Does Exposure time in the REO Addendum actually mean Marketing Time.

[NJ Valuator]

In the REO addendum where it asks for the "as is" and "as repaired" estimate of market value based on client imposed restricted market exposure time, does exposure time in the REO addendum actually mean marketing time? I was informed that when the REO addendum was created market exposure what not yet defined and that the form actually was referring to marketing time. Any validity in this?

 

[Terrel L. Shields]

https://www.appraisalinstitute.org/assets/1/7/guide-note-14.pdf

 

[NJ Valuator]

https://www.appraisalinstitute.org/assets/1/7/guide-note-14.pdf

I am aware of all of this.

I am just asking in regards to the REO addendum form specifically. I was told that exposure time in the REO addendum(just in this specific form) actually was meant to mean marketing time because at the time the REO addendum was developed, exposure time had not yet been defined. I am trying to determine the validity of this.

 

[Mr Rex]

Marketing time and Exposure Time are not the same thing but can be the same "time". The prior poster provided an excellent AI link. It takes a while to wrap your head around it. The REO addendum says "Market Exposure Time". As always when a Fannie form uses mealy mouth verbiage, you should include commentary that explains what you are using. Similarly, most REO appraisals require a shortened "Market/Exposure" time for the 2 lower values on the REO. As these values do not meet the pre-printed "Market Value" definition on the 1004 form, you are required per USPAP to identify the definition of value that you are using to determine these values. Oft used terms are "Disposition Value" or similar. Depending on the client and how they or the client depends on "disposition" of the property plays into the modified definition of value and the "market/exposure" time.

 

[Terrel L. Shields]

It means the market exposure prior to the sale is X many days (whatever the client states). So if the client asks a 90 day exposure, it means the exposure prior to the sale would not be over 90 days... The marketing time is in the future. Basically it is asking for you to limit yourself to sales with DOMs less than the client imposed time.

So yes, for a current date the "exposure" that they want you to assume is actually your prediction of the marketing time but that should be based upon using sales that has been exposed less than the imposed limits by the client.

 

[CANative]

You're looking at exposure time which is in the past. The time it would have taken to sell the asset on the ED of the appraisal. For a client imposed time that is less than typical exposure time, the value opinion is no longer market value. It might be Liquidation Value they are after. Liquidation value is the likely price of an asset when it is allowed insufficient time to sell on the open market, thereby reducing its exposure to potential buyers.

I run a < 30 days run (broad enough for a good statistical sample) and a >30 days. This helps with reconciling o the 4 values in the REO addendum.

 

[NJ Valuator]

It means the market exposure prior to the sale is X many days (whatever the client states). So if the client asks a 90 day exposure, it means the exposure prior to the sale would not be over 90 days... The marketing time is in the future. Basically it is asking for you to limit yourself to sales with DOMs less than the client imposed time.

So yes, for a current date the "exposure" that they want you to assume is actually your prediction of the marketing time but that should be based upon using sales that has been exposed less than the imposed limits by the client.

Is there anyway to find out when the REO addendum was first published? Also, what year was Exposure Time first defined?

 

[Mr Rex]

You're looking at exposure time which is in the past. The time it would have taken to sell the asset on the ED of the appraisal. For a client imposed time that is less than typical exposure time, the value opinion is no longer market value. It might be Liquidation Value they are after. Liquidation value is the likely price of an asset when it is allowed insufficient time to sell on the open market, thereby reducing its exposure to potential buyers.

I run a < 30 days run (broad enough for a good statistical sample) and a >30 days. This helps with reconciling o the 4 values in the REO addendum.

Persaxtly, Exposure is past tense, Marketing time aka "Market Exposure" is actually forecasting to a potential future value. If the market is stable, they are likely the same. If the market is moving in one direction or the other, then they may differ. I have always interpreted the REO to require forward thought of value, since obviously the REO owner is asking for an anticipated sales price (projected, prospective), not the theoretical sale on the day of the effective date of the appraisal in the typical mortgage appraisal. You should confirm with your client their definitions of each and comment in the report the vagaries that do not meet the pre-printed verbiage on the Fannie forms.

 

[CANative]

It's hard enough just to get an AMC to say "REO Addendum please" without the drool dripping from the corner of their mouth.

 

[J Grant]

exposure time is the theoretical time property would be on the market prior to a sale , aka the days on market estimated to achieve the $ price equivalence of the market value opinion.

It is not just an estimate of days listed to achieve a sale, it is estimate of days listed to achieve the price you opined for the subject.

I give a range and make a disclaimer the market exposure estimate is based on a list price within reasonable range of the market value opinion and assumes an adequate marketing effort. .