What Is Exposure Time In Appraisals?

Banking institutions require appraisals of real estate to loan out money. Real estate appraisals are highly governed by many factors, such as the kind of information contained and discussed in the report. However, an official appraisal assessment is still necessary even though the appraisers and the appraisal reports are highly governed. Here is the professional explanation of the appraisal review process and how exposure time is important to the appraisal.

What is Exposure Time in Appraisals

The Appraisal Institute has the following information about market value: The estimated price for a specific date, whether in cash or alternatives of equal value to the money that the real estate property should sell for when exposed for a reasonable time in a competitive market. A fair sale should prevail, and the buyer and the seller should act wisely without being forced.

The main function of an appraisal review is to ensure that exposure time is effective and independent from the estimated appraisal marketing time. Uniform Standards of Professional Appraisal Practice(USPAP) elaborates more on the meaning of exposure time. Exposure time is the approximate duration for the appraised home interest to be introduced to the market before the assumed completion of the sale at the market price on the practical day of the appraisal. Exposure time is a backward-looking opinion based on a review of preceding occurrences supposing an aggressive and open market.

Exposure time is an important concept in the appraisal process since market value definitions state that a reasonable exposure time in the open market should be allowed. When writing an appraisal report, the appraiser should point out the type and value of the home. If the exposure time is a key part of the value opinion, the appraiser should also have an opinion of reasonable exposure time to back up the value opinion.

Importance of An Opinion Of Exposure Time

The following are some of the reasons why an opinion of exposure is important:

  • It helps in gauging the appropriateness of the sales picked as alternatives.
  • It can point out weaknesses of the opinion of market value.
  • It can point out demand and supply imbalances or a weakening market.
  • It helps in assessing the risks of lending.

The Significance of Appraisal Review

There are set protocols for developing and implementing USPAP in the commercial real estate field and purchasing commercial property. These protocols involve several stages, such as reviewing, developing, and reporting the appraisal. You should follow these review process instructions, and they may be effectuated upon investigation, especially regarding flawless banking practices.

The appraisal review guarantees that the appraisal fully adheres to the USPAP standards. For instance, our professionals at ExcelAppraise track the appraisal throughout the process. We send automated emails to our clients informing them of the steps made. Upon completion, we check and verify if the appraisal complies with USPAP to satisfy our clients and their regulators.

Reasonable Exposure and Market Differences

Appraisers must first investigate the real estate industry to develop a reasonable exposure time. They must attend to reasonable exposure any time they make a sale. The real estate property’s duration on the market might affect the initial selling price. You will have to adjust the comparable sales if the property is exposed to potential buyers for an inadequate period. Reasonable exposure time is effective when a seller is forced to sell in a short duration for lower than the price they would have gotten.

The Appraisal Institute states that reasonable exposure time varies for different types of properties and in different market conditions. Reasonable exposure time depends on price, market conditions, and the features of the property. You should base your opinion of exposure time on the following:

  • Information on the market from data collection resources.
  • Opinions of players in the market
  • Past statistics of the days a similar property was on the market.
  • Verified Information
  • You can express your opinion of reasonable exposure time as a period or a specific number of days.

How Do Exposure Time and Marketing Time Compare?

Most people cannot differentiate exposure time from marketing time. The Appraisal Standard Board states that marketing time is an estimate that is predicted to occur after the effective date. The main distinction is where the duration under consideration lies within the business timeline. Exposure time occurs before the effective date, whereas marketing time succeeds the effective date.

Appraisal reports contain information such as the days the real estate asset spent on the market. These reports confuse people because the days on the market revealed in real estate trends are usually old data. It shows the period a house was exposed to the market before being sold. In this view, appraisers wrongly report exposure time as marketing data. Appraisers need to know that appraisal reports reveal past and not predicted data; therefore, the information represents exposure time.

Both marketing time and exposure time are factors of the same elements. These elements include the type and characteristic of the property, the market, position, attractiveness, and cost. Additionally, anticipated adjustments to the housing market affect marketing time since it is a forecast. Marketing time opinion will be different from exposure time if market conditions such as mortgage rates are likely to change. However, if market conditions are not likely to change, marketing time opinion will be similar to exposure time opinion.

How Best to Use Exposure Time?

As an appraiser, do not leverage this estimate to predict marketing time once you estimate the reasonable exposure time. You ought to investigate and expect different market conditions when analyzing marketing time. The following signs indicate that the market is strengthening:

  • Lower interest rates
  • Short exposure time
  • Low inventory levels
  • Higher listing price to sale price ratio
  • Increase in prices

These signs indicate that houses sell faster than previous times, and their absence indicates otherwise.

How Do I Implement The Appraisal Report?

It is important to clarify the analyses of events that determine the approximated marketing times. By making the reader understand the analyses, the appraisal report becomes relevant to them. You can contact our professionals at ExcelAppraise to get a home appraisal quote in Utah for free. Our hospitable staff will assist you in purchasing or selling your home.

Contact Our Professionals To Learn More About Exposure Time

Wrong estimation of the reasonable exposure time compromises the credibility of the value conclusion. You should understand the reasonable exposure time to identify and investigate the effect of insufficient market exposure. If you’re interested in a free quote, visit our webpage or call us at 1-801-882-2292!