Exposure time vs marketing time, just for fun

[glenn walker]

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Most reviewers (one hopes) lets the "little things" go - though exposure time estimate is not a little thing, much of the time an error about it is not critical to results, though it might show the appraiser was not thinking and giving a rote number. For example, if I saw 45-90 days exposure but the comps showed under 30-60 days, I'd either not comment, or might comment the exposure time is inconsistent with predominate marketing time which is less than 30-60 days.

I would only make a big deal about it in a review if the exposure estimate is way out of sync. Because a client can take exposure time into account in making a decision. For example, a limited buyer niche, oddball subject, where the comps show 8 months to a year DOM, but the estimate is 60-90 days market exposure for subject. That is an error of a magnitude that could be misleading, whether it was caused by carelessness or intentional.

I think anyone who has a problem with this issue needs to Read George Hatches Posts .. He has laid it out better than 90% of us . The rest of these posts are becoming like " The famed "Price "V" Value way to repetitive- never ending and not very convincing or easy for many to comprehend.

 

[alebrewer]

It seems to me that, in a fairly stable market, ET and MT would most likely be similar - of course I'm thinking in terms of residential markets - it may be different for other types of real estate. Assuming one is discussing the same definition of value for both time constructs, I would think the only time(s) that ET and MT would be significantly different (or use statistically different if you like that term better) would be in a changing market. Take the one we're currently in for example. Exposure time was/is probably ~ 5-10 days. Marketing time is probably closer to 20 days now.

 

[Mark K]

• My opinion of value for the subject property is $300,000, based in part on an opinion of exposure time of less than 30 days.
• 
  
• My opinion of value for the subject property is $300,000, based in part on an opinion of exposure time of 9-12 months.

Thoughts, opinions, disagreements encouraged.

Okay, so let me ask you this, then: In your opinion do both of the following two sentences mean exactly the same thing to you?

Of course they don't mean the same.

However, the appraised value is exactly the same. (Appraised value- the important part of the report)

ET and MT is a mostly useless bit of info mandated by USPAP and is really only marginally useful when the market value definition varies from that normally used in most residential reports. If you want to go off into the realm of distressed properties, forced sales, highly/motivated-unmotivated sellers, etc. then ET/MT could likely be an issue. Also, in which case, the appraiser need to modify the common definition of market value, frowned upon by F/F.

Otherwise, in my reports, my ET/MT is always the same number.

 

[alebrewer]

ET and MT is a mostly useless bit of info mandated by USPAP and is really only marginally useful when the market value definition varies from that normally used in most residential reports.

I don't disagree with this sentiment entirely. It seems that, if the ET was identified in the definition of value being employed, the appraiser's estimate of ET would be moot. The question is, I guess, whether the term 'competitive and open market' carries enough of an intuitive meaning for the intended user(s)/client to understand what time period would be involved in said 'competitive and open market'. Unfortunately, I think probably not.

 

[glenn walker]

I don't disagree with this sentiment entirely. It seems that, if the ET was identified in the definition of value being employed, the appraiser's estimate of ET would be moot. The question is, I guess, is whether the term 'competitive and open market' carries enough of an intuitive meaning for the intended user(s)/client to understand what time period would be involved in said 'competitive and open market'. Unfortunately, I think probably not.

In Land Sales I had seen exposure time issues because unlike residential homes it often can take years to find the right suitable buyer and user. On listings we never took one less than 12 to 24 months as we had no idea if a buyer would show up in one day or three years. Before Internet and large expensive Mini-Billboards, expensive majot newspaper Sunday Advertising made Days on Market ( DOM ) analysis virtually worthless. BUT in the end the final sales price became the market value to that particular buyer. Unlike residential loan production most land was sold for cash or seller carried financing so appraisals were rarely ordered by a buyer as he/she knew what their plans for that land was. in Summary: I can see a clear picture on market exposure on land and commercial but on residential frankly ( DOM ) and Exposure Time are really one and the same and we are just using different definitions. I know many disagree but that's how I feel about "Market Value "V" Sales Price". as in real world of real estate transactions a buyer and seller consider vlaue to be the price they agree to pay.

