REO sales and "Market Value"

[George Hatch]

Problem with the quote in blue ... How is "Our company has a property we can not legally own for more than three years from acquisition, less now, and thus we HAVE to sell it" ever considered a typically motivated seller?

Like you stated though, even the AI tries to avoid "always" and "never" even though they do state "distressed sales like foreclosures and short sales" which is a point blank statement that all foreclosures and all short sales are distressed sales.




So, let me get this straight, if I can find even 2 non-distressed sales that sold in under 10 days then ALL sales suddenly become non-distressed sales as long as they are marketed for 10+ days and have no other features of distress?? Even if average and median marketing times are longer than 10 days??? And even if maximum CDOM is over 3 years????

How brain-blown would that be? Yet it fits the criteria of your statement exactly as it only takes two to create a plural.
You may understand what you meant and you may be taking due diligence in analyzing marketing time, but that does not mean that people who read what you wrote and may even agree with you are actually doing so ... actually, if they agree with what you wrote there the probability is higher that they don't follow due diligence in analyzing market time as you do.





There, again, you miss word it a bit ... such probably *SHOULDN'T* be considered, because a) they are not marketed to the same market and b) again are not arms length transactions nor typically motivated, and could only be valid if thoroughly analyzed, commented on and appropriately adjusted, just like REOs and other distressed sales.

Like I said before, during the many previous iterations we've had of this discussion over the years the progression of the discussion is always the same. After you guys fail to find any appraisal references that significantly support your perspective you complain about those references being poorly worded or incorrect or in conflict with what the geniuses at NAR or Fannie say about appraising. It never fails and you guys never disappoint. FTR, each of your predecessors before you have eventually said the same thing about these references so we're really not breaking any new ground here, either.

I'd be impressed if you came up with an original argument but so far you've just been following the script.


Let's talk about what can happen in the real world with exposure times:

I've already commented on the fact that I have personally seen a number of datasets where the two subsets fully overlap and have no discernible difference in either exposure times or sales prices (after consideration for condition, of course). I've seen it often enough that I don't consider it a red herring.



Either you keep missing it when I comment on that or you have dismissed the possibility altogether on the basis that you think I'm lying just to make a point. Either way, I can't help you there. It's become apparent to me that you intend to believe what you want to believe regardless of what the AI said about it or what TAF said about it. And forgive me for saying so, but next to them I consider whatever Fannie or HUD might have to say about the situation to be completely irrelevant to me as a professional appraiser.

I particularly disagree with your blanket assumption that REOs are never marketed to owner-users or that the fear is universal of whatever X-factor can be attributed to an REO. Some owner-users are clearly not deterred by such concerns as evidenced by them paying just as much for the REO as their neighbor did for the outgunned traditional sale. After all, isn't that exactly what happens when the traditional sale doesn't sell for any more than the REOs nearby?

You can say you've never seen it but you can't say it doesn't exist. OTOH, I can say it exists because I've seen it. The burden of proof to prove otherwise rests with you. Good luck with that. BTW, I have no problems taking at your word if you say you've never seen it - that's because I recognize that markets vary and they don't all march to the same beat.


As for motivated sellers, if everyone in pa particular market segment who's selling is selling because they fear the consequences of not selling then why do we assume the banks are any more compelled than anyone else? If a rational person bought into the forecasts some economists are making about the RE markets over the next 10 years then what else would they do but walk away from a situation they considered untenable? Forget what the hormonal wrecks do with such decisions, how else would a purely rational person act in a significantly declining market?

Do we really assume a bank is *more* distressed than the short seller who has recognized they'll *never* recover the PV of their lost equity and on that basis can't afford to continue to pay $1000/month more for their housing just so they can say they didn't walk away?

I sure hope not. But based on what you keep saying maybe that's really the way you see it. If so, I can't help you there, either.

 

[Terrel L. Shields]

REO sales are "as if" sales... ."as if" the property was sold within an atypical time frame...

for your musings on the professional flippers, sure, they know what they're doing

Really..?? so all those folks that bought houses in 07 and 08 who were going to "flip" them and are now being foreclosed on "knew" what they were doing?

Flipping involves risk and risk involves a discount or you are a fool to attempt it. And if there is risk, then someone somewhere will roll the dice and lose sooner or later. That is what defines "risk"... REOs sell for less typically for the reason they are riskier purchases. "Dark" houses sell for less to begin with even when the owner is not compelled to sell. Some people simply do not want to "fool with" REOs nor banks. They want a seller who is "on the hook" with a disclosure statement. REOs are typically sold is "special" programs or "as is"...buyer bewares...

