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Market Exposure Time

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ZZGAMAZZ

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Jul 23, 2007
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Certified Residential Appraiser
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California
1) In what section of the 1004 should "market exposure" be addressed?

2) If the appraisal assignment is purchase related and the selling price is greater than market value, e.g., the opinion of value expressed in the report, should the report address market exposure at market value versus market exposure at the list price? (I'm unable to extrapolate on the example given in SMT-6.)
 

ZZGAMAZZ

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...what I meant to ask: should the report address the two market exposure times and the difference between the two (if list price & selling price are higher than m.v., for example).
 

CANative

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Retired Appraiser
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Why aren't you posting this in the newbie section?

j/k

Address exposure time in your narrative comments on market conditions. Exposure time is presumed to be prior to the effective date of the appraisal. It is the amount of time most properties took to sell. Market value presumes an adequate amount of exposure time. Longer times on the market are usually indicative of overpricing (but can also have other reasons). It takes longer to find a dumbkopf to pay that price. If a property is underpriced it will sell in less than a typical exposure time.

Are you trying to justify the higher than market value contract price because it had a longer exposure time? If so, that's incorrect (IMO). It just means that a dumbkopf finally came along and that would not be market value.
 

ZZGAMAZZ

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Certified Residential Appraiser
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California
Now that my cover is exposed (n/j/k): I have no alternative motive; I understand that exposure pertains to a hypothetical time in the past leading up to the effective date and pertaining to market value; however, I don't understand whether the report should address a discrepancy between market value and listing/price.

For example:

l/p of $500K, 60 dom, s/p of $500K, opinion of value of $450K.

Market exposure would be amount of time prior to the effective date that the subject would have been marketed at $450K, rather than $500K. It would be presumed that exposure time at market value would be less than exposure time at s/p. I imagine that numerous scenarios occur in nature, including s/p at less than market value.

Is it necessary/advisable to follow this line of reasoning/analysis--and it's possible that I don't understand exposure time as much as I would like to think...
 

Mike Boyd

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Jan 18, 2002
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Retired Appraiser
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I am probably wrong but here is my interpretation:

Some sellers try to sell the house themselves for a period of time then list it with a broker. Exposure time would be the total period of time, marketing period would be the period it was listed.

Never had anyone question me but I usually type in...."marketing and exposure time are equal in this area."

I think it is a stupid thing and not worth further analysis.
 

Couch Potato

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Mar 15, 2004
Professional Status
Certified Residential Appraiser
State
North Carolina
For example:

l/p of $500K, 60 dom, s/p of $500K, opinion of value of $450K.

Market exposure would be amount of time prior to the effective date that the subject would have been marketed at $450K, rather than $500K. It would be presumed that exposure time at market value would be less than exposure time at s/p. I imagine that numerous scenarios occur in nature, including s/p at less than market value.

Is it necessary/advisable to follow this line of reasoning/analysis--and it's possible that I don't understand exposure time as much as I would like to think...
I can see where you would be having problems. The first thing you need to work out is why your opinion of value is 10% less than the market participants have determined it to be. Obviously there is either something wrong with the transaction or there is something wrong with your opinion of value. Are there competing properties on the market at the lower price? How long have they been on the market? A good explanation is not going to fit in the blanks of a 1004, you will need an addendum to do the job right, IMHO.

You might want to include a copy of the contract they gave you as an exhibit in the report if you think the transaction is not aboveboard.
 

Mztk1

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Dec 3, 2006
Professional Status
Certified Residential Appraiser
State
Florida
I don't see where the problem is. Just because a house was marketed for 60 days and sold $50K above value when the value is esimated on an exposure time of say 90 days, doesn't prove anything. It is anecdotal. Exposure time is based on market data of all the comparables sales, and what is typical. Because a seller got lucky finding the right buyer quickly doesn't prove anything wrong with the analysis. Are you sure the buyer and seller do not know one another? What do the substitute listings in the area look like? Are there any? Or are they all overpriced too?
 

Marcia Langley

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Aug 26, 2005
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Certified Residential Appraiser
State
Missouri
ZZ,

I think your confuion stems from a misconception that the subject's data has anything to do with your analysis and reporting of probable exposure time at market value. That probable exposure time at market value is extracted from the comparable sales in the neighborhood (not necessarily only the ones in your grid).

After that task is complete you may want to comment on the subject data in the section where you analyze the contract. I think this is what you are trying to ask. But like you say, the subject data may not fit easily with the data extracted from the market.

Sometimes, in your analysis of the contract all you can say is that the subject appears to have sold above market.
 

George Hatch

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Jan 15, 2002
Professional Status
Certified General Appraiser
State
California
I deal with exposure time (and marketing time when applicable) in my Sales Comparison analysis, because that's where the data I use to develop those opinions occurs. I might mention my conclusions in the Market Conditions section of my Neighborhood analysis but I don't like to confuse what's going on in the neighborhood vs. what's going on with the subject itself.

IMO, the best indicators of exposure time come from the properties that are most comparable to my subject, including but not limited to the comps in the report.

And yes, I firmly believe that Fannie should have set aside a field in their appraisal report forms specifically for addressing this critical component of Market Value. Their failure to do so, even after we specifically asked them to do it before they finalized their forms, has enabled a lot of appraisers to completely skip this aspect of the appraisal process.
 

Jo Ann Meyer Stratton

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Jan 16, 2002
Professional Status
Certified Residential Appraiser
State
Arizona
Since we have few basements in my area I have the words Exposure Time typed in on the second line for basements in my subject grid. Then I type the number or days or months for each comparable. Then as part of my Scope of Work on page 3 I describe what I think the marketing time will be for my subject property as of the effective date of my opinion of value--how long I think it will take for my subject to sell at that price.
 
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