actually it said “registration entails a verbal agreement of a 40% referral fee.”)

Are you F-ing kidding me? “Referral fee?” Did they refer business to me? Hell no. These buyers found me on their own. They were a personal reference from a friend that felt like they got great service. And Cartus demands 40% to be part of their program. What is this Robin Hood? Take from one to give a another? And keep a little for profit in the process?

So here are the details for their program, I am a fine print reader, so at the end I will try to parse this out for you.

CARTUS HOME PURCHASE CLOSING COSTS

There are numerous expenses associated with the purchase of your new home that vary by state and local custom. You will be reimbursed for buyer’s expenses customary in the new location; which should be discussed with your Cartus Relocation Consultant.

In all cases, only one set of lending fees and one-time closing fees will be reimbursed. Fees and charges most commonly recognized for reimbursement are:

Abstract or title search, Amortization fee, Application fee, Appraisal fee (1), Attorney fees (where required by state law), Certified copies, Credit report (1), Document preparation fee, Escrow fee, Guarantee fee, Inspections that are normal and customary for the area (termite, well/septic),

– Loan origination fee not to exceed 1% of the mortgage amount. If you do not contact Cartus prior to beginning the home purchase assistance program, you will not be eligible for the 1% loan origination fee.

Homeowners title policy for new construction only, Lender’s Title Policy, Messenger service fees/express shipment fees, Notary fees, Recording fees, Settlement or closing fee, Survey, Tax service fee, Title examination, Underwriting fee

Isn’t it fun making a really long list of fees that are paid? Even though many of them are next to nothing. I just pulled up a HUD1 for a buyer (note that fees can vary by closing company and frequently get renamed and shuffled around).

Here are a few of the next to nothing fees on the list that you get FREE!!: Notary Fee= $0, Messenger= $55, Tax service fee $0, Recording $65, Termite $35, Credit report $14, Title examination=$0.

The fees that have some real value: Survey= $265 Settlement fee=$195 Title Search=$175 Lender’s title insurance=$1,800 (on a $650k VA home, reissue rate) NOT present in the list of closing costs: Owner’s title insurance= $1350 (except for closing costs) Read more on Owner’s Title

Conditional costs. Ie IF, a big IF, you use their “approved” Realtor. You get: Loan origination fee 1%. Lenders have a ton of names for these types of fees. Sometimes they are called “Rate buy down” points, or “Discount Fee.” The short hand is just “points.” Points aren’t necessarily bad (make sure to subscribe to this blog for a full post on when to buy points). More often than not, if you put down 20% there are ZERO POINTS, ie $0 Loan Origination fees. So if you DO use the Cartus program, and an “approved” Realtor, make sure you go out of your way to max out the full 1% point. (ie if the lender was going to charge you no points, they can make up the fee and buy down your rate, as in make your 5% rate 4.75% approximately)

But here is the fine print as I understand it…

BOTTOM LINE: You only have to use their approved Realtor IF you need that Loan origination fee. In other words, you can still pick your favorite Realtor and get all the other fees covered for free by Cartus. (I could be wrong, but that is how I understand their rules above).

Why in God’s world would you give up the ability to get a “free” 1% loan origination fee?

Well that is a separate and lengthy discussion on rebating and discounting. Heck, there are several companies that will give you a 1.5% cash rebate. Heck a 1.5% cash rebate is MUCH better than no cash reimbursement for a 1% fee you might not have purchased normally.

WAYS TO MILK CARTUS

1) Have them pay ALL your fees except the 1%, and find your own Realtor that will give you a rebate.

2) Or if you find a Realtor that is willing to be “approved” by Cartus, tell them “hey buddy, you are willing to give 40% to Cartus right? And Cartus will just turn around and refund 33% (1% or 1/3rd of the 3% offered to buyer’s agents) of the 40% in the form of a 1% loan rebate, why not just give me the 40% directly?! Cut out Cartus and get 1.2% refunded on your HUD1 vs 1% lender fee repayment and Cartus pocketing the rest.

3) Get your own un-approved agent, skip the loan fee reimbursement, yet accept all the other fees. So why am I telling you the secret path to getting the most cash out of the relocation company and system? Well maybe, just maybe you will then believe me that #3 above might be the best solution for you in the end.

Stop and think about for a second. Cartus demands 40% from a Realtor that you pick or one that they pick. So for the ones that they pick, what kind of Realtors will accept that? Oftentimes desperate ones. Perhaps those that are kinda struggling. You know, economy is tough right now. Weekend warrior Realtors that have nothing better to do? One that will pressure you into a house and hope to get you off their slate as fast as possible so they can make the next 60% deal from Cartus. Perhaps they have to cut down half the time they spend on you, to make it worth it.

So signing with Cartus with an “Approved” Realtor, is not much different than Rebating. I have no problem with the rebating business model. (note: you won’t find many other non-Rebating Realtors talk about it openly).

Why do I talk about it? Well as I like to say

I use to rebate, but then I got good.

