My firm is currently working on a very high profile ’C-level” search for a client, that we started just before the holidays. The candidate pool was huge and many executives were throwing their names in the hat for consideration. This is a great job, great city and a super opportunity for the right person. There were lots of great candidates – many that could “nail” this new job! But..as we always try to do, we were seeking the absolute BEST candidate that met all of the requirements and was the best cultural fit for the client.
The interview process started, quickly progressed, and before the New Year we had quickly narrowed the field of qualified candidates to 8. Then – on to the written questionnaire, personality testing and the video interviewing. Down the stretch and the field of 8 quickly became a final slate of 4. All candidates in the “hunt” for this job had a similar challenge if they were offered the job. It’s the newest ”kink in the hose” in the search business, that will be with us for the foreseeable future (Did I say years? Didn’t think so). More on that later.
On to the to the face-to-face interviews – and it was unanimous. The candidate of choice was chosen by a knock-out decision by each member of the search committee. A true no-brainer. I knew it – and predicted the outcome in advance. The feedback was overwhelmingly positive. Even my star candidate knew it – an offer was imminent. While he was in town, he decided to take a late flight home to meet with a local realtor to check out the area. The excitement in his voice was evident to me. Once an offer came down from the client, it would be a fast and furious race to get moved and situated in his new job and new town. After all, change, as Martha Stewart says, “is a good thing”. My candidate spent the next morning looking at real estate and evaluating schools and got a real taste of the new community he and his family would soon call home. Check. That all went well. It was a buyer’s market in the new city, and the deals were unreal!
Now, time to meet with the realtor in his current city to get the facts on the timing, details and projections for the sale of his current residence. That’s where the wheels came off on this deal. And… it was not what he wanted to hear – or what I wanted to hear – or what my client wanted to hear. My candidate would take a 25% – 30% bubble bath on the sale of their existing home. Case closed. Search over (at least for this STAR candidate).
Candidacy withdrawn - Period. All within 48 hours of meeting with the realtor. Yep - Game over.
Even though we test each candidate (including this person) for signs of any hesitation regarding relocation – when a candidate realizes they are 25% – 30% up-side-down on their real estate, it becomes a sobering event that economically no one can ignore. He was heart broken, I was sick (literally), and my client was incredibly disappointed. Without exploring other options and alternatives and taking (in some cases) huge financial risks, I’m afraid this story will be replayed over and over for the next few years. You may or may not have the option of renting your home until the market turns around - but that in itself has risks. The relocation challenges of moving that involve selling existing real estate are real, and there is very little we, as search consultants, can do about it. We work with real estate relocation experts who uncover all of the facts and challenges each candidate on the issue. We want to make sure they have thought through the entire process. But until we see a recovery in housing in the US, candidates may have to be willing to take a huge financial hit to pull the trigger and make the move. It’s tough.
Maybe, from now on, we will add additional language to each position profile, that involves a relocation, that sounds something like this…”The ideal candidate has extensive experience as a “home or apartment renter” and can prove they currently own NO real property”.
That should shrink the candidate pool. Yep…That should do it…
You have a good point that relocations are now dependant on money as much as willingness. Personally, I’m a little perturbed that an executive candidate would not have at least some sense of the value of his property ahead of time. Okay, the search was conducted in a very short period of time, but unless his house was a small portion of his wealth (in which case he would have been able to cover the loss) I would have expected him to have enough knowledge of his personal finances to realize that there would BE a loss, whether or not he was expecting a job change. Is this unreasonable?
Beth:
Actually I think we (most of us) go thru denial when we look at our own personal situation. We watch the evening news (ok – I lied – I don’t!) and feel badly about the housing crisis not knowing how connected we all really are in this mess. Yes – there are micro markets where some real estate is maintaining value in this housing debacle. Unless you have done a recent appraisal on your own property – most of us have no clue what the real value of our home is worth using today’s numbers. Some regions of the US are much worse than others and it’s hard to come to the realization that our wealth from a real estate perspective has been negatively impacted. But it has! I do not think this individual was malice in withholding information – just oblivious to think it could happen in thier own backyard. Great post Beth!
Thanks, Tim. I guess I’m spoiled living in a townhouse community with reasonably frequent turnover so there’s constantly refreshing data to check on to determine my home’s likely value.
Isn’t the seller going to offset the 25% loss on his/her current property on the new home that is probably selling at 25-30% less than the boom time real estate price?
Chris:
Depending on when the home was purchased and whether or not they had taken out a home equity line – we will never know. What I do know is that my candidate was “up-side-down” on the equity. Nobody wants to write a check even if they feel they can recoup their losses on the other side. It’s truly an emotional and economic issue for all executives we place. This was not the greatest geographical location which is why the numbers were so painful on the sell side. It is what it is. He bailed and we continued with our search. That’s what we do!
