Up until the mid-1960s, the United States had, for the most part, a stationary workforce. The only people that seemed to move around with their jobs or careers were military personnel. That all changed with the dawn of the Age of Mobility. With the ease of transferring to a new location, and transitioning into a new career, evolved a new industry: relocation.
As a result, corporations established a group to address moving household goods and real estate issues. This formed the basis for the creation of the Employee Relocation Council in 1975. Today this organization is known as Worldwide ERC, reflecting the mobility of a modern global workforce. This post will explore the realm of relocation appraisals and give advice on specializing in this particular area of residential appraisal.
A different approach and a different purpose for relocation appraisals
The relocation process is complex. It can include everything from handling the sale of a home in the employee’s city of departure, to the purchase of a home in their destination city. This complexity created a need for a different type of appraisal—one that could project a practical, realistic selling price with a specific, defined marketing time. Marketing trends that might influence the sales price of the property within this defined timeframe also needed evaluation.
It was determined that the standard Uniform Residential Appraisal Report (URAR) used in mortgage lending would not suffice for a relocation appraisal. There were no general purpose (GP) appraisal reports at this time, so the Employee Relocation Council developed its own standardized appraisal report form in 1984, and has updated this form several times over the years. Known as the ERC Summary Appraisal Report, it is lengthier than the URAR (seven pages) and requires the appraiser to provide a considerable degree of detail and analysis in narrative form.
In relocation appraisals, the purpose is to form an opinion of the anticipated sales price, not the market value of the property. Another difference is the intended user. The intended users of the relocation appraisal are the appraiser’s client, the relocation management company, and the employer. While the report can be provided to the transferee, the transferee is not an intended user.
Since the purpose of the relocation appraisal anticipate the sales price of the property (and includes an element of forecasting), the relocation appraisal involves a wider range of research and analysis. For example, retrospective analysis (i.e., closed comparable sales) is considered in a mortgage appraisal. Conversely, 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.
Financial considerations, marketing time, and compliance with relocation requirements and guidelines are examples of other ways in which relocation appraisals differ from “the norm.”
Sources of business for relocation appraisers
So, what opportunities does this offer you? The relocation business provides the opportunity to expand into a specialized area of appraising with a built-in clientele. Some corporations have their own “in-house” relocation package and rely upon local, experienced appraisers who have built a reputation within the community. Developing a relationship with the human resources department of a local company can lead to an ongoing source of business. Unique to the relocation business is the fact that two or more professional appraisals are required on each property. Hence, there is the add-on—twice the chance for opportunity to knock at your door.
How to get started
McKissock’s course on Relocation Appraisal and the ERC Form will get you up to speed on relocation appraisals. The course will help you develop a thorough understanding of the relocation market segment and can help you gain a competitive edge in this area of specialization. You’ll get in-depth information about the relocation industry and the process involved in completing a relocation appraisal assignment. You’ll also review specific terminology, forms, and guidelines associated with relocation appraisals.
Article by Carole McCullough. Carole McCullough has been a Certified Residential Appraiser in the State of Maryland for over 25 years. She is the owner of ARC (Appraising and Real Estate Consulting) LLC. Her areas of specialization include waterfront, retrospective, historical, and oddball appraisals in narrative form. If you’d like to get in touch, email email@example.com.