 

[Randolph Kinney]

APB Valuation Advisory #3: Residential Appraising in a Declining Market - Page 11


280 Market Value: The Public Perception – It is important to understand that most real estate
281 owners, lenders, investors and government officials believe that the term “market value” reflects
282 a gross sale price that an owner of the subject would receive if the subject were put on the market
283 as of the effective date of appraisal. This assumes exposure time has already occurred.
284 However, it is widely recognized (including in USPAP) that market value definitions assume a
285 hypothetical sale of the property as of the date of the appraisal according to the standards of the
286 definition of market value utilized in the appraisal.
287 In most definitions, market value assumes a sale to the most probable buyer within the highest
288 and best use opinion. This means the definition of the term is based on a sale from the current
289 owner to a new owner. When an appraiser is asked for a “Market Value Opinion,” the public
290 perception would be that the appraiser will tell the client how much they can sell it for. If so, this
291 necessitates an understanding by the appraiser and the client that the value is a future value. This
292 also necessitates an opinion of “the most probable type of buyer.”
293 Because comparable sales are used to develop opinions of market value, the comparable sales
294 must be compliant with the defined value or be adjusted to those requirements. There are many
295 parts to the popular definitions of market value including the condition that “(1) buyer and seller
296 are typically motivated;” Some appraisers consider that this condition in the defined value
297 precludes using comparable sales that were bank owned properties, short sales, or even corporate
298 relocations. While this may be possible in some markets, this cannot be done in many other
299 markets. There are markets where nearly all sales are bank-owned, short sales or other
300 financially distressed sellers. To say these are excluded fails in two ways:
301 (1) It precludes doing any market value appraisal in these markets with nearly all bank
302 owned properties sales unless significant adjustments are made to bring the sales up to a
303 perceived level where the “normal market” would be. The ambiguity of the term “normal
304 market” leaves too much room for debate; and
305 (2) It ignores the public and institutional perception of the words “Market Value.” These
306 terms are seldom argued by people outside the appraisal profession. They are assumed to
307 mean that the value opinion is the amount an appraiser thinks a property would have sold
308 for on the effective date of appraisal.
309 This is why communication with the client about the intended use and scope of work is important
310 to ensure the appraiser does not answer the wrong question.


APB Valuation Advisory #3: Residential Appraising in a Declining Market - Page 13


358 4. Market Value – This is the standard definition used in most residential appraisals. There
359 are other value definitions used for relocation and condemnation appraisals. This
360 definition refers to a “fair sale” without “undue stimulus.” This definition is based on a
361 transaction occurring under typical market conditions.


APB Valuation Advisory #3: Residential Appraising in a Declining Market - Page 15


453 Data verification is also necessary in some markets to determine if the comparables and/or
454 market data are reflective of the highest and best use. It is an error to use comparable sales that
455 reflect one buyer’s intended use to develop an opinion of value with a different highest and best
456 use. For example, a property sold with a house on a site which was immediately razed, but the
457 appraiser uses this sale as an improved property comparable. The buyer was not purchasing an
458 improved property, but a vacant site.

459 The Most Probable Buyer Type – It is a basic step in any market value appraisal for an
460 appraiser to identify the most likely buyer type. This is true for single-unit housing, office
461 buildings, industrial buildings and agricultural land. It is not possible to develop an opinion of
462 market value unless an appraiser is able to determine who the likely buyer type is and their
463 criteria for purchase. It is important for the appraiser to know who the most likely buyer type is
464 and what motivates their decision to buy. If the subject is only salable to an investor, then the
465 best comparables would be properties that sold to investors, not to owner-occupants.

472 It is especially difficult to develop a reliable opinion of market value using only minimal data
473 without verification. Verification of market data is important and is a function of the scope of
474 work. In the case of market value appraisals in declining markets this part of the appraisal
475 process is important because of the varied criteria for purchase in markets with both owner-users
476 and investor-entrepreneurs. If an appraiser is developing a market value opinion based on the
477 most likely buyer type, the appraiser needs to know if the buyer of a comparable was an owner
478 user or an investor-speculator. This determination is necessary to match up the sales with the
479 most probable buyer. This is again referring to the public perception of the term “Market
480 Value.”


