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What is a Relo Addendum?

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I’ve been looking at homes on Redfin lately (no plans to relocate, just window shopping) and a term I’ve seen pop up a few times is “Relo addendum required.” Relo addendum is short for relocation addendum and it usually means that the home is being sold through a relocation company. This happens when the owner accepts a job with a relocation package but can’t sell their home before they need to move. The home is then sold through a relocation company, who requires this addendum because they don’t want to deal with the hassle of learning local requirements. The addendum typically removes all warranties, sells the house “as-is,” etc. (If you see “bank addendum” then it means that the bank owns it.)

Ultimately, you negotiate with the seller and, if all is peachy, the seller, the relocation company, and you all agree on a price and the house is sold. Right before settlement, the relocation company may buy the house from the seller (if they don’t own it already) and then sell it to you. I don’t really know why this is necessary but that seems to be standard practice.

It’s important to review this addendum because it usually contains clauses that supersede clauses in the original sales contract.

Here’s another thing I thought I’d gripe about… considering how advanced we are technologically, why is the MLS still so backwards? I feel like I should be getting printouts on a dot matrix printer. The information contained in the system is so obfuscated and you’re constantly dealing with terms like this throughout a listing. Why can’t things be in plain English?

{ 6 comments, please add your thoughts now! }

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6 Responses to “What is a Relo Addendum?”

  1. Jack says:

    I just went through a relocation with a home sale benefit (and actually ended up buying a house from someone who was being relocated). There are two reasons that I’m aware of that the relocation company will buy the house just prior to the sale:

    1) There are no (or maybe reduced) transaction costs so that the original owner gets to keep more of the money from the home sale on a tax-free basis. For instance, normally you would have to pay commissions and closing costs as a seller but in this case those costs are not in your transaction with the relocation company (but they are in the subsequent sale from the relocation company to the buyer). The other option the company would have to reimburse these transactional costs would be to include it in your paycheck, and in that case you would pay income tax on the benefits.

    2) It provides some protection to the seller in case the sale falls through at the last minute. In the case the buyer can’t close as originally agreed, the seller already is free of the home and it is the relocation company’s responsibility to renegotiate or find a new buyer.

    If you go with the relocation company’s package you also have to agree to many restrictions that they have in place. We ultimately ended up skipping the home sale part of our relocation benefits because they wanted us to list the house for far less than we felt we could sell it for. Once we do find a buyer, we will have to pay income taxes on the reimbursements, but they are less than the increased sales price that we are confident we can get.

    From the buying end of things, we had to sign an agreement beyond the sales contract. I don’t remember everything that was in there but I do remember that we would pay additional penalties if we had to delay closing. I don’t think anything else was too onerous.

  2. tom says:

    MLS is terrible because it’s a single source program. There is nothing else out there to compete.

    Maybe we develop a brand new database and sell it to some new real estate companies like Redfin…

  3. cubiclegeoff says:

    It’s bad because they want to keep it confusing as far as I can tell.

  4. I wonder what companies are offering relocation packages. I wonder if people would be interested in learning in companies who are investing in their employees.

  5. John says:

    “The information contained in the system is so obfuscated and you’re constantly dealing with terms like this throughout a listing. Why can’t things be in plain English?”

    Job security.

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