Yep Read: Realtor Rebates. Free Money or Expensive Savings? and more on rebating.

In the end, know you do have a choice. You can get the best of both worlds. You can get Cartus to pay a good amount of your closing costs, get a loan with NO loan origination fees, and get to pick an agent that is working for YOU, and not for Cartus.

Oh, and remember I’m not too busy for you, so email me. See I’m Not Too Busy For You video #1 and Video #2

Make sure to subscribe and comment and debate. Nobody likes a stale blog!

Written by Frank Borges LL0SA

Broker FranklyRealty.com, Owner FranklyMLS.com

Croc image DrBartje Fish image Phillip

ps. My experience was on the BUYING side. Can somebody comment on the SELLING side of relocating? Do they really buy the house at the appraised price and eat any subsequent loss? Now that seems to have some value in this market.

  • 31
  • May
  • 2009

93 Responses to “Relo Companies. Scam or Yes Ma’am.”

  1. Oh man I don’t want to get started on this one……..drives me nuts. We’ve had this type of thing going on for years. I even had one relo company try to take over a listing….yeah….a listing. What part of NOOOO don’t you understand. They scared the heck out of the client and made us look like creeps (briefly) in our clients eyes. Once they understood the game they back away from the relo company and stuck with us, their trusted agents.

    I love the way you tell this story……….way cool.

  2. You said it so perfectly! This has happenned to me over and over again, where a potential client has found me through the internet, and we email back and forth and then all of a sudden they stop the correspondence. Cartus gets involved and tells them they have to use a certain agent.

  3. Laura Rivera says:

    At least you are getting 40%. The last transaction I had with Cartus was a 50% referral fee. I closed on the buyer, and I think my buyer got more money than me. It was a complicated escrow and the sellers and my buyers were both pain in the rear.

    When the time to renew being a Cartus agent came, and of course you have to attend a Webex training at your expense of $65, and then they pass the transaction fee of up to $500 per transaction to the referred agent- this is on top of the 50% , is when I said Adios Cartus!

  4. Natascha Clark says:

    There is a difference between relo companies and relo companies! The big machines who churn out volume and the medium size ones WHO LOOK AFTER PEOPLE! We are one of them.
    We do not take profit from our clients and their employees! For our all encompassing services we charge a management fee, adding value to the relocation process, buying and selling of properties. To be totally transparent, stick to the open book policy and be honest about our earnings is our differentiating factor! We make potential clients aware during tender process about some companies ripping off their ‘approved suppliers’ or adding fees to external invoices – however often this message is ignored when they are vetting a supplier. What a shame, this could save millions of dollars/punds! We do not charge suppliers to be on our panel, in fact we do not have a panel. Our suppliers are ”quality assured” and undergo a stringent supplier selection process.
    Frank – thanks for starting this blog and all the feedback. How I wish the Washington Post and the Financial Times would take up this story…

  5. Natascha Clark says:

    Frank – clarification for selling a home:
    This scheme is called the Guaranteed Sales Price. The relo company does not purchase the property but handles the transactions, marketing, management and (most of the time) funding.
    Two valuations (3 if the difference is more than 5 %) are taken on a property and the average value price is offered to the employee as a guaranteed price. Once accepted the employee has ‘cash in the pocket’ to purchase a new home, however the funds are only released when the employee is ready to close on the new home. The client (employer) pays the funding for this ‘bridging loan’ until the property is sold.
    When selling the property a loss or gain on sale is achieved. Depending on the clients relocation policy the gain/profit is sometimes released to the employee, some companies keep the profit to offset costs or pay out a percentage.
    If a loss is taken when the property is sold, usually the client (employer) covers 100% of the loss, there are however companies who cap the loss they are willing to take.

  6. Sammy says:

    I tried one as a buyer agent my first month in RE; from that experience plus everything I’ve heard since, they’re a scam and on the buyer side they probably violate RESPA to boot. The seller side is just as bad; the listing agents know that they get paid whether the house sells or not, so they “buy” the listing with a high suggested list price, do nothing to sell the house, and then get their cut when the Relo company buys out the now-desperate seller (who usually either has already moved or is about to move), at a price that is always (based on the valuation done by their own in-house appraiser…) below market.

  7. Franklyrealty says:

    Next time a Relo company demands half my commission, I will just send them this post!

  8. robert says:

    “Ok, first of all when you are buying, there are NO “Realtor fees” per se because the Realtor fees are paid by the buyer.”

    Huh?

  9. Thank you for giving the full response of which I give a partial response to relo buyers when they ask me if I “work with relo companies”.

    I’ll be passing this post along to all future relo buyers so that they understand what they’re getting themselves into and how they can get the best of both worlds.

    Love the new blog look btw.

  10. NoVA Buyer says:

    A little history is always fun and educational. Cartus, formerly known as Cendant (Relocation Services?), was a subsidiary of Cendant. Cendant was formerly CUC International. Look at some SEC filings. CUC screwed shareholders to the tune of billions of dollars in inflated revenues and earnings in the late nineties. I don’t trust Cendant or any of its offspring.

