Exhausting, taxing, and draining.
Unfortunately, these are among the most common words to describe moving.
Selling a home and moving can be a nightmare, it’s even worse when it needs to happen in a rush for a job relocation. A relocation appraisal can make the process easier by providing the company or employee with an estimated sale price.
This not only makes it easier to determine how much the house will sell for, but it’ll help the company put together an accurate compensation package.
In this article, we’re covering everything you need to know about relocation appraisals and how they’re performed.
What is a Relocation Appraisal?
The purpose of a relocation appraisal is to offer an estimate of a home’s expected sale price. The professional responsible for the appraisal will look at factors such as the design of your home, the current market, comparable sales, and the overall appeal.
Features such as updated appliances, curb appeal, a hot sellers market, and a nice neighborhood could have a positive impact on your appraisal.
Keep in mind that these appraisals are only performed for the purpose of corporate relocation. When the client receives these reports, it will provide them with an estimated sales time frame based on the current market.
In a hot market, homes will sell quickly for asking price or over. During a slower ‘buyers market’, homes will sit for a while and likely wait around for a decent offer. The appraising professional will factor this into the report.
How is a Relocation Appraisal Performed?
Since this appraisal is done for the immediate benefit of the corporate relocation company, they are the ones who will order the appraisals. An organization known as the Worldwide ERC is responsible for overseeing and managing relocation professionals in Human Resources, Real Estate, and the Military.
They’ve even created a form that you can look at called the Worldwide ERC Summary Appraisal Form (updated 2010).
As you go through this form, you can get a better understanding of what the appraiser is looking for when they go through the home. They’re looking for some of the following:
- Adverse conditions that may require additional inspections (water damage, termites, settling ground)
- Exterior and interior appeal
- Recommended improvements and their level of priority
- Competition in the market for comparable homes
- Current supply and demand
When everything is complete and the relocation appraiser is done, he or she will provide an anticipated sales price and a projected time frame to sell. The client (or company) relocating their employees can then factor this into their overall cost to relocate.
Without a relocation appraisal, the company would have no idea how long it could take the employee to sell their home. In some cases, the employer will even offer their employees something known as a guaranteed buyout to expedite the process.
Difference Between a Mortgage Appraisal and Relocation Appraisal
There are some significant differences between a mortgage appraisal and relocation appraisal. We touched on the fact that a relocation appraisal provides an estimated sales price or a home. Mortgage appraisals are performed with the intention of qualifying an individual for financing.
Because of that, the mortgage appraiser is looking at the actual hard value of the home based on its condition and market value. A mortgage appraiser wants to make sure that the home is worth what the prospective buyer is willing to pay for it.
For example, the hot real estate market in early 2021 lended a perfect situation to shine a light on this. An employee was purchasing a new home and was desperate to move out of their apartment because of their growing family.
The hot sellers market made it really competitive, homes were flying off the market, and buyers were having to forfeit all inspections and offer well over asking price.
She and her family found their dream home and ended up offering $15,000 over asking. The buyer accepted the incredible offer and the whole transaction went into underwriting.
The problem is, during the mortgage inspection, the home only appraised for $150,000 and the family offered $175,000. The deal ended up falling out and went to someone else with a larger down payment to clear the risk for the bank.
A relocation appraisal may have factored in the sellers market and accommodate for all the homes selling over asking price in that neighborhood. A mortgage appraisal will not because it will only look at the market value of the home.
Performing the Appraisals
Another significant difference in the process is the person who performs the appraisals. Relocation is performed by a licensed and trained real estate professional who abides by the ERC guidelines. This individual works for the client (company).
A mortgage appraisal is performed by the mortgage company’s appraiser and follows a Uniform Residential Appraisal Form (1004). This appraiser is hired by the mortgage company or bank and reports to them.
Marketing and Sales Time
These are non-factors in a mortgage appraisal because there is no time limit for a mortgage. You can receive an appraisal on a home and not purchase it right away and those figures would still apply if you bought it six months from now.
A relocation appraisal cannot exceed 120 days. This is because the timeframe is based on factors that are impacting the market right now. Since we’re focusing on sales price, that could change dramatically in three months.
A mortgage appraisal focuses on the hard value of the house which will only change if the homeowner makes improvements.
Keep in mind also that this appraisal is performed before any marketing begins on the property. This is one of the first steps for corporate relocation services. Mortgage appraisals occur after an offer has already been made on a home and the potential buyer is trying to receive financing.
Expectations from an Employer Standpoint
If you’re the employer right now and you’re considering relocation, you’ll first want to factor in the “why” behind it. Why are you relocating your employee(s)? Are you expecting better business elsewhere? Are you relocating an office or small group of employees to work elsewhere?? What is your anticipated ROI on this move?
The most important thing is that you understand all the steps involved in the relocation. You should also realize that your employees will not know these steps and it’s up to you to educate and inform them on everything they need to do.
Human Resources departments should put together informational packets explaining what a relocation appraisal is, what the steps are, and how they’ll benefit from it. We have plenty of resources to help you get started.
Expectations from an Employee Standpoint
If you’re reading this as an employee who works for a business that is relocating, you probably have a lot of questions. You might wonder how much you’ll get for your home, how much the company will pay you, and whether or not you’re making the right choice.
The good news is, if the business is using a corporate relocation company, the whole process will run very smoothly. We relocate thousands of employees each month, and provide everything the business needs to do it right.
How a Relocation Appraisal Impacts Workforce Mobility
Your final question might be, how does getting a relocation appraisal make the process easier and is it necessary?
A relocation appraisal is not required in the process but highly recommended because it provides the employer with a better idea of how to put together a relocation compensation package. If it’s projected that a house will sit on the market for a while and require extensive marketing efforts, the employer should increase the amount of compensation paid to the relocated employee.
It provides a clear path from point A to point B so everyone involved can understand how much the house should sell for and how long it should take to sell. There’s no guessing involved and it may make companies and employees more willing to relocate when there are no blind spots in the process.
Wrapping It Up
Relocation appraisals are an important piece of the overall puzzle. Whether you’re an employer planning to move everyone out or an employee trying to inform yourself, you should now know more than you ever thought possible about relocating appraisals.
ARC Relocation specializes in corporate relocation, policy development, and post-move support. We help HR professionals and departments build the right policies, organize moves, cut costs, and increase relocation success rates. Click here for more information on how we can make your corporate relocation run smoother.
In his role as Director of Business Development at ARC Bill oversees all aspects of the growth initiatives for both government and corporate clients, domestically and globally. Bill graduated from George Mason University with a BA in Psychology and has been in the relocation industry since 2000. Bill has earned both his SCRP and GMS designations from ERC. Bill is the former President for the Greater Washington Area Employee Relocation Council (GWERC), ERC content committee member, ERC Ambassador, the recipient of the ERC’s “Meritorious Service Award” and “Distinguished Service Award”.