Every appraiser has a type of assignment that is near and dear to them. One of my very favorites is Employee Relocation “WERC” work. These are a specialty assignment within the realm of the residential expert. They have long been a favorite type of appraisal work for me, because the relocation client has a real problem that needs to be solved correctly. Their problem relates to potentially purchasing the home of a transferring employee, which is offered to help make the transferee’s move more seamless and less stressful. This is a laudable goal, because anyone moving from one location to another is going to have many mixed emotions, and the stress of a home sale should not be an additional stressor.
Because of the real need for a supported answer, companies hiring appraisers to handle this type of work want to ensure that the appraiser they retain knows how to handle the problem correctly. There are differences between relocation work and most residential assignments. The differences largely relate to the definition of value, which on a relocation assignment is “Anticipated Sales Price” versus “Market Value”. Within the definition of Anticipated Sales Price, is the component of “Forecasting”, which includes the analysis of what has happened in the past, compared to the current market, and projecting out in time within a defined period (usually 120-days), in order to affect a sale within this period. This can be tricky in changing markets, as the past may not predict the future, and the appraiser has to be sensitive to what is happening, right here, right now.
This forecasting adjustment, whether it is positive, negative or zero, must be considered and made. In rapidly advancing markets, the prices may be rising at each sale, leap-frogging each other. The appraiser has to consider this as a possibility/probability, just as when the market is starting to retreat. Even when the market is balanced and stable, seasonality comes into play and may require an adjustment. For example, in the market in which I work, we tend to slow down after the Fourth of July, and the appraiser should consider that, just as much as they would want to consider how the market normally picks up in February. This is because we are projecting out in time to what the house will likely sell for within a marketing time of 120-days.
Another stark difference between the relocation assignment and a mortgage assignment is the detail involved in the market conditions section. The form, as developed, allows the appraiser to truly analyze the market segment they choose as representative of the subject’s competition. Appraisers can use whatever they consider relevant, and personally I like to lay this out as an annualized monthly data run. Some appraiser run it as quarter-to-quarter, others year-to-year, and so forth. This allows flexibility and can help organize the thought process to what is happening in the market as of the effective date of the report. In fact, this format is easy to use for any residential appraisal problem, and would be a benefit in lieu of the 1004MC.
In addition to the forecasting that is made, another difference in relocation assignments relates to décor, far more than with a mortgage assignment. The form guidelines specify that we consider the property’s appearance as it was shown, as of the date that we saw the property. Sometimes we are asked to value “as if vacant” – this is another challenge as the transferee may have a very coordinated color décor with wall hangings, furniture, and so forth, but when all of that is gone, what’s left may be personalized wall or floor coverings. Personalized colors and special design features that may be attractive to the transferee, may actually be a detriment to marketing the house. This needs to be addressed. For example, consider the built-in hot tub in the main bedroom (not the bathroom), or the 5,000 sqft house with pink vinyl siding, or the house where the teenagers thought painting the walls and ceilings black was a good idea.
Just as in a mortgage assignment, functional issues with a property have to be addressed. We have all seen houses with a captive bedroom which requires that you have to go through one bedroom to get to another, or where the bedrooms are on the second floor, and the only bathroom in the house is on the main floor, next to the kitchen. In an increasing market, the buyers may be more forgiving of these types of quirks in a property, but when the market slows, they can be make-or-break situations. As the relocation company and employer could well be offering a buy-out to the transferee on their property, it is of critical importance that these types of quirks are well analyzed and described.
Unlike a mortgage appraisal with the current UAD requirements, relocation appraisals require the appraiser to rate the quality and the condition based on relative versus absolute factors. If a house is almost new, and all the sales used are almost new, and the neighborhood consists largely of similar properties, then the condition is going to be “average” compared to these properties. If the house has amenities that are atypical for the market, then these may be “excellent” or “good” compared to others that compete. Or if there is a functional issue, this may or may not be average for that market, because other properties that are comparable may have a similar functional problem. The ratings are addressed in the Definitions and Guidelines page of the ERC form, and anyone who is considering completing this type of work should make themselves familiar with these guidelines, as well as with the definition of Anticipated Sales Price and Forecasting.
In relocation appraisal assignments, we are judged not only by the analysis that is presented in the report, but in comparison to another appraiser. It is quite common for the two appraisers who are completing the relocation assignment to use common sales or listings, but to include different information. This is common with items such as basement bathrooms, which the MLS may report as on the main floor, as opposed to a basement. Or maybe the ubiquitous days on market for the listings, when the reports were prepared at different times. If the Anticipated Sales Price for two reports are outside of a spread (commonly 5%), then the requirement is often a third appraisal report, allowing for possibly more noted discrepancies far after the fact. The appraiser handling relocation assignments has to be prepared to answer multiple questions from the relocation company in a prompt and professional manner. Appraisers who are not familiar with relocation appraisal guidelines can cause more call backs and requests for information. This is because of the compare-and-contrast function in the review of these assignments — one appraiser may consider a forecasting adjustment necessary and support it, while the other may not adequately address it. If you decide to do this type of work, educate yourself on the process and be prepared to answer questions on most reports that you complete.
If you enjoy the analysis, and describing your analysis and conclusions, then I would encourage you to explore the process in more detail. The Worldwide Employee Relocation Council has an introductory webinar series to relocation appraisal that is found on the website with the following link: https://academy.worldwideerc.org/relocation-appraiser-resources/
Chip Wagner has also developed and perfected a class on relocation appraisals which addresses unique situations that arise in this type of work. If you are interested in learning about relocation work, I highly recommend the class. You can also ask your local education provider to host it.
Of course, if your goal is to become the best relocation appraiser you can be, check out the RAC organization. RAC (Relocation Appraisers and Consultants) which is dedicated to advancing the relocation appraisal profession, but also includes members who specialize in appraisal of complex residential properties often involving litigation. First and foremost, however, it is a relocation appraiser organization, to which I am very happy to belong to. Each year, RAC hosts a 2-day conference dedicated to the residential appraisal profession, with emphasis on relocation appraisal. This is a great place to meet professionals in this field, and to learn more about this niche market. For more information about RAC, please visit the website at www.rac.net.
Relocation appraisal work offers the appraisal professional an opportunity to do their very best work, showcasing their writing and analytical abilities. Our conclusions have to stand up not only by way of comparison with another professional appraiser, but also with the eventual sales price. We will be measured on both of those fronts, as well as in our professional demeanor. There are few options available for this type of work outside of the litigation arena. In relocation work, we have the opportunity to do excellent work, as well as test it, and even more importantly, to serve those with a very real need.
This article first appeared in Appraisal Today, and was republished with permission.