    Now as to the selling side, I bid on this beauty: http://realestate.alexandriava.gov/detail.php?accountno=50685300. Cartus bought it from the relo’ed employee for $825K. It was listed for almost a year and ultimately sold for $718K. I assume the employer ate the difference. BTW, I didn’t win.

  11. Kristen says:

    Had I only had this info way back in Oct. We ended up using a really horrid agent to sell our house because of Cartus. I wish I had done some investigating of the company before, well, before we did anything associated with Cartus.

    I have lots to say about Cartus but it’s too early in the day for such a dramatic rise in blood pressure.

    What I will say is that the involvement with Cartus in our relocation has soured my view of my husband’s employer. They were well aware of the $#!+ Cartus pulled on us & they did nothing except take a discount on our case. A friend working with hubby’s company recently relocated to Hawaii & I am not at all surprised at the mess that’s become.

    I could write volumes on Cartus. Here’s the post I originally wrote about them http://threekidchaos.wordpress.com/2008/11/21/cartus-relocation-use-with-extreme-caution/

    I’d like to revisit the Cartus Fiasco, but my anger management classes don’t start until next week ;-p

  12. Amy Eskew says:

    Frank- I just got a listing from a client who realized that the relo company offered no benefit at all- when they wanted to FORCE him to discount his house a RIDICULOUS amount- I’m supposing to sell it fast and get it off their plate. I stepped in and will get him a decent price for his gorgeous place!

    There is NO replacement for good, local agents!

    Thanks for bringing this up and LOVE the blog!

    -Amy

  13. Bob McTague says:

    Robbery is an understatement! I had a client that was moving out of state so I reffered him to an agent in that state. I submited the paperwork to my agency. This week I got a phone call from relocation (Cartus) telling me that I violated the agreement they had with my agency. I was supposed to use an agent in the network… This is my client not going through relocation and he wanted me to find him an agent to work with so I interviewed several agents for him… Cartus should pay me for the service I provided!!
    Now to the robbery that took place this week, the commission was $3,000. Cartus took 50% off the top to start, then they took another 45% for a penalty as I did not follow the rules… So I am left with roughly $400.00 from $3,000?????? I called Corporate to have someone explain why a national franchise is letting this happen to their sub contractors??? They stood behind Cartus and I told them to hold the money in escrow and I will report this activity to the DOS and make sure every agent in my area is aware of these activities…

  14. Doug Francis says:

    In 18 years of being an agent, I have never met an agent who loved a relocation deal… even in the doldrums of the early 1990’s.

    They are paid leads that eventually have you working for $7.35 an hour, 24/7, and filing weekly progress reports and having admin people ask you, “why haven’t they found anything Frank, aren’t you hired to help them? Maybe we need to re-assign this case. By the way, your report last week was not complete, please resubmit your activity list.”

  15. Kevin Lisota says:

    Couldn’t agree with you more. I had the same negative experience with Cartus. It was for a friend of mine that I have known for 19 years. Cartus said the fee was normal for the relocation industry and that I should be happy to receive a qualified lead like this. A qualified lead? I have known the guy more than half of my life! Of course he wanted to use me as an agent.

    I wrote a recent post about it on my blog:
    http://blog.findwell.com/buying-a-home/who-pays-for-my-corporate-relocation/

  16. Michelle says:

    I just got one from SIRVA, sounds like the same deal. A raw deal. These people called me because they were unhappy with the agent the relo company sent them to, and found me from one of my listings. They were very pleased with me, and wanted to use me, so they called SIRVA to make sure I was on “the List” but now I’m being told I’m paying 35% to SIRVA, plus a $200 fee. WTF?? FOR WHAT??

    Then, when I corrected my buyers (She thought I GET 35%, I told her, no, I have to PAY that!) I got a call from my company telling me “We don’t talk about money with the client”. So the person being relocated is completely kept in the dark about how poorly we are being paid. No wonder their last agent was horrible, he knew he didn’t stand to make much. Too bad I have integrity.

  17. Leslie Turner says:

    Frank,

    Love this blog post because I also have gone head to head with Cartus. Wanna know what I did? Told them to take their “referral” of my friend of 6+ years and SHOVE IT. Flat told them I was not paying them A DIME! Often times with the relocation package, the employer is who determines what closings costs will be company paid and the relo company is just the facilitator. I relo alot of Boeing and was a Boeing relo myself, so knowing the “ends and outs” are key. For my agent on the buying end, I called my relo company (which was WRRI, same difference) and told them to stick their referral fee…I was NOT hiring an agent who would have to give up almost HALF the money they worked for when the relo company did not refer them…a friend did.
    Bottom line, every time I have relo’d a client who had a relo company, I have told the relo company to stick it…and amazingly, NONE have lost any of their relo benefits! Now, this is always on the buying side.
    The selling side does have more “loops” to jump through, as they want all kinds of paperwork from you, and the employer often will pay broker fees for the seller. I have never been on that side as a REALTOR, so cannot speak personally.
    As for the buyouts, generally what they do is obtain a relocation appraisal from two appraisers, average them, and that is the buyout offered. If the two initial appraisals are more than 5% apart, they bring in a third. However, I have seen lately the buyout being dropped due to the housing market, or the relocation appraisals coming in very low due to the fact that they are based on what the property will sell for in 120 days.