APB Valuation Advisory #3: Residential Appraising in a Declining Market - Page 16


511 Markets with both investor and Non-investor sales – The most significant problem for
512 appraisers is in markets where both REO and non-REO sales are found and where there is a
513 significant difference in the sale prices between these two classes of properties. This situation
514 has led many appraisers to question if they should adjust the investor sales up to the owner-user
515 level or adjust the owner-user sales down to the investor-entrepreneur level? This is asking
516 which class of sales is most appropriate. In estimating market value, appraisers are required to
517 determine who is the most likely buyer for the subject and it is logical that they use comparable
518 sales that reflect that opinion. If the subject must compete in the investor market, the
519 comparables should come from that market. If the most likely buyer for the subject is an owner
520 occupant retail buyer, then the comparables should be from that market. The appraiser can make
521 a judgment about the likely nature of the most probable buyer and the value that would probably
522 result, but would likely report the presence of the other type of buyer and that resulting price.


APB Valuation Advisory #3: Residential Appraising in a Declining Market - Page 17

539 Identification of Appropriate Sales and Listings – All appraisal assignments require an
540 appraiser to develop an opinion of value and usually report it to the client. This requires a
541 discussion or at least an understanding with the client of the intended use of the assignment
542 results. The intended use will help an appraiser understand the goals of the client, the level of
543 analysis and the format needed for the report.
544 There can be significant differences in prices between properties at the investor and the owner
545 occupied level in markets where both types of properties are offered for sale. The common
546 question presented by appraisers, lenders and especially assessors is, “Which comparable sales
547 are appropriate in providing an opinion of ‘market Value?”
548 When considering this issue, the public perception of the defined term, the client’s intended use
549 of the appraisal report and the public policy should be considered. It is apparent that an appraiser
550 should tell the client what the current economic conditions are and if they have developed a
551 value at the investor-entrepreneur price or the owner-user price.
552 If an appraiser finds the subject property is located in a market where both non-REO and REO
553 property sales exist and these result in significantly different value opinions, the appraiser should
554 use the comparable sales that represent the actions of buyers most similar to the most probable
555 buyer for the subject. It is also possible for an appraiser to give clients two values, properly
556 defined, in the same report.
557 Absent law to the contrary, if the appraiser is requested to use “only REO sales” or not use REO
558 sales, the appraiser must decide if that request allows the appraiser to produce credible
559 assignment results based on type and definition of value in the report. If a conflict arises, the
560 appraiser must decline or withdraw from the assignment or, if the client agrees, utilize a type and
561 definition of value that meets the client’s expectations and accurately describes the market in
562 which the subject will compete. It would be misleading in a market value appraisal to use non
563 REO sales as comparables for a property that will compete in the REO market, or not adjust
564 them to reflect the most likely buyer. It is a violation of USPAP to mislead the reader of the
565 report. The value opinion should be consistent with the defined value and the most likely buyer
566 for market value appraisals.


APB Valuation Advisory #3: Residential Appraising in a Declining Market - Page 27


899 • Market value
900 The major focus of most real property appraisal assignments. Both economic and legal
901 definitions of market value have been developed and refined. The most widely accepted
902 components of market value are incorporated in the following definition:

903 The most probable price that the specified property interest should sell for in a
904 competitive market after a reasonable exposure time, as of a specified date, in cash, or in
905 terms equivalent to cash, under all conditions requisite to a fair sale, with the buyer and
906 seller each acting prudently, knowledgeably, for self-interest, and assuming that neither is
907 under duress.

 

[George Hatch]

Actually, in my local market, a reasonable marketing time is up to 180-1800+ days, with 150-300+ being most typical. Funny how most REOs are not on the market that long and tend to max closer to 170 days. arms-length (as you put it) seem to average 80-270+ days.

I don't know of any market locally where only 1-30 days is reasonable except for liquidation value.

I'm glad you are acknowledging the basis of your perspective. Now allow me to do the same.

I am currently finishing up on an assignment involving a house on 2 acres of industrial zoned land down in the Otay Mesa district of the city of San Diego, which abuts the International border crossing with Mexico. .

In order to come up with some supporting data for the valuation of the residential component I had to go several miles to the west that has homes of similar age and size. That area has been heavily impacted by the REO and short sale trend.

