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The corporate relocation process is kind of like "Let's Make a Deal" because you don't know what's behind Door #1.
We're about to enter the corporate relocation process. We want to be living in our new destination in two months (school starts). Company pays all expenses (real estate commissions) if we sell it ourselves. We are encouraged by the company to sell it ourselves and pick up a 2% incentive (max $15K) or, if we can't sell it, accept a guaranteed buy out (GBO). The GBO is based on the average of two relocation (forecast) appraisals (to produce a probably sales price within 120 days - relatively quick) from a list of appraisers provided from the relo company. We must accept the GBO within 60 days or we lose the GBO offer forever. We've had three comparative market analysis (CMA) performed and all three say list at around $800K, but the average DOM is 180 days - things are really slow. We lose half the incentive (1%, or around $7500) if we sell it ourselves after the appraisals are made (an expensive way to find out what is behind Door #1). Our break even is $780K, so if we sold ourselves for around $765K then the sales prices plus 2% incentive is around $780K. The killer is we may have to wait like a year (and pay rent and a mortgage and all the hassles of selling from afar) if we try to sell ourselves.
The big unknown are the GBO appraisal values. If we knew them in advance we could make a much more informed decision and plan appropriately.
Here's our idea: We'd like to get the list of the Serva or Weichert appraisers and hire them (about $500 per appraisal) to do exactly what'd they'd do if we went the GBO route. So for $1000 we'd have two appraisal values - we'd essentially know what is behind Door #1. We live in a totally custom community so the appraisal values might be all over the place.
If we spent the $1000 for appraisals and we liked the numbers (meaning they are close to our break even point) then it's a no brainer - we take the GBO - we're done, no sweat, fast.
If we don't like the numbers, (for example they average $710K, or $70K below our breakeven) then we don't go GBO, we're only out $1000, and we didn't lose half of our incentive (which would be around $7500). We'd have to compare the costs of renting and owning simultaneously for a year or so to accepting a low GBO. Also, we would not be under the 60 day GBO acceptance timeout.
Biggest risks:
Risk 1) The appraisals we pay for do come back very low in which case we'd chose to sell it ourselves. The advantage (as written above) is we wouldn't lose half ($7500) our incentive. The big assumption is that eventually (within a year for example) we'd sell closer to our breakeven point with the 2% incentive.
Risk 2) We can't get the list of appraisers; we'd have to hire from the yellow pages but my hunch is they would probably be the same guys on the list, or at least their numbers would be similar to what would be returned from the guys on the list.
We are essentially paying for the relo appraisals ourselves in advance so as to see what is behind Door #1. We can make a more informed decision of whether to sell ourselves or accept the GBO. For $1000 we practically eliminate a huge, critical unknown.
Is this bulletproof?
Anyone tried this before or heard of someone doing it?
Why can't you have the relo company have the appraisals performed by the company? This isn't a game show and that doesn't make sense.
Because once we request appraisals, 1) we lose a 1% incentive ($7500) if we were to sell ourselves (assuming the GBO values are low) and 2) the 60 day clock to accept the GBO starts ticking.
For $1000 we get the appraisal information without losing 1% incentive and we don't commit to GBO.
Because once we request appraisals, 1) we lose a 1% incentive ($7500) if we were to sell ourselves (assuming the GBO values are low) and 2) the 60 day clock to accept the GBO starts ticking.
For $1000 we get the appraisal information without losing 1% incentive and we don't commit to GBO.
What doesn't make sense?
The fact that you are forced to make a decision without all the information being provided prior to the time you have to make a decision.
We've been in your shoes. Except we were at the top of the bubble and we didn't care. Both our appraisal supposedly came in at the same price. I would talk to the relo company representative about what happens if you think their offer is too low. Can you then get an appraisal of your own or request a third from them.
Here is something you may not have thought about. What if you don't sell the house within the 12 months? You are out the closing costs. 6% on a 780K is a lot.
Have you interviewed agents? What did they tell you you should list for?
I think if you apply some other knowns about the local market, the choices become more clear.
First, houses in the price range you're in are not moving in COS. The CS Gazette posts an extract of home sale data from the El Paso County Assessor's office (delayed ~1 month from closing) and you can look through those and see how very badly that price segment has dried up. This said, an informed extrapolation says that a price forecast to produce an offer at the tail end of the annual buying season in such a dead market is going to be heavily discounted by any appraiser with a clue. I think an assumption of a low-end appraisal is an informed one that can be made without throwing $1000 needlessly up Broadway.
Second, there's no guarantee that the appraisals you might buy will come in the same as the appraisals the relo company would obtain. Appraisers know where their bread is buttered, and they can be expected, within limits, to consider the client. Hence, I don't believe your $1000 would buy you a lot of reliable and/or actionable intel.
The CMAs you had done...are those DOM figures for houses that have sold, or are they for what's on the market now? Are the prices list prices, or prices at which similar properties have sold? List prices only reflect the dreams of a deluded mass of potential sellers that haven't come to grips with the realities of the housing bubble collapse. Sales prices, and recent ones, are all that matter. Keep in mind that the RE industry regularly allows relistings that reset the DOM numbers...in that regard they cook the books as a matter of routine and cannot be trusted. If 180 days is what they're quoting, it's probably much more than that now with all the properties being relisted to make them look fresh and newly listed despite having been untouched for much, much longer.
Were it me, I'd list it for private sale at close to the breakeven price, and if it doesn't go quickly, take the GBO. Carrying a house here may well adversely impact your ability to finance a new one at the next place, and it poses a terrific risk if this market downturn is as long and deep as I believe it will be. I'd consider any loss taken on the GBO cheap insurance in that regard.
If your appraiser is influenced by a list price he/she should be reported to the State for USPAP violations.
I should rephrase. The buyout offer will be influenced by list price.
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