Days On Market Vs. Exposure Time

[Andrew Walker]

Hey,

I recently took a USPAP course and all that kind of stuff and this was touched on briefly, however I don't especially understand it well.

Could someone briefly explain the difference between exposure time and marketing time?

Thanks so much, huge help!

-Andrew Walker

 

[Jeff Horton]

I believe the simplest answer is:

exposure time - the time the subject is 'expected' to have to be on the market before a buyer is found.

marketing time - the actual time the subject is on the market before a buyer is found.

For practical purposes I think they are interchangable.

 

[Thomas Fiehler]

Jeff-I believe that exposure time refers to the time period before the effective date of the appraisal and marketing time refers to the time after the effective date of the appraisal.

 

[Travis McGee]

As far as I know the terms are interchangable- (like house, and home) The terms refer to how long the property has been on the market (for our purposes, obviously, from the time it was listed or exposed to the market, up to the date we appraise it)

Thomas why do you marketing time relates to the time after we appraise it? Confusing comment and as far as I know not correct.

 

[Stephen J. Vertin MAI]

Exposure time is the time assumed in the value indication of a report that the subject was exposed on the open market before selling. Different exposure times can change value, i.e., a property with an expected exposure time of 1 day may have a different value than one exposed for one year. Marketing time is the time a property was on the actual market before selling. Many times appraiser look at the marketing times of similar properties to estimate exposure time for the subject.

Steve Vertin

 

[Carnivore]

Steve,

It is interesting to me that lenders typically want Days on Market for residential stated for comparables.

I actually think they want exposure time for the subject as related to the final opinion of value. Which to me would make more sense.

I love this stuff because it Skews AVM's beyond any reasonable margin of error!
Thus, making them virtually worthless for risk management.

 

[jtrotta]

S.J.V. MAI

will agree - good answer (donit make ya wonder when they "pocket" a listing for a few days and note a 1 day market time).


h34r:

 

[Nancy in Friday Harbor]

Andrew,

You mentioned "Day on Market vs. Exposure Time" in the heading to your question, but then asked what's the difference between exposure time and marketing time.

Maybe I'm wrapped a little too tight for this close to the holidays, but shame on all of you who've been so casual in your answers to Andrew!! 20 lashes with a wet USPAP volume and back to USPAP class!!

Statement 6 covers exposure time.....and remember that Statements have the same weight as Standards.

It states:
Reasonable exposure time is one of a series of conditions in most market-value definitions. Exposure time is always presumed to precede the effective date of the appraisal.
Exposure time may be defined as follows: the estimated length of time the proeprty interest being appraised would have been offered on th emarket prior to the hypothetical consummation of a sale at market value on the effective date of the appraisal; a retrospective opinion based on an analysis of past events assuming a competitive and open market."

Page 93 of the 2003 USPAP. Go read it. Too important to take lightly.

Exposure time is an opinion of the time BEFORE your effective date.
Marketing time is an opinion of the time it would take from the date of the appraisal forward to some date in the future.
Days on market is a fact (although that may be debated by those who know their realtors..... :lol: )

The way I remember it is "E" comes before "M", ergo "Exposure" before effective date. "Marketing" after effective date. Per USPAP Standard 1-2c, reporting Exposure time is required. Marketing time is voluntary--unless your lender has required it as a "supplemental standard".

Blustery and gray in Friday Harbor.
Happy Holidays to you All!

 

[Travis McGee]

Thanks Nancy! This is why the forum is great. We are all always learning.

 

[moh malekpour]

Andrew;

I don’t blame you for lack of understanding of exposure time and marketing time after attending the USPAP course. The exposure time is confusing.

I read SMT- 6- AQ-7 and previous posts about this topic in the forum and more I read more confused I got. To me the main reason is that SMT- 6 has a clear definition and example of marketing time and I believe every one knows what it is but when it comes to exposure time, AQ-7 has a lengthy definition but no clear example for it as the result every one has different opinion about it.

I have my own opinion about this topic and I am open to any critic if I am wrong.

When I complete an appraisal either for refi or purchase at the current effective date, I will tell the user of my report of two times: 1- the exposure time that was the time prior to effective date of appraisal and I use past tense verb. 2- the marketing time that will be the time after affective date of appraisal and I use future tense verb. Remember, the effective date is at present tense verb and it can be for past (retrospective), future (prospective).

Suppose the property is appraised at X amount. I will tell the user of appraisal that the property value is X amount but it needs a marketing time of 60 days. If the lender intends to sell the property in 10 days and the market is stable, the value might be less.

I also tell the lender that the property value is X amount with an exposure time of 60 days that happened prior to effective date. You may ask where is the exposure time for a property that is appraised for refinancing. The property was not on the market and had no exposure time. To me, the exposure time doesn’t come necessarily from the subject. We extract the exposure time from the market. We had to use three or four comps to appraise the subject and reviewed the exposure times of those comps that were on the market prior to their sales and that is the market exposure time. So, the exposure time is an implied time that happens prior to the effective date and the subject may or may not have an actual exposure time. In the case of purchase, it has actual exposure time but in the case of refi, it doesn’t have actual exposure time. My emphasis is on comparables exposure time or market exposure time.

In a stable market, the length of exposure time and marketing time is the same but in rapidly increasing market, the marketing time could be shorter than exposure time.

For example, it took 60 days for our comps in the case of refinancing and our subject in the case of purchase to sell at X amount prior to effective date. If the rate drops 1% one day after affective date, it may take 20 days to sell the subject at the X amount.