    I will tell you, nothing has given me more pleasure than to tell those relo companies to take their 40% and SHOVE IT!

  18. Frank, thanks for bringing this topic up! I feel the same way. We do all the work and RELO gets paid. I will certainly forward this to the next Relo company . Wonder what they will think of that! Thanks @whitneypannell

  19. I have never personally done business w/ a relo company but from reading this blog I’m pretty much going to ignore them if they ever come my way. Thanks for the great blog/site/videos, Frank!

  20. DN says:

    Robbery is an understatement! I had a client that was moving out of state so I reffered him to an agent in that state. I submited the paperwork to my agency. This week I got a phone call from relocation (Cartus) telling me that I violated the agreement they had with my agency. I was supposed to use an agent in the network… This is my client not going through relocation and he wanted me to find him an agent to work with so I interviewed several agents for him… Cartus should pay me for the service I provided!!
    Now to the robbery that took place this week, the commission was $3,000. Cartus took 50% off the top to start, then they took another 45% for a penalty as I did not follow the rules… So I am left with roughly $400.00 from $3,000?????? I called Corporate to have someone explain why a national franchise is letting this happen to their sub contractors??? They stood behind Cartus and I told them to hold the money in escrow and I will report this activity to the DOS and make sure every agent in my area is aware of these activities…

  21. Susan Hanley says:

    Realtors need to get together and combine forces agains relo companies. They win clients by offering rebates to their employees of the Realtor’s fees. Then they add big fees onto the closing costs that the employee pays. They steer the agents to push the employee to buy mortgage and title services from their company also – buy from their store, in other words. In one case, my buyer selected a new home. The builder offered a special rate through their own mortgage affiliate. The relo “counselor” told the buyer that it was a bad idea to buy a new home; not a good investment; an untested house; not recommended. I was furious and of course, the buyer was no dummy. They “grade” companies on how well they do selling extra services.

  22. LA Deeley says:

    My relocation nightmare is Prudential. I’m the home seller. I wish I had seen your site before I agreed to the program.

  23. LA Deeley says:

    Oh Frank where have you been all my home buying & selling life. I’m in a relo nightmare this very moment. We heard stories about the relocation company using inspections and appraisals as a weapon to keep buyout offers lower than Jessica Simpsons IQ. We thought maybe there was a little embellishment so we didn’t take it seriously. Boy were we wrong. One man had to hire a structural engineer to fight the bad inspection. The relo company assured us this type of thing doesn’t happen. Talk about a sucker born every day. We bought what they were selling like it was a Prada bag at a 60% discount. Now we have crazy inspection issues to deal with. Plus more “specialty inspections ordered. One of the “Defective Components” found was our central air. The inspector stated the a/c couldn’t be inspected because the temperature was below 65. However, he hear the compressor it was buzzing and the unit was warm to the touch. Really? Strange because the unit wasn’t on. We had an HVAC guy inspect it on a warm day it was fine, the relo company had it inspected and we were given a verbal OK from him too. They had to inspect our entire heating and cooling system because the inspector heard a buzzing from a unit that had no juice going to it? This was one of the simple issue from the inspection. We’ve show the inspection report to other inspector and and contractor even they were horrified. One referred to it as a witch hunt. We haven’t received our appraisals yet I’m awaiting those with an ice cold dirty martini. I shudder to think what our buyout offer will be on a home we’ve owned for less than a year and made improvements on. I’m thinking maybe they be generous and offer $20. We are not expecting to make any money off our home but it would have been nice to break even. But at least now I’ve found your blog. If I had only found you sooner I’d have know why it takes four calls to my relo referred Realtor to get one call back.

    PS Have you heard any horror stories like this?

  24. LA Deeley says:

    Please excuse my grammatical and spelling errors. Brain drain from the relo nightmare has left me with a slight learning disability.

  25. Jason - former Cartus employee says:

    One thing you have to remember, the Seller’s employer dictates the relocation policy. The vast majority of time, they mandate that the Seller make their list agent pay a referral fee (the employer also mandates that the employee’s purchase agent do the same thing). This is the employer’s way of not having to pay a fee to Cartus (or any other relocation company) and making the List Agent cover the costs the fee that Cartus would charge to the employer.

    If you as the List Agent refuse to pay the referral fee, the employee can have all of their homesale benefits pulled or have other items reduced or removed all together such as a home sale bonus, temporary living allowance reduced, etc. If the employer decides to make the homesale costs a Direct Reimbursement (see above posts), it could have drastic and severe tax implications for the employee.