My subject was recently remodeled and is in good condition so that's what I was looking for in terms of comparables. Of the 6 sales data I used for direct comparables in my report, 4 had been recently remodeled by flippers (who acquired via REO resale), one had been remodeled by the flipper before it was foreclosed on (flipper screwed up with his cumulative costs) and the last one had been remodeled shortly after it's previous REO sale back when it was purchased in 2008.

Of the 6 sales, 4 were flip transactions and the other two were REOs.

I came up with 26 transactions that fit my original search parameters. Of those:

- 5 of them sold with exposure times exceeding 90 days - all five of those were short sales (not "traditional sales").

- 3 more of them sold between 60-90 days, also all short sales

- the remaining 18 sales were about evenly divided between shorts, REO resales, flip resales of former REO sales and apparent "traditional sales".

- The lone 4-day sale in my dataset was a flip transaction of a newly remodeled home, not one of the REOs. It sold for virtually the same price as 2 other similar remodeled homes. I had a bunch of sales, REOs and flips alike, that clustered in the 20-40 day range. Only a handful above or below that.


I picked my comps based on their respective condition because my subject was in good shape. The REO sales I used came in at the same prices as my flips. I did have to make an upward adjustment to two of them (one flip and one REO) because the quality of their respective finishes was a little inferior but that was it. I couldn't find the basis to support a "time" adjustment or room count adjustment or most of the other variables.

The data basically just did it's thing.

Now I don't doubt for one second that reasonable exposure times of up to 4 years are common for certain parts of your region. Or that 150-300 days is real common. We have a some areas where the latter occurs, too. But we have other areas, like this one, where the properties will move if they're priced competitively.

Obviously I can't base all my conclusions in all my assignments on the results of this one assignment (and I don't). But for this one assignment the data says the primary difference in price is all about condition and that seller status isn't meaningful beyond the extra time it takes to attract buyers for the short sale marathon.

You know what you see in your market and I know what I see in my market but that doesn't mean that either one of us can speak definitively about how this plays out in every region in the nation.

 

[JSmith43]

That one could have a below the radar demand component. If the buyer is extra curious about soil conditions or has his buddy, the geologist or civil engineer walk the property, expect a high offer in cash if everything looks good to go.

I think the preferred soil type is soft clay for a quiet manual tunnel dig.

That was an interesting story, George. Did you interview any of the buyers or sellers or agents? Or, did you just let the data speak to you?

 

[moh malekpour]

Buyer may be typically motivated; seller is under compulsion to sell (possibly extreme compulsion).

Bank has to sell within 3 years and has holding costs on property without receiving use nor income off said thus can not choose to sell or not to sell as a typically motivated seller can so choose.

Extreme compulsion could exist as of time of sale if bank examiner had come through and ordered the bank to get there liquid and illiquid assets bank into proper order within 30days or risk fines and possible forced dissolution of the bank.

compulsion is a psychological term. It is a personality disorder. A compulsive person is neurotic, cannot sleep, cannot think straight, is obsessed, is repossessed, may need a psychological help. Are you psychologist who diagnoses bank CEOs that they are compulsive because they have REO properties. Where did you get the law that says the regulator can dictate the bank that own the property must liquid the peroperty within 30 days or pay the fine? Please show me that law. The REO property is not the government property, it is not a public property, it is the banks own property. If the bank pays the tax for that property and maintain it properly and there is no lien or eminent domain or judgment against the property, who has the right to dictate the owner of that property to liquid it within 30 days or pay fine?
Quote:
Originally Posted by moh malekpour 2(a)-Arms Lengths sale: both parties are well informed or well advised, and each acting in what he or she considers its or her own best interest.

Like most of the rest this may or may not actually be the case even in an otherwise apparently arms-length transaction. Just because the buyer and seller do not know each other does not mean the transaction is automatically "arms length".

I hope You know that the bank gets at least one full appraisal on that REO property prior to listing it, don't you?. In Addition, it may get a BPO and finally hires a real estate agent to list the property. That real estate agent has the same responsibility of agent/client relationship to the bank that he has to regular home sellers. As a matter of facts banks get more information about the market condition that regular home sellers have because banks get appraisal and BPO on that property prior to the listing. Do home sellers get pre-listing appraisal on their home when they want to list it?
Quote:
Originally Posted by moh malekpour 2(b)- Arms Lengths sale: both parties are well informed or well advised, and each acting in what he or she considers its or her own best interest. [This is the same as 2 (a)] agree or disagree? If disagree, pleas explain

Bank may or may not be well-advised (aka, broker could be looking to bilk off fast transactions and flips); may not be well informed (broker may have submitted bias BPO or have withheld information, and the bank may have much more limited ability to check on local conditions or know the local area that an owner-occupier should; the interests of the bank are rarely if ever the same as an owner-occupier and may well be acting on corporate policy rather than its own best interests.

