Relocation Appraising: What Goes Around Comes Around
Editor's Note: As times slow, in addition to foreclosures, relocation appraisals are another niche to investigate. This piece is reprinted with permission from MOBILITY Magazine, July 2007. Click here for more on relocation appraising.
Relocation Appraising:
What Goes Around Comes Around
By Robert Headrick, SRA,
SCRP
Once, long ago,
in an age before the interest rate hikes of the early 1980s, a
scholarly group of appraisers who specialized in relocation dealt
with all relocation appraising matters. Now, a market similar to
those days has reappeared, but appraisers specializing in relocation
seem to be sparse. Taking a look back to prepare for the days ahead, Headrick lays out the tough questions that need to be asked when
finding the best "right" appraiser for a relocation.
Prior
to skyrocketing interest rates in the early 1980s, the relocation
industry tightly controlled and monitored which appraisers were
approved to complete relocation assignments. Third-party relocation
companies and corporate America maintained their own lists of
qualified appraisers who understood the nuances of the relocation
appraisal.
Terms like "direct home selling costs" and "loss on sale" not only
were part of the client's vocabulary but the day-to-day language of
the professional relocation appraiser. Relocation appraising was a
specialization within the residential appraisal profession.
Understanding issues relating to forecasting, d?or,
market change, buy downs, cash equivalency, and listing competition
were (and continue to be) a specialization within the relocation
appraisal community. Some third-party clients met face-to-face with
appraisers as often as monthly to discuss assigned sales and
changing inventory levels. The cost to replace carpet and remove
wallpaper and paint were common topics. The relocation appraiser was
well-informed and educated to clearly understand the workings of his
or her markets and what it takes to sell housing in very complex
markets.
However, as a result of a time when transferring employees had great difficulty selling their homes due to increasing inventory levels, trust in the process became questioned. Transferees reported that the relocation process was unfairly offering lower values for their properties and perhaps making a profit at their expense. Of course, in reality the opposite was true, as the subject property entered an already oversupplied market, the corporate client was hoping to minimize their resale loss.
Sound Familiar?
Well, if this all sounds familiar-it should. The last year has
seen many real estate markets across the country become oversupplied
while inventory levels have risen. But one major difference today is
that seldom, if ever, does the third-party or corporate client
choose a qualified relocation appraiser.
As a result of 1980s real estate markets, corporate and third-party
clients succumbed to their transferring employees' complaints and
began the process of transferee choice-the objective being to help
remove the suspicion that their employers were unfairly offering
lower than fair market value for their homes. Of course, the issue
of anticipated sales price versus market value is a subject that has
left even clients confused at times. The saving grace of that time
was that clients had to choose from an "approved list" of qualified
appraisers.
Now let us jump from 1985 to 2005. During this time, some strong
real estate markets made it possible for the relocation industry to
further modify policy. When markets grew hotter and housing sold in
hours rather than months, companies decided to hold off on ordering
appraisals. Some replaced appraisals with the alternatives of using
only a broker's price opinion (BPO) or broker's market analysis (BMA).
In general, the demand for relocation appraisals diminished and many
individuals left the profession or found alternatives to the
relocation appraisal by redirecting their talents to litigation,
eminent domain or commercial appraisals.
Where Have All the Relocation Appraisers Gone?
The year 2006 brought back memories of the early 1980s. But
there was a major difference-a noticeable inverse relationship in
the supply of housing compared to the supply of appraisers. While
there certainly is no shortage of appraisers in general-the industry
grew because of the demand that resulted from historically
low-interest rates during the last several years-the professional
relocation appraiser diminished.
Training that had been plentiful become nearly non-existent. Clients
looked more to groups like Relocation Appraisers and Consultants (RAC)
to bring back some of the training that was missing. Unfortunately,
the commitment to relocation appraising as a specialization
virtually is gone. Appraisers have been forced to make a business
decision as they were dictated to by their relocation clients to
make the appraisals better, faster, and cheaper, and they
subsequently diversified their businesses to expand the
opportunities for their success in the long term.
(If you have E&O insurance through OREP and have not
registered yet for your free access, email for details
subscription@workingre.com.)