    Offering a monetary benefit to the seller would be of no benefit since the employer’s relocation policy will dictate what the employee will get. If the employer feels that their employee is attempting to circumvent their relocation policy, they may completely pull any type of relocation assistance (there are employer relocation policies that state the employee must have their agents pay a relocation on the home sale and home purchase side or they will receive no relocation assistance at all and the employee will have to pay their own bills). He is more concerned about the style of the blog and no consideration for the content. Remember, “He’s not too busy for you”; but he can provide misleading and inaccurate information that can jeopardize your customer’s (the employee) benefits and then I am sure once again, all blame will be placed on the relo company.

    On the Home Purchase side, the employer may take away all of the reimbursement of the new home closing costs or drastically reduce the amount to be reimbursed.

    What has been failed to be undestood through this entire blog is that the employer drives the relocation policy (and the subsequent paying of a referral fee to the relocation company), not the relo company (they just administer the policy of the employer). This thread was not an educational piece on relocation companies and why referral fees are being asked for; it was a myopic attempt attempt to solicit other agents to “grab your torch and pitchfork”.

    Frank does not do any of the agents that place comments here any service; he is also probably jeopardizing several employees relocation benefits by providing the information in this manner. Will Frank step up and provide assistance to any employee that loses their relocation benefits or make up the difference because of this blog? I seriously doubt it. He will continue from a perspective of convenience so that he does not have to be accountable for his actions or information; must be nice,

    The only question he does ask is about the loss on sale. In the vast majority of cases, the employer incurs the loss (or gain, never happens though) on the sale (unless it is a fixed fee contract which were vogue about 10 years ago but in these markets incur severe losses so relo companies rarely offer them anymore). Once again, the employer dictates the appraisal policy on the employee’s home, not the relocation company. Typically, the appraisal parameter will be “normal market time, not to exceed 90 days”. This means that the appraiser has to come up with a value of the home to gain a sale in 90 days which in these markets, can substantially drive the value down. The loss on sale is a part of the “risk” that the employer takes in order to be compliant with the IRS 11 step amended process.

    Why is this blog thread on multiple sites? Self grandizing.

  26. FranklyRealty.com says:

    Hey “Jason”
    I like it when insiders help give the real skivvy. And why I like all the posts from other ex-employees that have chimed in. But you are the first to defend the company.

    So help me get the math?

    These “benefits” that the client is getting from the all so nicer employer… I don’t get it.

    $10,000 commission.
    $4,000 demanded by cartus or employer

    Homeowner is given $1,000 in “benefits”

    How is that the employer being so nice? Why doesn’t the agent just give the homeowner $1,200?

    I still don’t get how the employer butting in, claiming to give benefits, but actually profiting from the transaction is an added perk.

    Frank

  27. Jason - former Cartus employee says:

    Frank,
    I am not defending relo companies; I am presenting the facts. It would drive me insane why agents would not take the time to understand this. I have seen agents have their customers, the employee kicked out of a relocation program and lose all of their benfits because they could not follow some simple instructions.

    Scenario – $400,000 home both ends; mortgage 80% LTV. Home has a sale and does not go into inventory to incur more costs for the employer.

    Benfits that a typical homeowner will get:
    1. Home Sale Assistance – these include the commission and other transactional closing costs. Figure on average 8% of the sales price of the home. $32,000
    2. Home Purchase Assistance – typically about 3% of the Mortgage Amount (1% LOF, 1% DP, 1% transactionals). $9,600
    3. Temporary Living – typically 30 days (includes Hotel & Meals) $4,500
    4. Home Finding Trip – typically 5 to 6 days. $5,000
    5. Shipment of Household Goods – $20,000 (depends on tariff, distance, and intra vs. inter state move)
    6. Final Move Trip (old location to new location for family). $5,000

    We are at $71,600 at this point. Base cost to move an employee. Does not include any type of Cost of Living compensation, Spousal Allowance, Spousal Assistance, Cost of a home in inventory, etc. Due to taxable income and the need to gross up expenses to make them “whole”, you will need to add another $10,000 in this scenario.

    Cost is $81,600 base relocation. These “benefits” are a cost to the employer. Due to certain taxation laws, the shipment of Household Goods and Final Move (most of the costs) are not a tax generating event (See Publication 521 in the IRS Website http://www.irs.gov/publications/p521/index.html)

    Let’s take the example of 6% commission on $400,000 and it is a 50/50 split. Your side of the commission is $12,000 of which relo companies are asking between 35% and 40%. We can use 40%. $4,800 to the relocation company, $7,800 to you. Most relocation companies have a “Relist Agreement” that states the relocation company is paying your commission and not the employee. This document is a part of the IRS 11 Step Amended process.

    http://www.visionrelocation.com/pdf/IRSRulingonHomesaleTransactions.pdf

    http://primacy.com/resources/Overview%20Two-Deed.pdf

    In doing so, the relocation company pays your commission and not the employee. The relocation company also appears on the HUD1 as the Seller of record. So in giving a employee money back for a employer sponsored relocation, you are potentially tying them back to the sale and could be deemed to invalidate the IRS process to keep a homesale transaction as a business expense to the employer and not an income generating event for the employee. This is also why relocation companies have adopted a “two deed” process (which incurs more costs in states like Maryland that have a high transfer tax) to make the transaction more IRS compliant.

