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Exposure time vs. marketing time

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Pat Butler

Thread Starter
Senior Member
Joined
Jan 17, 2002
Professional Status
Certified Residential Appraiser
State
Illinois
With many areas of the country now experiencing extended marketing times, it now becomes especially important to distinguish the difference between exposure time and marketing time in our reports.

In the past, if the marketing time was only a few months, then going 'forward' a few months (assuming similar short term exposure) didn't make much of a difference with anything.

It's now apparent that for some users that our appraisals are less useful for multiple purposes. For example, I do a lot of estate work. Use to be that the market value had some close correlation to what they could market their property at. Now, some of my areas have marketing times exceeding one year. So my estate clients get their market value based upon the presumption that the subject property had been marketed for sale prior to the effective date of the appraisal- that's going back at least a year. YET, they might also be listing the subject property for sale which might presume that a sale occur at least one year, or maybe farther, in the future. That makes it a TWO YEAR difference between my appraised value and their expectations for a future sale.

Many of my clients are now in need of two separate appraisals. One for estate or BK purposes, and another to assist them with competitive pricing for FUTURE sale.
 

Marcia Langley

Senior Member
Joined
Aug 26, 2005
Professional Status
Certified Residential Appraiser
State
Missouri
Pat,

Yes the extended exposure times have affected our view of what is meaningful to the client. As have the declining prices. There have been some interesting discussions here about REOs that require different opinions of value for different exposure times and there are new considerations due to DOM/declining issues.
 

Ray Miller

Elite Member
Joined
Feb 20, 2002
Professional Status
Licensed Appraiser
State
Wisconsin
Try this on an ERC appraisal. You have the buyers purchase price of 3 years ago, you have todays market value and you are projecting the sale value no longer then six months and in some case now I have been ask for a year out sale value.

You are doing at least two if not three appraisals. The third comes in to see if the purchase value was what the market was at the the time that the buyer bought it.

Just got word on friday that one of my ERCs had been accepted. They had to order a third appraisal as I cut the value $200,000 below what the owner thought it was worth and a $150,000 below what he had paid for it a 1 1/2 ago. third appraiser agreeded with my project selling value within $2000K. The other appraiser was up around where the owner thought it was worth. The ERC company called and place another order in the same area with me on friday.
 

Pat Butler

Thread Starter
Senior Member
Joined
Jan 17, 2002
Professional Status
Certified Residential Appraiser
State
Illinois
I had one last month with a -$75K forecasting and it's beginning to look like that was not enough. The problem that I am seeing is that there is so much inventory in our area that it's difficult to have a low priced property stand out in the MLS. No one would believe that a homeowner would underprice a property like what would happen in a relo situation. So sometimes the 'discount' has to be so significant that it stands out in the MLS and gets people to look. Otherwise the property that's listed $75K less just falls into a lower priced group of properties and everyone expects that it's similar to those properties.

The other thing I'm seeing with relos and extended marketing times is that the market is continuing to deteriorate. It's too easy to make the mistake of projecting out into the future at a constant rate of deprecation rather than a continuing-rate of deprecation.
 

CANative

Elite Member
Joined
Jun 18, 2003
Professional Status
Retired Appraiser
State
California
The ERC company called and place another order in the same area with me on friday.

They like it when the value comes in "low."
 

Ray Miller

Elite Member
Joined
Feb 20, 2002
Professional Status
Licensed Appraiser
State
Wisconsin
They like it when the value comes in "low."


Change that to, within reason :clapping: . If you get to low they stop using you. I know you know that so will discount your above statement because of age or starting New Years Eve a little early. :new_multi:
 

Mztk1

Senior Member
Joined
Dec 3, 2006
Professional Status
Certified Residential Appraiser
State
Florida
In my market, marketing time is directly related to how well priced a house is. If it is priced right it sells within 90 days nearly all the time, but definately within 180. The trouble for sales agents has been getting sellers to price right. If a house is not priced correctly, or if an owner is not slightly flexible with the asking price, it will sit in excess of a year, sometimes two.

I have looked at my comps in all my reports where they have spent over 6 months on the market. One thing stands out. As soon as the list price was within 10% of the final closing price, the contract always came within 4 months.

I don't know what it is like in Illinois, but it can't be much worse than here in Central Florida. My exposure time considerations are based on the subject being priced right to begin with, and that cuts down on marketing time considerably, erasing the problem you are having.
 

Ray Miller

Elite Member
Joined
Feb 20, 2002
Professional Status
Licensed Appraiser
State
Wisconsin
One problem I have in my rural area, is someone will transfer in with a large wage/salary, or money from another state where you can buy much, because of the cost.

Many traveling sale reps or traveling sales mangers who salary is not base on local conditions.

They get here to the rural area of Wisconsin and their salary might be double or triple of the areas. So they build or buy the bigest home in the area. Live in it for a year or two and are transfered out. Here sits a $350K home that the area will not support and it is out in the middle of no where. In time it might sell for what the seller has in it. But that could be as long as three years down the road. If you doing it for ERC you have got to give it a deep discount and then some local gets a steal.

Move it to a different market area in the state and it would sell higher. That market area might only be fifty or sixty miles nearer to Madison, but that is fifty sixty miles most do not want to drive. Considering there is no direct four lane road with in 25 miles. Most of the state hiways and county trunks are hilly and full of curves.
 

Wayne Tomlinson

Senior Member
Joined
Jan 25, 2005
Professional Status
Certified General Appraiser
State
Illinois
In an estate appraisal, the concept of marketing time, and the extension of that time up to a year or more would be an incorrect appraisal.

The marketing time/exposure time is for the purpose of letting lenders know how long it would take to get their money back.

In an estate appraisal, the question is what is the house/property worth today, not some time in the future.

In the scenario presented, actually likely the market time might likely be less if assumed a 30 day marketing time, although, it might also be that if you extend that to the current marketing time of a year, who is to say that it would not be even lower then than a 30 day time now.

The estate must be closed in less time than that the current "marketing time".

Similar to an ERC situation.

Wayne Tomlinson







s
 

Couch Potato

Elite Member
Joined
Mar 15, 2004
Professional Status
Certified Residential Appraiser
State
North Carolina
Good point.

With many areas of the country now experiencing extended marketing times, it now becomes especially important to distinguish the difference between exposure time and marketing time in our reports.

In the past, if the marketing time was only a few months, then going 'forward' a few months (assuming similar short term exposure) didn't make much of a difference with anything.

It's now apparent that for some users that our appraisals are less useful for multiple purposes. For example, I do a lot of estate work. Use to be that the market value had some close correlation to what they could market their property at. Now, some of my areas have marketing times exceeding one year. So my estate clients get their market value based upon the presumption that the subject property had been marketed for sale prior to the effective date of the appraisal- that's going back at least a year. YET, they might also be listing the subject property for sale which might presume that a sale occur at least one year, or maybe farther, in the future. That makes it a TWO YEAR difference between my appraised value and their expectations for a future sale.

Many of my clients are now in need of two separate appraisals. One for estate or BK purposes, and another to assist them with competitive pricing for FUTURE sale.
Good point Pat. It's very important to be sure of the needs of our clients. Estate appraisals for tax purposes are based on exposure time, just like a typical mortgage appraisal; but estate appraisals for the purpose of a sale would need to be based on marketing time, just like a typical relocation appraisal. Knowing the current market characteristics and how that could affect the client's needs is part of why we are hired.
 
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