For a homeowner relocating to a new city, state, or even country, selling their existing home is one of the most challenging and stressful parts of the process. To speed up the relocation timeline, the homeowner’s employer may provide compensation to make payments on the property while finding a new home or even purchase the property from the homeowner.
Thus, having an accurate valuation of the property supports both the homeowner and the company to ensure they receive fair compensation.
Relocation Appraisal: Background
Until the mid-1960s, the United States had a fairly stationary workforce. Except for people in the military, jobs didn’t require people to relocate to new areas. But as moving became more accessible and companies began to source employees from different locations, relocation became more common. And this opened the door to a new service: relocation appraisals.
For corporations to better serve their employees, they established an organization to address issues related to moving belongings and selling real estate. This organization led to creating the Employee Relocation Council in 1975, which is now known as Worldwide ERC and works with companies and employees worldwide, helping them relocate both within their country and around the world.
How Relocation Appraisals are Done
A relocation appraisal will be commissioned by the corporate relocation company. As the appraiser, you will observe any adverse conditions which might require another inspection, such as the presence of termite or water damage. You will investigate the interior and exterior of the home and address questions regarding how to prioritize any recommended improvements to the home.
Once you fill out the Summary Appraisal Form, you will offer an estimated price for the home and how long it might take to sell. The company ordering the relocation will then use this information and factor it into the cost of the relocation before approving it.
Relocation Appraisals vs. Traditional Appraisals
The ERC determined that the standard Uniform Residential Appraisal Report (URAR) used in mortgage lending would not suffice for a relocation appraisal because they wanted to better serve the corporate relocation companies who order the appraisals. To meet this need, they created the Worldwide ERC Summary Appraisal Form¹ in 1984.
It’s longer than the URAR form and requires the appraiser to provide more detail and analysis in a longer, more narrative format.
There are two key differences between a relocation appraisal and a mortgage-based appraisal:
- You aren’t providing the market value of the property so much as you are providing an opinion of the anticipated sales price. the purpose is to form an opinion of the anticipated sales price, not the market value of the property.
- The intended user of the appraisal is not the transferee. Instead it is the appraiser’s client, the relocation management company, and the employer.
Let’s look a bit closer at these. Since the purpose of the relocation appraisal is to anticipate the sales price of the property and requires some forecasting, it involves a wider range of research and analysis.
For example, retrospective analysis (i.e., closed comparable sales) is considered in a mortgage appraisal, but a prospective analysis is used in a relocation appraisal, as forecasting is a part of the assignment. Data on supply and demand, as well as overall market conditions such as absorption rates, are used to reach a forecasting adjustment.
There are also differences in the selection of comparables. Regarding closed sales, the restrictions differ from those of a mortgage appraisal in that the appraiser does not have time constraints. Properties of similar style, design, and amenities within the same community carry more importance than settled sales within a few months of each other that lack these similarities. Pending sales are also given more consideration in the process.
The subject property inspection in a relocation appraisal is decidedly more detailed than that for mortgage purposes. It is not unusual for an appraiser to spend at least an hour or more at the property, notating aspects of interior décor, landscaping, and improvements—as well as deficiencies—as all of these factors play an important role in developing an opinion of the anticipated sales price.
Difference in Timeframe
Relocation appraisals usually have a much faster turnaround, usually only up to 120 days. The planning, review, and implementation of the employee relocation process need to happen within this window. A mortgage appraisal has much longer to unfold–30 years in the case of a 30-year mortgage. Mortgage lenders look to ensure that the value of the home will be preserved over the duration of the mortgage.
The marketing of a home in a relocation appraisal takes place as soon as the appraisal has been made. On the other hand, a mortgage appraisal only happens once the home has already been on the market; and by this time, many other factors may have altered which can affect the market value of the home, and therefore the mortgage appraisal.
More minor differences between the two types of appraisals also include financial consideration, marketing time, and compliance with relocation requirements and guidelines.
How to Find Relocation Appraisal Clients
So, what opportunities does this offer you as an appraiser? Offering relocation appraisals allows you to expand into a specialized area with a built-in clientele. Larger corporations have their own “in-house” relocation package and will work with experienced local appraisers. By developing connections with human resources professionals within these companies, you can tap into an ongoing source of business.
Learn More about how to Diversify Your Income
When you join McKissock’s Unlimited Learning Membership, you’ll get unlimited access to hundreds of appraisal continuing education courses, including those that provide skills and insights in how to diversify your income. In addition to relocation appraisals, you can learn about estate appraisals, divorce appraisals, and even earn a luxury home appraisal certification. Visit our Unlimited Learning Membership page to learn more and get started!
You can also explore all the opportunities we provide to renew your license in our appraisal continuing education courses. Work with McKissock today–the leader in appraiser education!
Sources:
1. Microsoft Word – 2010 Appraisal Form Sample.doc (worldwideerc.org)
