Exposure time vs marketing time, just for fun

[Tiffany Gibbons]

The number is the same. Within reason , we didn't necessarily need the analysis in order to get to the number. But when expressed within the context of the exposure time the *meaning* of that number can be considered different to different users. These appraisals aren't comprised solely of the number, otherwise they would be one page of report and 6 pages of boilerplated assumptions and limiting conditions. These appraisal reports also provide additional information to these uses which are intended to contribute to their decision making if/when they so avail themselves of using it that way.

If you tell a lender the existing use has a very limited remaining economic life or that the site is located in a flood zone or that this home is some sort of atypical construction or floorplan, the number is the same but the meaning of that number to the user's decision might not be. As this relates to the subject's exposure time, if you tell the reader that the DOMs for all sales in the neighborhood are under 3-4 months but for this market segment it's less than 10 days that's information that can contribute to their decision making. And can also contribute to your explanation of why you're being more aggressive with your market conditions adjustments if that's the case.

As with most aspects of appraising, the details (like this) don't become an issue most of the time and under most conditions, but they CAN become an issue under certain conditions. It's not an issue to give a lot of thought to until it becomes an issue. One example is when a market turns down and supply grossly exceeds demand. Yeah, the exposure time was 90 days but the inventory is stacking up quickly and prices are declining as a result, so the marketing time (during which the pricing can be expected to continue to decline) is likely to be longer. The same is arguably true in a market that's entering a trend for pricing increases. It took 3 months to get these sales, but at the current faster rate of absorption it might only take 6 weeks to get a sale going forward.

What about pre sale new homes? They are "on the market" even though the particular house is already under contract. Or Appraisal Waivers sales?

 

[George Hatch]

Uhhh, what about appraisals for re-fi wherein the borrower isn't even considering a sale? The definition of MV already includes an assumption about the hypothetical sale as of the effective date.

If I'm doing a subdivision analysis that includes the sale of the finished homes I will be required to provide the Prospective Value of those units - and of the project as a whole - upon completion. That effective date can be several years into the future for the large projects that involve multiple phases. Now personally, I don't think Prospective Value opinions can be considered reliable enough for a user to bet the farm on them, but it doesn't matter what I think about such assignment conditions. My options are to accept or reject the assignment, not accept the assignment and then shortsheet the assignment conditions on the basis of not liking it or thinking it's a waste of my time.

Same with requests for Marketing Time, which some clients will request and some won't. Considering the MT issue separately from Exposure Time might only take a moment in most cases, but it's the act of at least asking/answering the SR1 question that meets the SR1 requirement, even if the SR2 boilerplate remains the same as a result of not being edited.

As for waivers (no appraisal involved) and AVMs and Evaluations it will be obvious that those users aren't asking any of these questions of whatever alternate valuation products they're using.

 

[ZZGAMAZZ]

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.

How can "marketing time" not be tagged as Prospective?

 

[George Hatch]

Exposure time estimate as of a future date would be just as much a projection of the past into the future as a marketing time estimate going forward as of today, but they're still different concepts.

 

[ZZGAMAZZ]

Exposure time estimate as of a future date would be just as much a projection of the past into the future as a marketing time estimate going forward as of today, but they're still different concepts.

"Exposure time estimate as of a future date" is oxymoronic, eh?

 

[George Hatch]

Yeah, well the party line on Prospective Value is that the exposure time as of that future effective date is based on an EA, not an HC, even though every single aspect of that valuation problem doesn't currently exist and some of them never will exist.

IMO the none of the elements of the future market condition, future date of completion and future condition on that future date exist, and ALL of them are hypotheticals. None of them are "I think so but I can't be sure" assumptions. So that makes my take on these elements of a Prospective Value scenario the minority opinion.

 

[J Grant]

"Exposure time estimate as of a future date" is oxymoronic, eh?

NO, Because an exposure time estimate is an opinion of the time it would have taken for the subject to sell at a MV price as of the effective date of appraisal - whether the effective date is current, of one year past, or one year future.

(MV for market value is most typically asked for but could be LV or DV etc)

 

[ZZGAMAZZ]

NO, Because an exposure time estimate is an opinion of the time it would have taken for the subject to sell at a MV price as of the effective date of appraisal - whether the effective date is current, of one year past, or one year future.

(MV for market value is most typically asked for but could be LV or DV etc)

This is a perfect time for this thread because "Exposure time is less than two weeks; and Market time is less than two months."

 

[J Grant]

This is a perfect time for this thread because "Exposure time is less than two weeks; and Market time is less than two months."

We look at pending's and listings for our opinion of the market exposure for analysis , not just closed sales DOM.

. The market exposure estimate is as of the eff date. assuming a current eff date, if your past sales show DOM under 2 weeks, but the present listings show similar houses are on the market for 2 months, then your market exposure estimate might be two months and explain why.

 

[Sadie]

Exposure time is the estimated time it the property is exposed to the market BEFORE the effective date. Marketing time is the estimated time the property might take to sell AFTER the effective date. They are 2 separate things. This has always been part of my appraisal education. Easy to remember Exposure before, Marketing after.