“The wheels on the bus go round and round”.
This is why I hope I can be competitive on the job market in the future-I’m a young renter who can move when she needs to.
So this guy turned down a perfect career in a huge opportunity because of a real estate issue. Couldn’t find a rental and rent the house? Sounds like kind of a basic thing to consider to me. So I call this either a) cold feet, b) a leader with no guts, or c) inability to negotiate a better comp package. (That search alone should warrant a $50k signing bonus).
Life is too short to put your mortgage concerns over your happiness 40-60 hours a week. Isn’t it?
Laura – you being mobile without a mortgage to deal with is a plus for sure!
Henry- Some people tend to be risk takers – while others simply don’t have that in their DNA. On the signing bonus I have done several searches in the past 12 months with $350K – $500K in total compensation and the $50K signing bonuses are not on the table. Signing bonuses – YES. $50K (excluding relo) NO.
I do agree with the happiness factor and I probably would have rented my home until the market turned. But – he was definately not into taking on risks.
I’ve moved a few times in my carrer, and the hiring company either helps with the selling of my house, some way or other to keep me whole through this transition. If that company is unable or unwilling to do that, even as they tell me I’m their guy, then all bets are off. It’s just part of the price to get me in the position where they are located. Consider it a hiring bonus!
John:
I have moved and had the company that recruited me pick up the tab for the move and to ensure I was “whole” in the process financially. However, it IS a much different game now and employers are not as generous as they once were on relocation packages. You can still get the deal done – but it takes much more effort by all parties to get to an acceptable agreement. I do think things will get better on the relocation front as the housing market improves. However, we have all seen a change in the amount of money a prospective employer is willing to pay for a relo compared to just one year ago. It is truly a different game and selling a relocation to the candidate and to the new employer takes much more creative thinking than ever before. This too, shall pass! Hopefully soon!!! Thanks for your post!
I’m with Beth on this one. I think any candidate looking at a major relocation like that would have to look at the feasibility factor first (before even applying and flying out for meetings). Failure to look at current home appraisal value, compare values between the two cities, etc. doesn’t make any sense. It’s also possible that he assumed he could reel the company into helping him out.
Each “deal” is different. I’m sure for the sake of time and space you didn’t provide all of the intimate details. But this reads as though there was something else in addition to the home equity loss at play here. Maybe the equity loss was the tipping point (i.e. straw-broke-camel’s-back). How much equity are we talking about here?
Hayli:
There was no “reeling” in this deal. It was DOA (dead on arrival) right after he had the appraisal done on his home. I think he knew he home had lost some value – so he did not have his head in the sand. He just had no idea how much value he had lost. Like I said before – there are always several factors including improvements made, equity line balances and other data from recent sales/comps in the neighborhood that all have an impact on the seller’s bottom line. In the end – I think he was overly optimistic about what he would get for his home and he indicated he was ALL IN (multiple times) and would make the move. His actions proved to be different.
He was upside down – by over 6 figures. OUCH! I truly feel like we could have made this deal work if the delta wasn’t as huge – he could have made it up on the other end of the transaction. He and his wife discussed it: she-said-no-and he-said-no and that was that! The (very) good news is we closed the search with another candidate. Thanks for your post!
Hiring, the little that will have to take place, will probably be increasingly “locals only.” Companies with established patterns of relocating high-potential employees are probably wondering how to keep their career-pathing systems working in the face of these real estate problems.
This economy has clearly put more of a regional focus on candidate sourcing when there is a relocation involved. Local would be great if you can make it work. In high level executive search with narrowly defined (hard to find) skills usually reduces the candidate pool significantly.
Good post Barbara!
I like your indirect reference to an assumption that is somewhat culturally based: a person fit for a leadership job owns a home and has good credit/ is wealthy.
In other countries, it is not necessarily a given that professionally successful people own a home.
Even narrowing the candidate pool based on “renters” might not do the trick. They may look for a new position and when they look into the detail of moving they may have a divorce with custody battle to deal with
Christine:
My reference to the executive talent pool we work with owning their own home is based on my actual experience in dealing with candidates that have to relocate. Sure – circumstances could be different and I certainly make no judgment or measure a candidate based on whether or not they are a homeowner. I also don’t define wealth as owning a home:-) We deal with all sorts of circumstances – the good, bad and ugly. You bring up several scenarios that could all come into play in a search assignment. There is not a “one size fits all” in this business. Thanks for your post!
Last September, I accepted a position that required relocation. I moved my family to a rental house close to my new employer to avoid having two mortgages while waiting for our previous house to sell.
