Common Red Flag Issues for Relocation Appraisals

Relocation appraisals are integral in developing a “guaranteed buyout” for a transferring employee and are generally reviewed by an in-house appraiser at the ordering company prior to being released to the transferee. The review of the appraisals offers a unique opportunity to gain additional perspective on the analysis of common concerns.  Some common themes emerge with these appraisals, especially since two or three appraisals are reviewed, many times along with a broker’s price opinion. Some of the common red flag issues are as follows:

  • Developing an opinion of market value, instead of an anticipated sales price
  • Worldwide ERC guidelines and specific client guideline
  • Estimating the competitive list price range for the SUBJECT property
  • Valuing the property above the current listing price in a stable or declining market
  • Incorrectly analyzing market trends that would include absorption rates and inventory levels
  • Omission of the actual days on the market on page four for the neighborhood
  • Discussing extended marketing times in the report for the defined market segment,  then indicating normal marketing time as 0-120 days on the report
  • Applying market change and forecasting adjustments
  • Discussing how personalized décor will affect marketability and making corresponding adjustments on the grid
  • Selecting appropriate comparable sales and competing listings
  • Appraising the property “as is” instead of appraising based on planned improvements
  • Applying appeal ratings on pages two and three that match the appeal ratings on the sales grid
  • Calculating gross living area
  • Properly adjusting  for identified differences on the grid
  • Marking the market segment forecasted trends and analysis as stable while also indicating the forecasted price trend is anticipated to continue at an accelerated/decelerated pace
  • Indicating that repairs and or improvements are needed  and will significantly impact marketability and neglecting to estimate the recommended improvements effect on marketing
  • Estimating significant recommended improvements and neglecting to add them to the grid
  • Including language about mortgage guidelines or Fannie Mae requirements in the supplemental addendum

Each of these items presents a challenge to both the reviewer and the appraiser.  They will generate additional questions from the reviewer to the appraiser and may extend the process of determining a guaranteed purchase offer and delay an offer from the client to the transferee.  Avoiding these common red flags will allow the appraiser and reviewer to enjoy a more seamless delivery of the appraisals to the transferee.

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