Confused about USPAP, Marketing &/or Exposure Time

[hastalavista]

As an aside, does anyone remotely understand why a statement of exposure time was taken out of SMT-6?
Barry Dayton

As I recall, it was because it was determined that not every definition of value requires an estimate of "exposure time" and the requirement applied to all scenarios.

However, the question (in my mind) is what could be some real-life examples?

Perhaps the answer is exposure time is not required for some non-real property appraising assignments?

 

[Webbed Feet]

As I recall, it was because it was determined that not every definition of value requires an estimate of "exposure time" and the requirement applied to all scenarios.

However, the question (in my mind) is what could be some real-life examples?

Perhaps the answer is exposure time is not required for some non-real property appraising assignments?

Mr. DeSaix,

Again if I am not incorrect, I believe I noticed some responding to this now saying they believe since that is not in SMT-6 anymore then even when Market Value is the assignment that a statement of exposure time is no longer needed but only developed and held in the work file. A concept that I expect my appraisal board to barf on. You, me, and all the little birdies out there all know if it is not a requirement to report it will be quickly forgotten and considered a Do Do bird by a majority of appraisers out there.

What is your stand on this? I can understand SMT-6 being altered to consider things like "Insurance Value". But do you believe that for a market value assignment the intent was to change the reporting requirements of exposure time?

Barry Dayton

 

[hastalavista]

What is your stand on this? I can understand SMT-6 being altered to consider things like "Insurance Value". But do you believe that for a market value assignment the intent was to change the reporting requirements of exposure time?

No, I don't.
In the definition of Market Value (for most of the assignments I complete), there are five enumerated conditions. #3 calls for a "reasonable exposure time" but does not define what that is? Therefore, I provide a statement of what I consider "reasonable exposure time" to be, usually expressed as a benchmark or as a range:
"Based on my market research, my estimate of a reasonable exposure time for the subject is ...
A) less than 60-days"
B) 30-90 days"

 

[Brad Ellis]

Guys,

PLEASE.

Go read USPAP 2006. SR 1-2(c)- the comment under that on lines 550-551 says,

"When developing an opinion of market value, the appraiser must also develop an opinion of reasonable exposure time linked to the value opinion."

What is all this talk about SMT-6?

Read it- it is fairly clear.

Brad

 

[Couch Potato]

Brad, the question was over reporting, not development.

 

[George Hatch]

SMT-6 includes comments warning appraisers to be careful about the communication of exposure time estimates:

Applications to Client Uses of an Appraisal

When an appraisal is commissioned as the result of a mortgage application after a potential seller and buyer enter into a Contract for Sale, no conflict exists between the presumption in the appraisal process that exposure time occurs prior to the effective date of the appraisal and the intended use of the appraisal.

When an appraisal is commissioned for employee relocation, asset evaluation, foreclosure, or asset management purposes, the presumption in the appraisal process that exposure time occurs prior to the effective date of the appraisal may conflict with the intended use of the appraisal. Problems arise when clients attempt to make business decisions or account for assets without understanding the difference between reasonable exposure time and marketing time (see related Advisory Opinion 7, Marketing Time Opinions).

The ASB is basically saying that there are some assignments where reporting the exposure time estimate linked to the Market Value opinion might be confused by some users with an estimate of marketing time.



Regardless, SR2-2.*.v still contains the following comment:

Comment: Stating the definition of value also requires any comments needed to clearly indicate to intended users how the definition is being applied.20

 

[Brad Ellis]

George, Greg,

While you are correct, there is a however: to wit,

SR-2 for all reporting options cited states that content of appraisal reports must be consistent with the intended use of the appraisal and then adds only the minimum required components.

The contents of a report of an appraisal developed for mortgage lending purposes (self-contained and summary) also include this, "... [summarize or describe]the information analyzed, the appraisal methods and techniques employed and the reasoning that supports the the analysis, opinions and conclusions;..." Please note that this is in SR-2.

So, now we have an appraiser trying to tell me, without a breath of comment about exposure time, that the value is $500K when I have model matches at $400K that closed last month with about the same upgrades. Further, he tells me that marketing time for this neighborhood is 3-6 months but all the comps were exposed to the market for 270 days.

So, I strongly disagree with the notion that the appraiser has no reporting requirements on exposure time. 2-1 (b) clearly says that the communicated report must contain sufficient information to enable the intended users to understand the report properly.

If you are not telling me what the exposure time is- even if it is nothing more than stating that the exposure time utilized is in line with the marketing time cited in the neighborhood section- then you will not have given me adequate information to understand the report properly- period.

So, please tell me how I am supposed to react if I call the appraiser on that one and he then tells me (after being paid) to stuff it because his exposure time was 60 months.

Reaction 1: Reaction 2: :new_2gunsfiring_v1:

Brad

 

[Ms. Janet]

So, please tell me how I am supposed to react if I call the appraiser on that one and he then tells me (after being paid) to stuff it because his exposure time was 60 months.

Reaction 1: Reaction 2: :new_2gunsfiring_v1:

Brad

:new_rofl: ahhhh............so that's the reasonable man response...............:new_rofl:

 

[George Hatch]

Brad,

I don't know with whom you're disagreeing but it isn't me. As far as I can see, reporting exposure time is critical for any assignment that involves developing it. Personally, I think the ASBs stated reason for removing the verbiage is kinda weak. I mean, if an assignment involves marketing time (the way we define it) in addition to exposure time I'd be very careful to explain which was which so there wouldn't be any confusion. I don't understand how a value conclusion can be adequately understood without reporting on one of the elements of the definition of value being used.

Maybe I'm not doing enough different types of work to understand the subtle nuance involved, but I don't see why this change was necessary. The downside is just too big.

 

[Marcia Langley]

Greg M,

I agree that Fannie wants marketing time (a forecast) for the neighborhood. I don't see any confusion about that.

Checking that box does not imply that the opinion of market value as defined in the report was developed using marketing time. It is simply additional information that the client (in order to conform with Fannie) has required.

Like George, when I am discussing time in relation to the development of Market Value, I always use exposure time.