    Granted that the duplication of paperwork is extremely redundant and just kills trees, but in the manner that the IRS has ruled on this, it creates the necessity for the paperwork to distance the employee from the actual transaction as much as possible. This is also the reason why the employee is not suppose to sign the contract or offer as seller; the relocation company representative is to sign as the seller.

    The stance that the employer takes is that they are in fact are generating the referral as they have made a decision to move their employee and they are paying for the costs to relocate their employee. Employers do not want to pay for any service fees to anyone when their employee is relocating; what does that say about the employer? They dictate the relocation policy; the relocation companies follow the policy dictated to them by the employer and the guidelines of the IRS. Some employers have dictated that their employees only work with agents that charge a 5% commission and in some cases 4%.

    I hope that this provides a little more understanding about the facts of the situation. Trying to get everyone to jump on the bandwagon of treating Cartus like a pinata does not provide the “why” relocation companies are asking for referral fees. Before you attack relocation companies, please remember that I probably can relate many painful, mind numbing experiences that I have had with real estate agents. I would be genuinely worried about them driving, peeling an orange, or un-doing velcro.

    Is Cartus perfect; far from it. Part of the reason I left and I could spend hours discussing it. This blog has been going on for over a year:

    http://www.topix.net/forum/city/danbury-ct/T0S07QMKLIGJ4IKMS

    There are plenty of good people still there. You want to attack someone, attack the leadership.

    Best Regards,
    Jason

  28. Jason - former Cartus employee says:

    From: Frank
    Sent: Friday, December 18, 2009 1:21 AM
    To: Jason
    Subject: Re: [FranklyRealty.com Trust Me I’m A REALTOR] Please moderate: “Relo Companies. Scam or Yes Ma’am.”

    too complex

    K.I.S.S.

    Relo person is ONLY buying a house. Nothing to sell.

    What “benefits” do they get from Cartus that requires the buyer’s
    agent to cough up 40%.

    Frank

    It is very complex and you are asking that something be simplified that really cannot be. These are all of the things that a relocation company must take into account when administering the relocation policy of the employer. All of these considerations must be taken into account for what the relocation company has to do. The employer typically does not pay any type of fee for any of the actions listed above. The employer expects the referral fees on the home sale and home purchase to cover any expenses that the relo company incurs.

    Once again, any reimbursements are based on the policy of the employer (such as new home closing costs). The employer drives the requirement for the referral to be paid so they do not have to pay any service fee top Cartus.

    If you are looking for who to place blame for you having to pay a referral fee for the home purchase, blame the employer. It is their relocation policy that relo companies administer. They make it mandatory that their employees real estate agent pay the referral. If it was a “value” or “benefit” proposition, the employer would pay a service fee to relo companies; they don’t want to do that and would rather have any income that relo companies generate be paid by real estate agents.

  29. Checked the facts says:

    “Actually many “relocation” companies that are supposed to help the employee are just fronts for making profit.”

    Hahahahaha….You are pretty naive if you think that any company exists for any reason other than making a profit!!! I suppose that you donate all of your commissions to charity???

    Perhaps you forgot about a little thing called “procuring cause”. What you don’t realize is that many times the COMPANY PAYING FOR THE EMPLOYEES RELOCATION (the company that is the procuring cause for the real estate transaction: No relocation = no purchase or sale of a home) keeps the referral fee or is eligible for no cost relocations because of the referral fee. You can blame the relocation companies, but you are clearly uneducated about the law and the relocation process.

    Don’t be fooled by this guy, you might lose MUCH more than a 1% origination fee and guess what? This guy still gets his full commission check and you lose thousands in benefits. He has picked one type of policy from one relocation company and acts as though he’s a genius and all relocations and all policies are the same.

    He is not looking out for you, he is looking out for his OWN commission check and fails to see that your company is the only reason he is collecting one. You company might not even be able to afford to relocate you at all if it weren’t for the fact that they were collected a referral fee for a transaction that they are the cause of.

    He is just as greedy as the relo companies that he is slamming.

    (Written by an HR representative for a Fortune 500 company that contracts with a relocation company to handle moves nationwide).

  30. Laura R says:

    You are right on with this one (as usual) Frank.

    I am appalled at the enormous scam that is Cartus (relocation, real estate affiliates and mortgage loans). Fortunately, I like you did not fall victim to their big brother scare tactics when they tried repeatedly and unprofessionally to coerce me into paying first a referral fee and then they re-labeled it an administrative fee of 40% of my commission on a deal where a client hired me to sell his home based on my Internet presence and sales history. They repeatedly told me this was not optional. The practiced method and verbiage used by the representative was just what I had heard on a previous transaction. Coincidence or standard representative training for Cartus to get those referral fees?

