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On 19 September, Worldwide ERC® and RAC, a premier organization providing valuation solutions for relocation and complex residential properties, announced the winner of the 2019 Relocation Appraisal Report Writing Contest. Out of more than 20 entries in the contest, the winner was Michael S. Cook, MAI, SRA. Judging criteria included completeness, clarity of communication, thoroughness, internal consistency, and assignment complexity.
Relocation appraising requires unique skills. It was described by Paul M. Lewis, a professional with more than 25 years of experience, as “reviewed more thoroughly and by more parties than any other type of appraisal.” He explored these complexities in an article for Mobility magazine entitled “The Relocation Appraisal: Defining the Differences.”
The two most frequent appraisals of residential property are the mortgage appraisal and the relocation appraisal. Comparing them showcases the unique skills required to perform a relocation appraisal.
The two most frequent appraisals of residential property are the mortgage appraisal and the relocation appraisal. Comparing them showcases the unique skills required to perform a relocation appraisal. The Worldwide ERC® Summary Appraisal Report calls for more detailed analysis, with narrative explanations, and a more detailed reporting. While mortgage appraisals focus on condition, design, and general appeal, the relocation appraisal goes beyond those aspects to evaluate additional factors such as appliances, décor, and home improvements. The relocation appraisal similarly goes beyond the mortgage appraisal by considering the cash equivalency of comparable properties as well as adjustments, such as seller-paid points or assistance with closing costs.
The intent of the mortgage appraisal is to determine a property’s current market value and assess the level of financial risk to the lender, while the relocation appraisal is used in determining a buy-out offer in a relocation home purchase program and, therefore, estimates an anticipated sales price within a defined marketing period which will occur in the future. This, then, requires the appraiser to apply forecasting adjustments to arrive at a valuation that takes into account trends in the real estate market that will affect the price that the home will sell for if it is marketed for that period of time. Worldwide ERC®’s form defines forecasting as “the process of analyzing historical trends and current factors as a basis for anticipating market trends.” Forecasting adjustments are then applied both to comparable sales and the valuation for the subject property.
In other words, according to Lewis, “to determine the most realistic price, relocation appraisers analyze what has happened in the past compared with the current market and form an educated opinion as to what will happen during a predetermined marketing period, the length of which is typically set by client policy.”
Relocation appraisers meet a unique challenge to use economic and demographic trends to predict how quickly the market will go in one direction or another.
Relocation appraisers meet a unique challenge to use economic and demographic trends to predict how quickly the market will go in one direction or another. Lewis points out that the forecasting component is “often the most challenging and least understood variable of a relocation appraiser’s work, as there is no mathematical formula that will result in two appraisers arriving at the exact same adjustment. The accuracy of the conclusion is also not verifiable by current market data, just the test of time.”
With these factors in mind, it is safe to say that the relocation appraisal provides a more nuanced, detailed, and time-consuming endeavor than mortgage appraisals. A firm understanding of the process allows for the relocation appraiser to showcase their market knowledge and communication skills.
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