Confused about USPAP, Marketing &/or Exposure Time

[Couch Potato]

What is the effective date?

If the foreclosure is going to take place on July 31 and you are doing the appraisal tomorrow, would the effective date you use for the value be tomorrow or July 31? If tomorrow, I am in full agreement with you, but I would think July 31 the more appropriate effective date. I lack experience in foreclosures as anything other than the buyer of the foreclosed property or seller of the foreclosed property of which I was the lender. If you have regularly done such properties please clarify my question of the effective date. It would be much appreciated.

 

[moh malekpour]

Steven,
USPAP frequently refers to marketing and exposure times.
ADVICE FROM THE ASB ON THE ISSUE:

The reasonable marketing time is an opinion of the amount of time it might take to sell a real or personal property interest at the concluded market value level during the period immediately after the effective date of an appraisal.

Marketing time differs from exposure time, which is always presumed to precede the effective date of an appraisal

Marketing time differs from exposure time, which is always presumed to precede the effective date of an appraisal.
If you haven’t found it anywhere else, possibly there is none. So, either you didn’t look hard or USPAP made it up but if USPAP made it up, it was possibly for the prevention of confusing the readers like those of complete and limited appraisal. However the definition of marketing time and its different with exposure time make sense to me

 

[moh malekpour]

If the foreclosure is going to take place on July 31 and you are doing the appraisal tomorrow, would the effective date you use for the value be tomorrow or July 31? If tomorrow, I am in full agreement with you, but I would think July 31 the more appropriate effective date. I lack experience in foreclosures as anything other than the buyer of the foreclosed property or seller of the foreclosed property of which I was the lender. If you have regularly done such properties please clarify my question of the effective date. It would be much appreciated.

The answer is tomorrow.
Lets forget about the foreclosure and try to get a value for a homeowner who wants to list and sell his home in open market. You search the market and you conclude a value to be effective on tomorrow based on marketing time of 60 days on MLS and typical marketing in the neighborhood. The value that you give the homeowner is not market value because it is not sold yet and requires at least 60 days marketing time. If the homeowner wants the market value, then it requires the exposure time that has happened in the past not the marketing time and that value might be different from the value that you have established for the listing to sell because your value for listing is based on 60 days marketing after your value conclusion and if the market is changing, the vaue would be different even in few days marketing.

 

[Fred]

Steven,
USPAP frequently refers to marketing and exposure times.

Moh, It probably just adds to the confusion, but I have to point out you are not quoting from USPAP. And I was asking what Fannie thinks the term means.

Also, that defintiion is screwy. It doesn't quite refer to period that comes after "the" effective date, but creates additional effective dates. That is, you are not only saying it is the most probable price today, but also" three to six months" down the road. Does everyone think that is what Fannie is asking - for a forecast?

 

[Couch Potato]

Moh quoted AO-7 (the normal definition of the terms)

Moh, It probably just adds to the confusion, but I have to point out you are not quoting from USPAP. And I was asking what Fannie thinks the term means.

Also, that defintiion is screwy. It doesn't quite refer to period that comes after "the" effective date, but creates additional effective dates. That is, you are not only saying it is the most probable price today, but also" three to six months" down the road. Does everyone think that is what Fannie is asking - for a forecast?

Yes, Fannie is asking for a forecast; if the property is put on the market on the effective date of the appraisal, how long would it be expected to take to sell at that price? If Fannie is not asking for a forecast, they need to change their terms.

 

[moh malekpour]

Moh, It probably just adds to the confusion, but I have to point out you are not quoting from USPAP. And I was asking what Fannie thinks the term means.

Also, that defintiion is screwy. It doesn't quite refer to period that comes after "the" effective date, but creates additional effective dates. That is, you are not only saying it is the most probable price today, but also" three to six months" down the road. Does everyone think that is what Fannie is asking - for a forecast?