Consider the pre-listing appraisal and BPO a firewall against the crook broker who may wants to fool the bank to listed it for less than what is worth. At least the bank gets an appraisal on the property prior to listing, what a regular home seller does prior to listing. how the home seller gets informed?

Quote:
Originally Posted by moh malekpour 3(a)-Arms Length sale: A reasonable time is allowed for exposure in the open market3(b)-REO sale: the client restricted time is allowed for exposure in the open market [this is different from 3 (a)] agree or disagree? If disagree, pleas explain

For 3a this could exceed 6 years, for 3b this is under 3 years and typically much shorter. Realize that until foreclosure it is technically NOT the bank's property thus an REO property could be on the market continually for 3+ years yet only been listed by the bank as owner for 5 days. So, at which point does exposure time really start? [quote/] It is not up to you or me to set the time frame for the bank to sell. Each bank has its own time frame zone that plan to sell within that time. The fact is that they want to sell but they are not crazy to expect to sell the property in 5 days unless you diagnose them and found out that they are really crazy and neurotic that cannot sleep until the sell that property.

Originally Posted by moh malekpour 4(b)- payment is made in terms of cash in U.S. dollars or in terms financial arrangements thereto. [This is the same as 4 (a) agree or disagree? If disagree, pleas explain
Where this might not be the same is with HomePath and other special financing, see below.

I don’t get your homepath and creative financing. The Bank that sells a REO property doesn’t have anything to do with the buyer’s financing that buys that property. That buyer may get a conventional, FHA, VA or adjustable rate loan just like any other buyers in open market
Quote:
Originally Posted by moh malekpour The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concession granted by anyone associated with the sale [this is the same as 5 (b)] agree or disagree? If disagree, pleas explain
HomePath and such are textbook examples of special or creative financing.

Quote:
Originally Posted by moh malekpour As you can the only difference between these two sales as far as market definition is concerned is between 3 (a) and 3 (b).
Really? Odd. I found many more than just that one.
Quote:
Originally Posted by moh malekpour If you agree with above comparison, then lets go back to comparison of 3 (a) and 3(b)3(a)-Arms Length sale: A reasonable time that is allowed for exposure in this open market is 1-30 days.

Actually, in my local market, a reasonable marketing time is up to 180-1800+ days, with 150-300+ being most typical. Funny how most REOs are not on the market that long and tend to max closer to 170 days. arms-length (as you put it) seem to average 80-270+ days.

I don't know of any market locally where only 1-30 days is reasonable except for liquidation value.

I don’t dispute about your local reasonable marketing time but there are some markets out there with reasonable marketing time within 1-30 days.
I never generalize anything about real estate. I never believe one fits all on anything in real estate. It all depends on condition of the property, location, and market conditio. All I am saying is that some REO in some particular markets are not distressed sale and some are. You , on the other hand, think that if a property is an REO, it is automatically a distressed sale.
__________________


I don't know of any market locally where only 1-30 days is reasonable except for liquidation value.

 

[residentialguy]

Moh, it is a distressed sale. They didn't buy it, they didn't want it, it is a constant money pit, it's losing value every day with physical deterioration by sitting vacant, it is not serving them and they have to get rid of it. There is compulsion to sell. Compulsion is a force. REOs are a liquidation sale...or disposition sale at best. BTW, that appraisal that they got for listing was for disposition or liquidation value, not market value.

Bottom line....if they are selling at different price points than equal non-distress sales, there's a reason. What ever you determine that reason to be, you need to adjust for it so that it's adjusted price represents market value. There is no good reason to use a REO or SS as a comp if you have similar home owner occupant sales available.

 

[George Hatch]

That one could have a below the radar demand component. If the buyer is extra curious about soil conditions or has his buddy, the geologist or civil engineer walk the property, expect a high offer in cash if everything looks good to go.

I think the preferred soil type is soft clay for a quiet manual tunnel dig.