 

[George Hatch]

The DOM is the expression for the exposure time estimate - it is the same question answered. The DOM is not another question about marketing time. The DOM on the USPAP cert page is there to express the days as a range for the question about market exposure. ( It is usually expressed as a range.)

1004 URAR appraisals only ask for market exposure. They do not ask for an estimate of future marketing time. An appraiser can provide that estimate as an additional comment - but why they would do that I have no idea - it is not being asked for and is just one more thing to hang you with .

DOM as reported in a listing is a fact, just like the list price is a fact and the subsequent sale price is a fact. A sale/list ratio is a fact. Months of supply (sales/listings) is a fact. The trendlines over time of all of the above are comprised of facts.


The opinions of MV, exposure time, marketing time, and prospective value can all be based on the analyses of such facts - among others.

 

[George Hatch]

Of course they don't mean the same.

However, the appraised value is exactly the same. (Appraised value- the important part of the report)

ET and MT is a mostly useless bit of info mandated by USPAP and is really only marginally useful when the market value definition varies from that normally used in most residential reports. If you want to go off into the realm of distressed properties, forced sales, highly/motivated-unmotivated sellers, etc. then ET/MT could likely be an issue. Also, in which case, the appraiser need to modify the common definition of market value, frowned upon by F/F.

Otherwise, in my reports, my ET/MT is always the same number.

The market is the market regardless of any imbalances between supply and demand that will give one side of the transaction more options (and less motivation to compromise or concede) than the other. "Typically motivated" is always relational to the market conditions at hand. What was typical in the market last year isn't so typical this year. What is typical for SFRs isn't necessarily typical for oil refineries or industrials.

But back to the question, I will repeat myself: the number isn't always the most important part of the report, and if all an appraiser did was come to that number they might very well be not meeting the user expectations for their assignment. Whether the appraiser *agrees* with their users' priorities or perspectives on what they consider to be meaningful is irrelevant; the clause is "meaningful and not misleading to intended users", not to the appraiser.

As for using the same number for both that would usually be the case: in lieu of information to the contrary we commonly project the past trend into the future. However, I will note that DOMs for many market segments can and do change from year to year, so IRL the exposure times DO change. We could technically argue that if/when exposure times are exceeding 4 months and ETs are changing that the MTs should also be changing if we were paying enough attention to that analysis to actually make the attempt.

 

[J Grant]

DOM as reported in a listing is a fact, just like the list price is a fact and the subsequent sale price is a fact. A sale/list ratio is a fact. Months of supply (sales/listings) is a fact. The trendlines over time of all of the above are comprised of facts.


The opinions of MV, exposure time, marketing time, and prospective value can all be based on the analyses of such facts - among others.

I agree, I never said otherwise!

The days on market of comps are facts -the appraiser analyzes those facts to support their opinion of a market exposure estimate for the subject. Like everything else in the appraisal, the exposure time estimate is a model developed to serve the appraisal conclusions

 

[George Hatch]

I'll provide another example of analyses that appraisers are *capable* of doing but commonly decline to even make the effort: Prospective Values. Now this isn't a common request in the GSE pipelines but it is common for the RRTs and FRTs even when the transaction involves an SFR (proposed construction or remodel).

Appraisers CAN develop an opinion of the prospective value with an effective date being a year from now by extrapolating the past trends into the future. Obviously, we cannot know the future and the reliability of that value opinion will be a lot weaker than the current value opinion, but it can be done and these users ARE required to request those supplemental value opinions for certain lending activities. Appraisers can (and often do) balk at providing them and a certain percentage of appraisers will simply project their current value opinion into the future without even making the attempt to predict it. But playing it safe isn't doing what we say we're doing when we call that the Prospective Value with the effective date into next year.

Say what we do, do what we say.

 

[ramrcdk]

Elated to read A THREAD-Posts
about
'appraisals'!