Steven,

May be I should have said ASB or AO 7 refers to it but it is close enough.

regarding the definition of the value for the foreclosure sale or for the listing to sell, there is no forecasting. The value will be concluded at the date prior to marketing time and it is based on that marketing time. If you get the value without considering the marketing time, then you are developing the market value that has exposure time in the past. The value is current. If the conclusion for that value is based on the time that already been exposed, that value is market value and time is exposure time and if the value conclusion is based on the time after the value conclusion, that value is not market value and time is marketing time. It becomes market value when it gets exposed to that marketing time and sold or appraised when it got the offer.

 

[Fred]

Yes, Fannie is asking for a forecast; if the property is put on the market on the effective date of the appraisal, how long would it be expected to take to sell at that price? If Fannie is not asking for a forecast, they need to change their terms.

I am not disagreeing that Fannie wants a forecast. I am not sure. And I am not convinced.

It could be that the writers of the AO got the term from the GSE form and used it that way because they think that's what Fannie's intent was. And in those circumstances, if that is not what Fannie means, then the AO was and is in error and that's what needs to change.

I found an explanation from a Harrison book from when the term was added to the 1993 form. That defines the term as how long it would take "in the same market." See what I am getting a? If my effective date is July 1 with a 3-6 month exposure, then "the market" I am analyzing is the last six monts (maybe longer for listings). The appraisal says, in effect, if the property had been exposed started from Jan 1 through Apr 1, that ca July 1 it's most probable price would have been X.

The market going forward from today is NOT "the same market" as the one I am appraising to find July 1 value. Your interpretation means that a Fannie assignment includes most of the elements of an ERC assignment with anticipated or prospective effective dates - and the after-today market is not "the same market" as the up-until-today market. I am not telling anyone in here what to do, we are subject to varying degrees of competitive pressure and whatnot - but they have to pay me more to say what somethings WILL SELL for than to say what something WOULD HAVE SOLD for. You know, 20-20 hindsight and all that.

Steven, May be I should have said ASB or AO 7 refers to it but it is close enough.

That's only strike one. An AO is weak source and even moreso if your use of it is to draw a line in the sand on vocabulary. USPAP itself doesn't require strict use of any use of the vocabulary in the USPAP definition section.

 

[Rich Heyn]

Why would you not consider it a supplemental standard? It is required by FNMA and in no way optional. It is not required by USPAP. I understand clearly that many aspects of FNMA's selling guide are simply guidelines and recommendations, but the wording on marketing time is quite strong.

Greg,
In order for a Fannie requirement to be a supplemental standard it has to add to the intent, purpose and content of USPAP and have a material effect on development and reporting of assignment results.

One could argue that the requirement adds something to SR-2 reporting requirements, but I don't think checking a few boxes and making a statement or two materially affects the reporting of the assignment results. And I don't think the analysis requirements adds to development because any good appraiser would be doing the analysis anyway, given the scope of the assignment.

 

[Mike Garrett RAA]

Does checking a box in the neighborhood section on page one of the URAR constitute analyzing marketing time? I feel too many appraisers just mark this section with little or no analysis.

Does including Days on the Market (DOM) for the subject and comparables used in the grid accomplish the same thing? Again, my gut says..."form filling, little analysis".

The question is..."does filling out the form by checking boxes meet the intent for analysis?". Perhaps the answer would be in defining your Scope of Work.

ERC appraisal assignments require substantial market analysis. They want to know how long it will take for the property to sell. Why? Because if they buy it from the transferee they will have "holding costs". The same is true for REOs and foreclosures. Look at the addendum...they want two values, one based on a shorter marketing time and one on a longer.

Exposure time occurs prior to the effective date...marketing time will occur after. How long was it "exposed" to the market. How long will it take to "market" the property.

Good source for clarification is Frequently Asked Questions 2006, pages 52 ~ 53.

 

[CANative]

I check one of the three boxes next to "marketing time" because I have to or else the appraisal would be back in my email in about 30 seconds.

But I use the term "exposure" time in my narrative comments.