Marketing time and exposure time are two phrases that surely ring a bell to real estate appraisers. Knowing these two things is crucial in giving an insight into the market value of properties. However, some appraisers, especially newbies, have a difficult time understanding and applying these two key terms in their daily assignments.

In this blog post, you will have an overview of the difference between marketing time and exposure time and what is their importance to real estate appraisers. 

Following the Standards

According to Rules 1-2 of the Uniform Standards of Professional Appraisal Practice, an appraiser should know how to recognize the type and significance of a value. Developing a value opinion uses reasonable exposure time as its component. It is crucial for the appraiser to create an opinion of reasonable exposure time connected to that value opinion. 

Unless the appraisal assignment has something to do with a non-market value, an insurance replacement value, or a liquidation value, it is typical in lending appraisal work to require a market value opinion. Federal agencies define several conditions implicit in market value. For instance, it is a condition that a reasonable time is given exposure in the open market. 

Reporting reasonable exposure time can be tricky because standardized residential appraisal report forms from Fannie Mae and Freddie Mac do not have space for such information. It is not surprising that appraisers often miss reporting reasonable exposure time. 

Exposure Time: Defined

Exposure time is the approximate amount of time that the subject of the appraisal would have been available for purchase before a hypothetical sale at market value was completed on the appraisal's effective date. An analysis of previous events is required to gain insight into competitive and open market dynamics and come up with the estimated exposure time. 

Marketing Time: Defined

Be sure to refer to The Dictionary of Real Estate Appraisal to define marketing time. According to this reference book, marketing time is an opinion of the approximate period of time it might take to sell a real property interest at the completed market value right after the appraisal’s effective date. 

Difference Between Exposure Time and Marketing Time

There is some confusion in contrasting exposure time and marketing time among appraisers, clients, and lenders who use an appraisal report. The main difference between the two is when each takes place within the transaction timeline. Exposure time occurs prior to the appraisal’s effective date, while marketing time happens after it. 

Appraisal reports often contain information about the “marketing time” or “days on the market” of closed sales. This typical reporting is what makes appraisers, clients, and lenders confused because, in truth, the marketing time outlined in the housing trends and sales comparison grid of appraisal reports actually refers to the exposure time.

The reported data typically (and wrongly) labeled as marketing time should be referred to as exposure time. Appraisers must understand that most market data sources and appraisal reports share historical data, not forecasted data. Hence, the data you read on these reports is exposure time, not marketing time. 

There are similar elements that exposure time and marketing time may depend on, such as the property type, property features, location, appeal, market activity, and price range. However, it is crucial to note that marketing time refers to forecasting and should take into account anticipated market variations. 

The opinions on exposure time and marketing time may vary if housing inventory, unemployment rates, mortgage rates, and market conditions are anticipated to change at the soonest time possible. In contrast, there will be more or less similarity between the two opinions if there are no immediate anticipated changes in the market. 

Appraisers should know how to identify inconsistencies in their appraisal reports. Find the difference between your appraisal report according to housing trends and the report’s calculated opinion in relation to reasonable exposure time. 

How to Support Your Opinion of Exposure Time

According to USPAP, you should take note of these pieces of reliable information to support your opinion of exposure time. 

• Information on how many days the property is on the market. 

• Information obtained through sales confirmation

• Information gathered from data collection services

• Interviews of market participants

As an appraiser, you can express your opinion of reasonable exposure time as a specific number (e.g., four months) or a range (e.g., 60 to 90 days).  

Final Thoughts

Appraisers should know the difference between exposure time and marketing time because it helps them to evaluate the suitability of the sales selected as comparables and the risk of the loan transaction. It can also aid them in identifying an imbalance in supply and demand or inconsistencies regarding the opinion of market value. Be sure to do your work well as an appraiser by understanding exposure time and marketing time.