Exposure time vs marketing time, just for fun

[glenn walker]

Ha ha I am back to torture everyone !!

Enjoy a few days because now there are additional hot button topics people are wigging out about. This is like a family reunion where we all pretend we missed Uncle Billy until he had been buried for three days.

 

[bnmappraisal]

Okay, so let me ask you this, then: In your opinion do both of the following two sentences mean exactly the same thing to you?

• My opinion of value for the subject property is $300,000, based in part on an opinion of exposure time of less than 30 days.
• 
  
• My opinion of value for the subject property is $300,000, based in part on an opinion of exposure time of 9-12 months.

First, thanks for starting this thread, George. Good reminder/refresher for many, including myself

Second, can you explain a little more WHY those are not the same?
My answer would be, the 1st (less than 30 days) means it only took 30 days for the subject to have a value of $300k. The 2nd (9-12 mos) that it took that long to have the same $300k value

 

[J Grant]

Now to step back and look at the why. Not all definitions of value we use include the explicit assumption of exposure time, but some of them do. The definition of MV we use for most of our mortgage lending assignments being one of them:

View attachment 64815

So that's an example of the usage of "reasonable" exposure time. But "reasonable" isn't the only metric that appraisers might be tasked to use. There are other definitions we can run into that use different assumptions WRT exposure time:

View attachment 64816

https://www.appraisalinstitute.org/assets/1/7/guide-note-11.pdf

In this manner we can see that the requirements for appraisers to develop an opinion of exposure time when using certain definitions of value isn't just a formality or an arbitrary impediment being imposed on some of you Tier-1 High Speed/Low Drag Appraisal Operators to slow you down. The point at hand here is that although the numbers may be the same, readers may consider those numbers to mean something different to them depending on the context they draw from the stated opinion of exposure time:

• My opinion of value for the subject property is $300,000, based in part on an opinion of exposure time of less than 30 days.
• 
  
• My opinion of value for the subject property is $300,000, based in part on an opinion of exposure time of 9-12 months.

Thoughts, opinions, disagreements encouraged.

I always give exposure time ( or marketing time ) in a range. While we can take responsibility for our point value as our opinion, it is insane to think we can pinpoint, whether retrospectively or going forward, the exact number of days it would take to sell a property or get a market value equivalent price.

Per your example above, the estimate for marketing time for a same property would be different to achieve liquidation value vs market value.

Market exposure estimates imo can be ignored at an appraiser's peril and come back to haunt them later. Many special use, very expensive, or oddball properties have a much longer market exposure needed, so estimating for that type of property a generic , incorrect market exposure can discredit the MV opinion.

 

[J Grant]

I don't do many listing purpose appraisals, but when I do, I like to present 3 estimates of marketing time :

One for a market value price, one for a higher price, and one for a lower price. Then let the client decide which is most useful for them.

 

[ZZGAMAZZ]

It is redundant in almost -all Residential Loan Production type assignments but it is what it is. Forget it and move on and if you ever start doing commercial or land transactions you will see how it can be relivant in that arena. I never fully comprehend it until we had started doing commercial land sales and development.

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

 

[George Hatch]

Okay, so let me ask you this, then: In your opinion do both of the following two sentences mean exactly the same thing to you?


First, thanks for starting this thread, George. Good reminder/refresher for many, including myself

Second, can you explain a little more WHY those are not the same?
My answer would be, the 1st (less than 30 days) means it only took 30 days for the subject to have a value of $300k. The 2nd (9-12 mos) that it took that long to have the same $300k value

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.

 

[bnmappraisal]

Gama, you can put it pretty much anywhere you would like. I have it in my addendum

 

[George Hatch]

Imo, the distinct difference for appraisers ( besides the fact that exposure time is retrospective - ) The difference in the way appraisers analyze it vs RE agents /the public is that for appraisal purpose, the appraiser estimates the exposure time as the length of time it would have taken to get a sale between buyer and seller at a market value price at market value terms. And the same applies going forward for an estimate of future marketing time to achieve a sale price at market value with a transaction at MV terms.

Whereas the RE agents and public sees marketing time as the estimated length of time to get a "good price" , or an offer, for the subject.

I used market value in above but it could be whatever type of value is identified in the assignment - the exposure estimate for liquidation value would be different than for market value ( typically).

PS see Water cooler for thanks for your free JGrant thread

I'm not talking about what brokers do or what brokers think or what broker perspectives are and I'm especially not talking about what brokers think will happen in the future. I'm talking about what appraisers do.

An appraiser's opinion of exposure time can and should be based on the facts in front of them, to the extent of the availability of those facts. It might be a broker or an MLS system that is counting the number of DOMS, but once reported those DOMs are a fact to be identified, not someone's opinion to be developed. Those facts can be used to develop the opinion WRT the subject's marketability and even it's value.

One distinction between the exposure/marketing is that "adequate exposure" is explicitly referenced in this particular definition of MV and is "knowable" based on the facts and data at hand. That's how we can consider its analysis a standard that's applicable when "exposure" is an element of the value definition.

Reasonable exposure in the market will be market-driven, as opposed to the more constrained exposures periods referenced in the assumptions for Liquidation Value or Disposition Value which are fixed, usually by the user and not by market conditions. So exposure time is VERY MUCH an issue with those two definitions of value as well, which is another indication as to its significance in the definition of MV we use. It's not just some arbitrary afterthought that was inserted into the definition in order to annoy appraisers.

From the AI forms:

 

[George Hatch]

Now SOMETIMES the number coming from a LV opinion with a 30-day exposure time can be the same as a MV opinion, usually when the market is running hot and the buyers will buy anything they can get their hands on. In which case your report is still expressing value conclusions for each of the value definitions being used. It's another example of the numbers being the same but having somewhat different meanings.

We've all become accustomed to the recent market trends for increase, but sooner or later that trend will reverse and we'll be seeing different DOMS and pricing trending toward declines, even if only by a little.

 

[J Grant]

https://www.appraisalcourseassociates.com/exposure-time-marketing-time/

An informative relevant article