Please help me understand

[KD247]

...how can you prove that unless the exposure times exceed long periods as well? And, that needs to occur before it is proven. Sort of like begging the question, I think.

You're right, but only if you make the assumption that Marketing Time must be supported by hard data or "proven." So, in a way, you're actually begging the question regarding how predictions must be substantiated. If the only acceptable way to estimate Marketing Time was by extrapolating a trend line based on historical Exposure Times, you'd be right - this would be a huge conundrum.

But, you've just developed a trend line that indicates a consistent six month Exposure Time when the dog walks in with the morning paper (and a cup of coffee if he's a really good dog) with the headline reading, "Plant Closing to Cause Widespread Unemployment." The crystal ball comes out and the projected trend line (Marketing Time) takes a sharp turn up.

Exposure Time is a conclusion, based on data.
Marketing Time is a prediction, based on a combination of data, logic, and intuition.

 

[Mike Garrett RAA]

Deleted previous posting.

Reading Rich's definition answers a question in my mind about the difference between the two periods and infers that my previous understanding may not have been totally correct.

Now, how come nobody else could so simply explain it?

Because Rich beat me to it?

 

[CGW Appraising CO]

My understanding is the same as many of these but with a small twist...marketing time is actual time spent on the market...exposure time is how long a property is exposed to the market at a reasonable price (assumably at or close to market value) in order to sell.

ie. a property may be on the market at 250,000 and sit for 220 days the price then reduced to 225,000 and 30 days later it sells...the property was "on the market" for 250 days but only 30 days of that is actual exposure to the "reasonable" price requirement for exposure time.

Am I missing something?

 

[KD247]

...the property was "on the market" for 250 days but only 30 days of that is actual exposure to the "reasonable" price requirement for exposure time.

That's an important distinction to make, and drastically overpriced properties should probably be kicked out of the data set when determining Exposure Time.

Your definition would be workable if everyone agreed on it, but the accepted convention is that Exposure Time concludes how long the property (or comparable sales) DID take to sell and Marketing Time estimates how long the property WOULD take to sell.

An interesting aspect is when the appraiser is asked to estimate the value that the property would sell at within 90 days. "Market Value" requires adequate exposure, so when you limit the marketing time, you're not really estimating Market Value and should say so in the report (even though the form includes a definition of Market Value).

 

[ZZGAMAZZ]

Question: If the subject was marketed for 90 days and sold at $zzz, and the opinion of value was $zzz, is exposure time 90 days?

Question: exposure time "is" or exposure time "was"?

 

[KD247]

Question: ...Question: exposure time "is" or exposure time "was"?

Exposure Time, as we use the term, is one of the components of Market Value. (e.g. "The property at 123 Main St., with reasonable Exposure Time estimated at 45 days, would likely sell for $125,000.")

So although the subject's actual time on the market might be one of the pieces of data we'd use to estimate reasonable Exposure Time, it might be confusing to use the actual term "Exposure Time" by saying "The subject's exposure time was 60 days."

I'd prefer to say, "The subject was listed for 60 days prior to the contract date and Reasonable Exposure Time for the subject is estimated at 60 days." Or, "The subject was listed for 285 days at $275,000, then for an additional 10 days at $95,000 prior to the contract date, with a contract price of $125,000. Reasonable Exposure Time for the subject is estimated at 60 days."

I'm open for criticism - haven't really thought that much about the semantics of "exposure time" and "marketing time" outside of their strict USPAP definitions.

 

[Mztk1]

That's an important distinction to make, and drastically overpriced properties should probably be kicked out of the data set when determining Exposure Time.

Your definition would be workable if everyone agreed on it, but the accepted convention is that Exposure Time concludes how long the property (or comparable sales) DID take to sell and Marketing Time estimates how long the property WOULD take to sell.

To me exposure time is always a hypothetical, typically based on an analysis of Days On Market, which is a measure of actual marketing time.

When we do an appraisal, and let's say the effective date is the same as the inspection date, our value is determined as if the subject closed the day we were at the house. The hypothetical marketing time leading up to that closing is "exposure time".

On the other hand, when you have a comp, it actually did sell on the day of closing. The time leading up to the actual sale was its marketing time, not exposure time. It physically was being marketed. We estimate our exposure time (pretend marketing time) by looking at at the historical data of actual marketing time, most often using DOM data.

When we try to sell a house and project how long it will take, we are estimating marketing time. Once it actually sells, we no longer need to estimate it, we know what it is. That is actual days on market, or actual marketing time.

If however, we are appraising a house with a prospective effective date, even though the time to list the house remains in front of me just as if I am trying to sell a house, I am still estimating "exposure time" because I am estimating a hypothetical time leading up to a hypothetical sale. That exposure time might not begin for a month, or might have started last month...it doesn't matter, it is hypothetical.

I hope that made as much sense to you reading as it does to me.

 

[KD247]

I don't like the way I worded my last statement. The word "DID" was meant to indicate past tense, not what actually occurred in a specific instance. I probably should have said "WOULD HAVE" instead.

Mr. Google says:

STATEMENT ON APPRAISAL STANDARDS NO. 6 (SMT-6)

Exposure time may be defined as: the estimated length of time the property interest being appraised would have been offered on the market prior to the hypothetical consummation of a sale at market value on the effective date of the appraisal; a retrospective opinion based on an analysis of past events assuming a competitive and open market.

Discussion of Marketing Time in the Appraisal Report (AO-7)

Marketing time occurs after the effective date of the market value opinion and the marketing time opinion is related to, yet apart from, the appraisal process. Therefore, it is appropriate for the section of the appraisal report that discusses marketing time and its implications to appear toward the end of the report after the market value conclusion. The request to provide a reasonable marketing time opinion exceeds the normal information required for the appraisal process and should be treated separately from that process.

It is also appropriate for the appraiser to discuss the impact of price/value relationships on marketing time and to contrast different potential prices and their associated marketing times with an appraiser’s market value opinion for the subject property.

 

[Atlanta CG]

Super responses guys & gals - thanks
John (the thickheaded)

 

[Fred]

Exposure time and market value are linked.

Exposure time and value are related. Reduce exposure too much (for example, immediate liquidation value) or expand it too much, and you no longer estimating market value.