Developing and Reporting Exposure Time

by ICAP Board · Published February 20, 2012 · Updated March 10, 2017

Developing and Reporting Exposure Time Did you know that the 2012 USPAP has a new development and reporting requirement?

Effective January 1, 2012; when exposure time is a component of the definition for the value opinion being developed, the appraiser must also develop and state in the report an opinion of reasonable exposure time linked to that value opinion.

The following is the exact language in the USPAP;

DEFINITIONS

Exposure Time: estimated length of time that 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.

Comment: Exposure time is a retrospective opinion based on an analysis of past events assuming a competitive and open market.

STANDARD 1: REAL PROPERTY APPRAISAL, DEVELOPMENT

Standards Rule 1-2

(c) identify the type and definition of value, and, if the value opinion to be developed is market value, ascertain whether the value is to be the most probable price:

(i) in terms of cash; or

(ii) in terms of financial arrangements equivalent to cash; or

(iii) in other precisely defined terms; and

(iv) if the opinion of value is to be based on non-market financing or financing with unusual conditions or incentives, the terms of such financing must be clearly identified and the appraiser’s opinion of their contributions to or negative influence on value must be developed by analysis of relevant market data;

Comment: When exposure time is a component of the definition for the value opinion being developed, the appraiser must also develop an opinion of reasonable exposure time linked to that value opinion.

STANDARD 2: REAL PROPERTY APPRAISAL, REPORTING

This reporting requirement is the same for all three types of appraisal reports; Self-Contained, Summary and Restricted Use

Standards Rule 2-2 (a), (b), (c) – (v)

When an opinion of reasonable exposure time has been developed in compliance with Standards Rule 1-2(c), the opinion must be stated in the report.

…I’m still a little confused here TJ, is there somewhere else in the USPAP that provides a little more direction?

Great question random reader!

For additional information on exposure time, refer to Statement 6, Advisory Opinion 7 and Frequently Asked Question 163 in the USPAP.

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

SUBJECT: Reasonable Exposure Time in Real Property and Personal Property Opinions of Value (Refer to USPAP for this large statement)

WARNING: Do not confuse Exposure Time with Marketing Time. USPAP Advisory Opinion 7 helps differentiate between the two:

The reasonable marketing time is an opinion of the amount of time it might take to sell a real or personal property interest at the concluded market value level during the period immediately after the effective date of an appraisal. Marketing time differs from exposure time, which is always presumed to precede the effective date of an appraisal.

Simple way to remember the difference:

Exposure Time: In the past before the effective date of the appraisal
Marketing Time: In the future after the effective date of the appraisal

Finally we have a USPAP FAQ to add more clarity to these terms:

163. EXPOSURE TIME AND MARKETING TIME

Question: What is the difference between exposure time and marketing time?

Response: Both the DEFINITIONS and STATEMENT ON APPRAISAL STANDARDS NO. 6 (SMT-6),

Reasonable Exposure Time in Real Property and Personal Property Market Value Opinions of Value, define exposure time as:

estimated length of time that 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.

Comment: Exposure time is a retrospective opinion based on an analysis of past events assuming a competitive and open market. In contrast, Advisory Opinion 7 (AO-7), Marketing Time Opinions, defines marketing time as:

an opinion of the amount of time it might take to sell a real or personal property interest at the concluded market value level during the period immediately after the effective date of an appraisal.

In other words, exposure time occurs before the effective date of the appraisal, whereas marketing time occurs after the effective date. An estimate of exposure time is required by USPAP for market value appraisal assignments (see Standards Rules 1-2(c)(iv) and 7-2(c)(iv)), whereas an estimate of marketing time is not mandated by USPAP (but may be required by the client and so becomes an assignment condition in those assignments). For additional guidance, see SMT-6 and AO-7.

Good Luck!!!

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