Having candidates for management positions refuse job offers due to housing costs used to be a problem strictly for law firms in the Northeast and the West Coast. But plummeting housing prices seem to be having an impact on law firms all over the country. 

The problem is a common one. Upon accepting a job involving relocation, most senior administrators follow the conventional wisdom of buying as much house as they can possibly afford to benefit from the maximum appreciation leverage. Then, as their home value appreciates, many homeowners take advantage of home equity loans that allow them to borrow 100 percent or more of the appraised value of their home.   The result, when it comes time to sell, is that the value of what the home will sell for is less than the amount owed on their mortgages. This may involve a cash payment to get out of their existing house as well as for a down payment on a new house.

Here are five things you should know about relocating senior law firm management staff members:

1.        Go into the interview process with your eyes open. When interviewing a candidate in a situation that may require a move, don’t be afraid to ask questions about the individual’s housing situation. This is especially true if you are considering moving someone from a high cost of living area where the burst housing bubble has had the greatest impact. If relocation is going to be a sticking point you want to know that as soon as possible.

2.        Large signing bonuses are becoming a fact of life. This is especially true where relocation is involved and cash may be needed for bridge mortgage payments. 

3.        Moving to a lower cost of living area rarely justifies a lateral salary move. There are situations where someone is not currently in a position and might be willing to consider a lateral move, but as a general rule, if someone is willing to work for a lower salary, ask yourself why.

4.        Negotiate relocation allowances as actual expenses against a cap. After an offer has been made, especially if the candidate has been interviewed and approved by a number of partners, it is easy for a firm to get nickled and dimed for additional relocation costs during salary negotiations. Additionally, in situations where it may be difficult for the candidate to sell his or her existing home, it is easy to give up incremental increases in temporary living expenses that were not part of the original deal. Describe allowable expenses but always have a dollar cap.

5.        Do your homework. Before extending an offer or even a second interview, investigate cost of living differences. Runzheimer International provides customized cost of living and salary level comparatives (www.runzheimer.com); for more basic information go to www.bankrate.com/brm/movecalc.asp for a cost of living calculator.