    I have now acquired a buyer for that home after the Cartus “preferred” agent (that had the listing for 375 days) was unsuccessful in finding a buyer. Ironically this same “preferred” agent added comments to the expired MLS listing wishing the next agent good luck with this client. Strikes 1 and 2 already on record before the house was actively on the market.

    Now that I have a buyer, Cartus is asking that I sign a new listing agreement with them that allows them to terminate the original listing agreement if the existing deal falls through and contains other ridiculous clauses that place all liability for the maintenance, management and even personal payment of all utilities on me, the real estate agent. And of course I should do this for no additional pay or compensation. Sounds like a great deal…..for THEM!

    These folks will say and do anything to pad their pockets using any of their real estate, mortgage, and relocation affiliates. It is not only nauseating it is, in my opinion, an abuse of taxpayer dollars. Because yes, they primarily assist with government relocations and relocations for government contractors. Buckle up America, they are taking us for a multi-million dollar ride.

    And I’ve been told if I don’t sign this as is then their client isn’t entitled to his tax savings and full benefits. Hmmm, let’s see. If I comply with Maryland law and give this listing contract a firm start and end date that limits the clients benefits? And if I don’t agree to put the utilities in my personal name, that limits the clients benefit? And if I don’t actively promote Cartus financing verbally and in writing at the property AND provide confidential buyer contact information to a Cartus financial representative (EVEN IF that buyer client has notified us that he is using another lender) then I am in violation of the Cartus listing contract? In the famous words of my three year old granddaughter Are You Kidding Me?

    Here are some actual excerpts from the listing contract.

    5. As part of this agreement, you (the agent) agree to offer Cartus Home Loans financing to all prospective purchasers of this property and will also:

    a. Display and maintain in the property all information provided by that describes the programs offered by Cartus Home Loans.

    b. Actively encourage pre-qualification of all prospective purchasers of this property with Cartus Home Loans, 1-888-342-5744.

    c. When presenting offers to purchase from prospective purchasers to Cartus, provide the buyer’s name, and home and work telephone numbers, as well as the name and telephone numbers of the Real Estate agents involved in the transaction. At the same time, notify Cartus in all instances where buyers choose to obtain financing from a source other than Cartus Home Loans. This information will be forwarded by Cartus to Cartus Home Loans for follow-up on the buyers mortgage needs.

    Now let’s break this down….I am to do everything possible to shove Cartus financing down the buyer’s throat whether it is my buyer or the buyer of a co-op agent. And I also need to give Cartus the buyer’s home and work telephone numbers EVEN IF THE BUYER HAS INDICATED THEY ARE USING ANOTHER LENDER so that Cartus Home Loans can follow up with them about their mortgage needs. Hello Cartus, meet RESPA and the DO NOT CALL list.

    And I don’t have room here to go into the prices they sell the homes for once they acquire them. Around here relo. property in the MLS description means let’s make a deal. There has to be some sort of reimbursement for the “loss” they suffer when selling the house for less than they purchased it (of course using their salaried agents and charging a full commission on that deal too). This is just all kinds of wrong.

    All of their paperwork and communication is subterfuge designed to get the agent (particularly a sharp one) out of communication with the actual homeowner as quickly as possible and into the great machine that is Cartus. There ought to be a law!!!! 60 Minutes, Dateline, 20/20…could you please give me a call?

  31. NYC Burbs says:

    It’s nice to see it in print what I’ve been feeling for years! Prudential Relo is one of the worst but Cartus is close. They charge 40% of my commission to send out confusing forms and scare off buyers!

  32. John Williams (AKA wise to relocation scames) says:

    I just wrote a long letter to NAR explaining these abuses by relocation companies and asking for one of their “call to Actions”. If everyone on this blog does the same over the next week, maybe it will result in a review / investigation that just might hilight the fraud being perpetuated by these relocation companies. In the end the consumer (transferee) is being taken advantage of even more than us realtors. My next letter goes to the US Attorney Generals office. I’m determined to impact these fraudulent relocation companies the same they’ve impacted the consuming public and us hard workign realtors. No more!!

  33. Emily says:

    You are so ill informed on how relocation works, it’s hilarious.

    What many people (including yourself) don’t realize is that an employee’s relocation is COMPLETELY dictated by their company’s policy. Yes, some companies require their employees to work with a registered agent, which means paying a referral fee. The reason for this is that their COMPANY is paying new home closing cost benefits, like the ones you mentioned (including title insurance) The referral fee, believe it or not offsets the costs to the COMPANY that is moving the employee. There are other folks relocated that do not have agent restrictions, but may not receive benefits. So generalizing it as Cartus, is not only inaccurate, it’s not fair. Yes, referral fees are the main revenue source for Relocation Companies, but most of the largest corporations in the world (and the US govt) use relocation companies, to make sure they are compliant with IRS guidelines, not to mention giving the assistance to their employees to help make the move easier, and again, believe it or not they do help thousands of people every year with their transition, and are very happy with the services (your rarely hear the good stories)

    So I would suggest, in the future, you do proper research before you bash a company without having all the facts, or without understanding the industry what so ever.

