Relocation Work: Understanding Anticipated Sales Price, Forecasting

Editor's Note: Relocation work is one niche that some appraisers have carved out for themselves with great success.  In this story, author Jay Delich provides some background and explains relocation specifics such as anticipated sales price, forecasting and more.  (Reprinted with permission from Worldwide ERC?, from the April 2008 issue of MOBILITY.)

Relocation Work: Understanding Anticipated Sales Price, Forecasting

By Jay Delich, SRA, IFA, SCRP

Several months ago during the Relocation Appraisers and Consultants planning session, appraisers began discussing the technicalities of forecasting for the relocation appraisal. It was a fascinating exchange for the appraisers but afterward the clients present quietly asked, "But what about the rest of us? What did you just say and what the heck is forecasting?"

It is a great question and a hot topic because of today's static and declining markets. Relocation appraisals are more challenging in today's markets because of increased inventory and resale loss, necessitating a closer examination of forecasting.  

Quick History
Worldwide ERC? was founded in 1964 to help its members overcome the challenges of workforce mobility. In the 1960s few corporations had established policies for moving employees but the 1970s saw a jump to more than 50 percent of corporations providing home sale assistance. During the 1980s, more than 80 percent of corporations relied on home sale assistance, according to the ERC.

In the beginning, companies created and used their own forms and procedures, thus the recognized need for standardization and guidance. The leadership of ERC accepted the challenge for their corporate members and developed the Appraisal Practices Committee to assist with standardization and guidance.
 
Anticipated Sales Price and Why Forecasting?
The corporations said, "Okay Committee, write a form that will answer our main question: what will our valued employee's home sell for? We'll buy the home and then sell it as a service or perk for our valued employee. We want our employee to be happy, we want to do this rather quickly but we don't want to lose money!" So, the Committee went to work. Because the client will buy the home but may not see it first, the client will need expanded detail and analysis and that is different than a mortgage appraisal or a market value appraisal.

With market value appraisals, the exposure (marketing) time precedes the date of inspection but marketing for the relocation appraisal is completed after the date of inspection. With market-value appraisals, the marketing time is open and normal but the marketing time for a relocation appraisal has to be regulated. There typically are no adjustments for concessions in a market-value appraisal but a relocation appraisal must deduct all concessions. Market-value appraisals require closed sales but we need competitive listings and pending sales to understand the immediate buyer's perspective.