That was an interesting story, George. Did you interview any of the buyers or sellers or agents? Or, did you just let the data speak to you?

My assignment involved loan monitoring purposes for a portfolio lender so no sale is involved at this point.


My subject is about 500 yards north of the border. The airport is on the other wide of the border so any tunneling would be coming from a long ways away. There are only a total of 15 SFR properties in this area so the SFR comps for the assignment are located elsewhere - that aspect of it is pretty ugly but it is what it is. I had several recent industrial land sales from the area so those were more proximate - that part was a lot easier.


I spoke directly with the listing agents for both the REOs - I got more out of the one than the other but that's pretty typical. As far as I could get out of either of them both involved pretty typical circumstances. Nothing unusual.

With the flips these all involved pretty substantial improvements between acquisition and resale so the pricing reflected returns in excess of the improvements - again typical. Those guys don't work for free and neither do the homeowners they're competing with. Heavy discounting for condition relative to the hard costs involved.

I had another assignment about a month ago where everything played out the other way instead. REOs and shorts were about 1/3 of the sales vs traditional sales with the latter paying about 10% extra after accounting for condition. Interestingly, on that one I could only find a single flip in my dataset. It was a higher pricing tier and a pretty small dataset, though so either or both of those factors could have been of effect.

I'm a CG so I do a lot more non-res properties than SFRs. That's another element to my perspective. Many of those property owners are caught in a vice - the rents are down by 30% and 40% relative to their peak and the vacancies are up. What else can happen with prices except to adjust to that environment? The pricing moves to reflect those factors.

I consider the REOs themselves to be the symptom, not the problem as such. Apparently there are a lot of people who disagree.

 

[J Grant]

Compulsion to sell, as used in the LV definition , means complusion to sell within the severely limited marketing time frame, not compulsion to sell in a general sense. Many sellers feel compelled to sell.

When a lender asks for a 30 day MVO time frame to sell, on the REO addendum, it is not a compusory sale within 30 day, which would be different.

As George said above, REO's are a symptom of the problem, not the problem itself. Virtually every REO was at one time owned by a private person who had a mortgage, and stopped paying at some point.

 

[moh malekpour]

Moh, it is a distressed sale. They didn't buy it, they didn't want it, it is a constant money pit, it's losing value every day with physical deterioration by sitting vacant, it is not serving them and they have to get rid of it. There is compulsion to sell. Compulsion is a force. REOs are a liquidation sale...or disposition sale at best. BTW, that appraisal that they got for listing was for disposition or liquidation value, not market value.

Bottom line....if they are selling at different price points than equal non-distress sales, there's a reason. What ever you determine that reason to be, you need to adjust for it so that it's adjusted price represents market value. There is no good reason to use a REO or SS as a comp if you have similar home owner occupant sales available.

I know that they want to sell the property. It is in their best interest to sell it than to keep it . I said it myself before but to say that every single REO is subject to extreme compulsion and a fine from regulators to sell the property is just too extreme.
Let me give you an example of real distressed or compulsury sale. A home owner whose only child is diagnosed with a terminal brain cancer has been notified by doctors that his love one is going to die unless the child gets a surgery within 30 days but he doesn’t have enough cash and has no source to borrow money to pay for the surgery. He cannot sleep, he cannot rest, he cannot think, he cannot work; he is compulsive, distressed, full of anxiety, desperate to find a way to save the child. The only asset he has is his home with enough equity to pay for the surgery. He calls the real estate agent and tells him that his child is dying and he needs to sell the home to get cash and save the child. The real estate agent tells him that it takes at least 3 months to sell the home at that market value in that market but if he needs the money within 30 days, the broker has to reduce the asking price to 10% below the market value. The homeowner says go for it and the broker sells the property and the child is saved. This is a real distressed, compolsury, forced, emergency sale.
Does a CEO of a multi trillion dollar asset have similar compulsion to sell an REO property? I doubt it. But if there is a compulsion to sell, that compulsion establishes a certain exposure time for selling the property that can relieve the owner from the compulsion. If that exposure time is shorter than reasonable exposure time, then a discounted price should be applied to consummate that sale within that exposure time. If that exposure time is equal to reasonable exposure time in the market, then there is no need for the owner to be in compulsion and there is no need to discount the asking price. The knowledge to the owner is provided by the appraiser who has done an appraisal on that property that tells the owner whether should be in compulsion or not.