Exposure time vs marketing time, just for fun

[ZZGAMAZZ]

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.

So....a reviewer who is interested in the nuances of the market might question a report in which a market is defined as "increasing" but with marketing time that significantly exceeds exposure?

 

[George Hatch]

For one thing, the market conditions for the subject's market segment might not be in sync with the market conditions for all properties in the neighborhood. Which IMO is a good reason to analyze both separately unless the subject's market segment consists of every property in that neighborhood.

For another, it's on the appraiser to explain their conclusions even if they're not showing the entirety of their work.

And lastly, reviewers have become accustomed to seeing appraisal reports with internal inconsistencies, so in lieu of the appraisers explanations to the contrary their default will usually be to assume the apparent disconnect to be just another an error on the part of an appraiser, not the result of an actual analysis by this appraiser.

 

[glenn walker]

When and where in a report would an appraiser report both exposure time and marketing time?

On Fannie Forms Its called using and attaching the USPAP Compliance-Addendum -Form which has a place to insert ( DOM ) Days on Market & Estimated Exposure time You used to be able to juts write it in your report but the USPAP Form is signed and its a certification. I am shocked you have not been "stipped" on this as HUD has sent out tonnes of of deficiency letters on this subject over the last 8 years and reviewers are supposed to make sure you-have both DOM and Exposure time in your report. IT'S APPRAISAL COMPLIANCE ADDENDUM FORM normally in certifications forms library. It also ask if its a "appraisal report or a restricted appraisal report ' So on one form you cover four or five different bases required by USPAP.

 

[glenn walker]

So....a reviewer who is interested in the nuances of the market might question a report in which a market is defined as "increasing" but with marketing time that significantly exceeds exposure?

I have never seen a California market increasing low inventory and a long exposure time.

 

[ZZGAMAZZ]

On Fannie Forms Its called using and attaching the USPAP Compliance-Addendum -Form which has a place to insert ( DOM ) Days on Market & Estimated Exposure time You used to be able to juts write it in your report but the USPAP Form is signed and its a certification. I am shocked you have not been "stipped" on this as HUD has sent out tonnes of of deficiency letters on this subject over the last 8 years and reviewers are supposed to make sure you-have both DOM and Exposure time in your report. IT'S APPRAISAL COMPLIANCE ADDENDUM FORM normally in certifications forms library. It also ask if its a "appraisal report or a restricted appraisal report ' So on one form you cover four or five different bases required by USPAP.

I've used the USPAP addendum for the last year or so, and find it to be very convenient. I report exposure in the section of the form where it is required, but I never report marketing time because the form does not include that section. Why would an appraiser report exposure time and also marketing time on a form entitled USPAP, if only one of the two is embedded? That the form only requires the "minimum" info would not be a good answer unless the form is porrly designed.

 

[Tiffany Gibbons]

I know with MARS (R/earth) I could feed in DOM (Days On Market) as a measurable value to the regression and if I had enough data going back perhaps several years, if there were some correlation between DOM and Sale Price - it would find it. And interestingly, assuming there were such a relationship, you could use it to adjust exposure time and indicated value in synch. I did this many years ago and have forgotten the results. But I would guess there is going to be too much noise in the data to find a relationship.

Desirable houses sell fast and often at sometimes inflated values due to bidding wars and/or waiting lists. Hard to sell homes take longer to sell. Then of course it depends on what the seller is willing to sell for.

So, my gosh, it doesn't hurt to try, but you are probably wasting your time in a lot of markets where Demand exceeds Supply. The simple approach is to use the average and/or median DOM for sales in the past 3-6 months as the exposure time.

This thread is particularly interesting now with respect to Marketing Time - because we are headed in a new direction in many market areas, with interest rates that are expected to keep increasing. You can predict Marketing Time under certain assumptions, such as assuming that recent rates of change will continue. Beyond that, you get into speculation that is most likely risky.

I don't think you can say "desirable" anymore. It was canceled. Hurts the other undesirable houses' feelings or something. It's just your opinion kinda like the entire appraisal is just your opinion.

 

[J Grant]

On Fannie Forms Its called using and attaching the USPAP Compliance-Addendum -Form which has a place to insert ( DOM ) Days on Market & Estimated Exposure time You used to be able to juts write it in your report but the USPAP Form is signed and its a certification. I am shocked you have not been "stipped" on this as HUD has sent out tonnes of of deficiency letters on this subject over the last 8 years and reviewers are supposed to make sure you-have both DOM and Exposure time in your report. IT'S APPRAISAL COMPLIANCE ADDENDUM FORM normally in certifications forms library. It also ask if its a "appraisal report or a restricted appraisal report ' So on one form you cover four or five different bases required by USPAP.

The DOM is the expression for the exposure time estimate - it is the same question answered. The DOM is not another question about marketing time. The DOM on the USPAP cert page is there to express the days as a range for the question about market exposure. ( It is usually expressed as a range.)

1004 URAR appraisals only ask for market exposure. They do not ask for an estimate of future marketing time. An appraiser can provide that estimate as an additional comment - but why they would do that I have no idea - it is not being asked for and is just one more thing to hang you with .

 

[J Grant]

For one thing, the market conditions for the subject's market segment might not be in sync with the market conditions for all properties in the neighborhood. Which IMO is a good reason to analyze both separately unless the subject's market segment consists of every property in that neighborhood.

For another, it's on the appraiser to explain their conclusions even if they're not showing the entirety of their work.

And lastly, reviewers have become accustomed to seeing appraisal reports with internal inconsistencies, so in lieu of the appraisers explanations to the contrary their default will usually be to assume the apparent disconnect to be just another an error on the part of an appraiser, not the result of an actual analysis by this appraiser.

Most reviewers (one hopes) lets the "little things" go - though exposure time estimate is not a little thing, much of the time an error about it is not critical to results, though it might show the appraiser was not thinking and giving a rote number. For example, if I saw 45-90 days exposure but the comps showed under 30-60 days, I'd either not comment, or might comment the exposure time is inconsistent with predominate marketing time which is less than 30-60 days.

I would only make a big deal about it in a review if the exposure estimate is way out of sync. Because a client can take exposure time into account in making a decision. For example, a limited buyer niche, oddball subject, where the comps show 8 months to a year DOM, but the estimate is 60-90 days market exposure for subject. That is an error of a magnitude that could be misleading, whether it was caused by carelessness or intentional.

 

[J Grant]

sorry duplicate post

 

[alebrewer]

We cannot "know" how long it will take our active listing comps to result in the sales contract. We can only project the past into the future expectation, basically an extrapolation.

Technically, we cannot 'know' if our estimate of exposure time would have resulted in a consummated price at the appraiser's OOV either. Both are extrapolated from available data, and are only the appraiser's estimate(s) based on analysis of that data.