The last time my house was shown to a potential buyer was in December. There are 20 houses for sale in my previous neighborhood, with only 1 completed sale in the past three months.
My family and I are making plans to move back to our previous house next month and I will begin commuting 120 miles each way to work (at least its mostly interstate).
I’m not upside-down in my existing house, but the proceeds from its sale wouldn’t afford me enough for a down payment on a replacement. Jumbo mortgages (the type that any C-level employee would likely be looking for) are requiring 20% down payments on top of interest rates that are significantly higher than conforming ones.
Selling other assets, in their currently depressed state, in order to fund a downpayment isn’t very palitable either.
Robert
Robert:
Thanks for sharing your story. I hope you are able to get “whole” at some point from the $$ you invested in your new job. I can only imagine how tough it was to move – only to move back. Then when you consider the financial impact this has on you and the emotional toll on your family – I can truly feel your pain. I hope this new oppty works out for you and your family and tnaks again for sharing your story about this very critical subject. My best to you and yours Robert.
And they used to ask me testily what real estate had to do with recruiting.
Sheesh!
Ya’ think they get it now?
Maureen:
Absolutely! It has a whole lot more to do with recruiting than it did a year or two ago!
please forgive me, but I am still stuck on “cultural fit” for the client.. what exactly does that Mean? are we discussing work environment ie micro/creative/bureaucratic? or are we discussing golf/country club…
Okay, and besides that Mrs Lincoln, how was the play? Tim, this was a good article.. — Yep, try relocating anyone out of California especially San Diego in this day and age..
Karen:
It’s a fair question. Every company has a certain “culture” that is based on what the company stands for and the type of company they want to build to attract key customers and human talent. In many cases we present great candidates that meet the position profile – but are not the “best fit” for a client. We estimate that 50% of the work we do to trying to place a candidate that is the best “cultural fit” and the company feels that candidate can be successful if hired. Call it the hiring managers “gut feeling” about how they will work with other employees of the company and how they might interface with customers. While a candidate may be an exact match in many ways – they may not be the right person and may NOT fit with the organization’s ideals, ethics, mission statement and what the company stands for ect.
I hear you on your other point loud and clear.
BTW – If I lived in San Diego (great city) I would probably not want to leave anyway!
Tim, I also deal with this same issue – I can’t provide national data, but I can say, without a doubt, that willingness to relo has fallen through the floor.
For me personally, it is very early in the courting process in which I’m spending time with the candidate on their real estate situation. I’m not going to say a deep dive on conversation 1, although it does come up topically. At conversation 2, we’re spending time together (literally) researching the market for cost-of-living data, etc.
Fallouts happen to the best of us, unfortunately . . . but I’d be quite upset if it came down to a real estate concern in the 13th hour. The candidate should be serious, meaning they’ve done this homework with us before the offer comes . . . and it’s up to us to convey to the Client what it will take to close the deal.
These are tough times and I concur that real estate is my biggest variable today – so much so that I spend extensive time qualifying ‘seriousness’ (and/or what it would take to create absolute viability). I hope the real estate market adjusts upward as inventories come down, however I’ve seen more of a normalization (i.e. real estate values cominmg more in line with reality) than what they were before the bubble popped. This means many of us have equity evaporate (equity that was never sustainable to begin with.)
Agreed and we did a ton of the up front qualifying as well. We are now working with a national firm that can give us (and our candidate) real time data on average sales by neighborhood, days on market (DOM) and cost per sq ft averages. It’s not scientific – but it does provide useful data to help validate the candidate’s interest in making a move. This too shall pass Josh!
thanks for the response Tim – so often I hear the comment “corporate culture” and in this day and age of job loss, and high litigation – each and every time I hear those words, I get a shiver down my spine.
Yes you are correct, that the Corporate Values, and work environment (often classified as corporate culture) are indeed important when reviewing candidate potential.. but, sometimes we as recruiters may put too much emphasis on the “wants” of the client, rather than focusing on the Needs.. What is needed to get the job done, and done well.
But back to the article at hand.. In the past couple of years we were able to get complacent regarding the housing market.. but, we are back to the good old days, where interviewing the family and finding out even where the family pet likes to play is so important in the recruiting process..
Thanks for the reality check.. Yeah, San Diego is Great – but we do have a lot of people leaving due to the crisis.. those who can afford to leave.. Lot of foreclosures here as well.. it is pretty sad.. it is quite an upside down market here in America’s finest city
Karen
Another possibility to consider is that there will not be a recovery. That is a return to prior prices. Many economists think the recent market was hyper inflated and that we shouldn’t be thinking of that coming back, at least not in a time frame that would feel like a recovery. It may be a slow steady climb that will leave a lot of people underwater for a long time. This housing market may be our new reality.