    Obviously I am not the first person who has pointed this out to you. Hopefully you have been educated by now, but there is no scam with relocation companies, sorry to disappoint you. I understand agents don’t like to pay referral fees, but last time I checked 60% is better than 0%.

  34. FranklyRealty.com says:

    Thank you for your kind comments Emily. I am glad you feel getting paid half is better than nothing. Hope your boss says the same to you one day. Giving you a 40% pay cut and saying “at least we aren’t paying you $0.” Even Obama wouldn’t agree with that.

    Question for you Ms. insider, are you saying the referral fee goes to the company (indirectly or directly)? And they use the relo company as a front to collect the money, since they are licensed.

  35. sandy k says:

    Iam doing a listing side right now that I can’t figure out what the relo company is up to. The seller is a friend. She was
    told she had to use one of their two choices of Real Estate agents. Those agents under valued her home for an easy sale. Iam a top producer and have stayed on top through the recession, I know what I am doing. The seller wanted me to sell her home. The relo company made me jump through hoops to become qualified to sell her home and of course sign over 40% of my commission. I had to beg and plead with them to let me list it higher. I listed it at $10,000 higher then the top price the relo company wanted me to list it at. I know Denvers market extremely well and our inventory is very low. I knew we would have it under contract within the week. I listed it in the afternoon on Friday and had two full price offers with no concessions by Monday. By Monday evening we had a verbal at 176900. $1,900 over list. Also we had 17 showings. The relo company has been stalling and hasnt signed the contract yet. They want me to prove the value! My seller is furious, shes worried the buyer will give up on waiting for relo to accept. The buyer is having it appraised tomorrow. What a nightmare and all along the relo company keeps asking me for more nonsense. I wonder if the big companys understand whats going on out here with their valued employees being treated so badly by their relo companys. This company is a major us airline. The relo company is out of Texas.

  36. sandy k says:

    Oh my, i just read Emilys post. I had to do a usaa deal for a friend. The friend loved me but didnt like the usaa lender. He gave me a ten and usaa a five score. My companys relo dept told me not to let t8hat happen again. We have to get the highest score for the usaa lender too even if they do a bad job. Those high scores are fake.

  37. mike says:

    It is time for the Department of Justice to fully investigate relocation companies and their disclosures to the home owners.

  38. mike says:

    Just did a relo. My company even asked me, in writing, not to disclose the “referral” fee amount to the home owner who were my past clients.

    I refused.

  39. Lahna says:

    Cartus sucks!!!!!! I was the homeseller/ relocated person. What they put us and our realtor through …WHO WE EMPLOYED OURSELVES was sick. It’s been 6 months and I am still fuming. Gotta go before I have a heart attack thinking about them.

  40. Clay says:

    Thank you so much for this blog. I believe you have saved us quite a bit of grief. Kind of like telling us we were about to step in something and allowing us a clear path around it.

    We purchased our home just before the relo company contacted us. They are agitated and want to take 40% of our agents commission and possibly interfere with our current loan. I fear we might have been railroaded had we not discovered this information. Since we purchased before they contacted us we should be totally in the clear and will not allow them to bully them for a free” 1% loan origination fee that we don’t need.

    Again, thank you for this information!

  41. Jackie H says:

    A friend of mine worked for an ERA office in NY and had a seller who had land in S. Carolina he wanted to sell. She went to her broker for a referral agent in S. Carolina and was told she would be paid 25%. She left the company and when she asked for the paperwork her broker told her “don’t worry, I will do the right thing”. She was a fairly new agent and trusted his word (HA!)The deal took over 2 years and the selling price was 2M. This is raw land. NOT A RELO. When she found out the closing is in 4 days she called S. Carolina office to ask what her commission was going to be. They informed her that Cartus would be taking a percentage. This was the first time she ever heard of them. She contacted her ex-broker in NY who informed her that out of her $25,000 commission Cartus was taking 50% off the top and then she splits with him. She would get $6000 while ERA and Cartus gets $19,000. Cartus and ERA are owned by Realogy. Is this even legal? Didn’t they have an obligation to tell her in writing what this deal was going to be so she could have refused two years ago? Does she have any rights at all? This sounds like fraud to me….
    Help!

  42. Stella says:

    All relocation companies administer employees relocation benefits on behalf of the employer. They do not write them. They are bound by the client, or employer, who decides what their employee will receive. They are also required to abide by IRS rulings. Many Employers require a collection of referral fees to offset the costs they incur. I chose a lump sum over other benefits and afterwards realized I cut off my nose to spite my face all because of my agent.

  43. Redshoe says:

    We are the sellers in a relo situation. The relo package is making us pick between twi agents to sell our home yet the benefits do not include paying the agents fee or any other sweet perks. We basically get packers and movers and the “privilege” of help with marketing our house but we still need to pay for all that marketing. IF we do go with a different agent than we have to get approval for them to work w the relo company.

    I don’t understand at all why we have to use their suggested agents when we are paying for it and we do not have a buy out clause.

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