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Relocation Appraisals

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larryhaskell

Senior Member
Joined
Apr 23, 2002
Professional Status
Certified General Appraiser
State
Nevada
I have a question regarding relocation appraisals because I don't do them. I'm posing this question because a realtor called our office challenging a value on a sale. She indicated the relocation appraisal had a value of $420,000 while I appraised it for $405,000. The sale price was $415,000. I'm sure the sale will go through due to the LVR. Is the value in a relocation appraisal typically higher than for an appraisal for a sale considering a stable or appreciating market? Thanks in advance & I look forward to your responses.
 

EDWARD BERRY

Senior Member
Joined
Jan 15, 2002
Professional Status
Certified General Appraiser
State
Arkansas
After doing RELOS for 25 years we have found that because they look FORWARD to the market, that some appraisers tend to overvalue them. ( I am sure I did that early on).

In addition, the listings SHOULD dictate the value sought after more that on regular work and because they are rarely ever included in a report not analyzed much.

Also, sales of existing houses should be utilized more that normal (rather than new house sales in the sd) because that are the conditions of the subject future sale.

Over the years, in my experience, my estimated values have been HIGHER rather than LOWER that the ultimate sales price.

The RELO companies would like 5% accuracy, but you won't stay on the panel long unless you can do better than that.

RELOS are good assignments but require more work, but are more rewarding. ($$$ )

Ed in Arkkansas
 

Doug in NC

Elite Member
Joined
Jan 17, 2002
Professional Status
Certified Residential Appraiser
State
North Carolina
It's hard to say. Since relos are not really a "market" sale (this is not your typical seller). I tend to think they "generally" sell for less than market price since their owners are what real estate investors call "don't wanters". So, it is not hard to understand why an appraisal could be high. We are looking at listings and sales, but sales are market sales so they would tend to indicate a higher value.

On the other hand, I have seen relos sell within days of going on the market for very near what the seller was asking. The market has to be good for that to happen, and the homes were above-average in features and condition.
 

Jim Bartley

Senior Member
Joined
Jan 20, 2002
Professional Status
Certified Residential Appraiser
State
Virginia
The main difference between a traditional URAR appraisal and a relocation appraisal is that a relo is FORECASTING what a property may sell for within a specified market exposure period, not what it may be worth today or at the time it was placed under contract. As part of that analysis it takes into consideration the competing properties in the market (principal of substitution).

I'll give you a real world example of how this can play itself out. A few years ago I did a relocation appraisal in a high end neighborhood. During my inspection, I counted about 30 homes for sale. This out of a total of maybe 200 homes. It turns out that a major employer in the area was transferring a bunch of people and many of them lived in this development. Values had been increasing up to this time, but now sellers were lowering their prices since there was so much competition. So, even if I had adjusted positively for time (i.e. values increasing) on some older comps, I now had to project what was likely to happen (i.e values dropping) and make a downward "Forecasting Adjustment".
 

Mike Garrett RAA

Elite Member
Gold Supporting Member
Joined
Jan 14, 2002
Professional Status
Certified Residential Appraiser
State
Colorado
As a general rule I would say the relocation appraiser is more conservative and more likely to under value rather than over value.

Might I suggest you join the Employee Relocation Council (ERC). Get their handbook on appraisal. It can be a good source of business depending on your location. I am looking at the 2002 directory and there are presently 9 listed for Colorado Springs...7 are designated, all have 20 or more years experience.

Typically, ERC appraisals are in the $550 to $650 price range. Annual dues are less than one appraisal fee.
 

Richard Carlsen

Elite Member
Joined
Jan 15, 2002
Professional Status
Licensed Appraiser
State
Michigan
Relocation appraisals, as stated above, are opinions of selling prices within a stated period of time. This is usually 120 days. The problem is that the seller, who has an interest in the outcome of the value, often gets to pick the appraisers who will do the appraisal. It has been my experience that the sellers try to "sell" the house to the appraiser because they want the value as high as possible for the buyout. Less experienced appraisers will often succumb to this pressure and tend to go to the upper end of the value range. I know when I first started doing relos, I did.

The trick is to really be very fair and honest with your data. Read and listen to what the market is telling you. Don't listen to what the homeowner wants and wishes.

You may have had one of those new relo appraisers in this deal that just got carried away with themselves.
 

Verne Hebert

Senior Member
Joined
Feb 25, 2002
Professional Status
Certified General Appraiser
State
Montana
Larry-

I have been doing relo's for about 20 years now. There is a big shift right now in who is assigning these things.

In the end, you may have "market value" and you may not. Differing agencies define different marketing periods. I have seen them from 90 to 180 days; most agencies are however 120 days. If your typical marketing period is more than the defined period you will be discounting your value to sell in a shorter period of time. Take a good look at inventory (we should always do this anyway).

The appraisal process in this area is very challenging-normally operating in the range of 40% to 100% gross adjustment. I have had to heavily discount "market value" to arrive at their requested "anticipated sales price". I have also had assignments that discounting the value heavily would not entice the market to purchase in a shorter period--this is a very interesting element.

I find the marketing period the most significant aspect of the report. I adjust through the grid and nail the market value...and go from there with forecasting and adjusting.

I hope this helps. I really enjoy doing these...and I track them to see how I did...and how the relo company did. One thing I don't like is the lack of a cost approach--often I do them on the side and keep them in my file.

Here, my fees for these are $650 to $1,000. If I am doing a "third" appraisal, these are generally complicated (hence the need for a third appraisal) I charge my standard fee for the assignment, then add another $150 to $ 200 for not calling me first (and because these will require yet greater diligence and analysis).

Good Luck!
 
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