One of several conditions implicit in the definition of market value (see USPAP definition of market value below) is that consideration be given to the "conditions of sale," one of which is that a reasonable amount of time be allowed for exposure to the open market. Adequate exposure time permits proper marketing to participants in the relevant marketplace. It provides an opportunity for potential buyers to become aware of and knowledgeable about the subject property. Insufficient exposure time (such as in the case of a forced liquidation sale) typically does not allow enough time for proper marketing to ensure the most lucrative sale possible.

Exposure time is the estimated amount of time the subject property would have been offered for sale before it hypothetically sold at market value in a competitive and open market on the effective date of the appraisal. Exposure time is presumed to precede the effective date of the appraisal. It is a retrospective opinion based on past events within an open and competitive market.

Exposure time is a cornerstone of the most common definitions of value referred to in valuation theory. Exposure time is meant to set a context within which the market value estimate is rendered and is derived from the notion that, on a fundamental level, appraisals are commissioned primarily to facilitate some other decision or action to be taken by the client or other intended users of the report. To a potential buyer, "Do I buy at this price?"; to the seller, "How much should I expect to receive?"; to the heir in an estate, "How much is my fair share?"; to a donor, "How large will my tax deduction be?"

USPAP requires the development of an opinion of reasonable exposure time for market value appraisals.

Note that USPAP does not require the reporting of the reasonable exposure time - only its development. Having said that, it is probably good practice to report the exposure time opinion if doing so would help clarify the appraisal results. This is in accordance with USPAP's Standard 8 which requires the inclusion of any comments needed to clarify how the value definition is applied. Examples of such clarification might very well include defining the value in the context of the amount of exposure time, i.e., is it reasonable? insufficient? USPAP Standard 8 states:

"It is not always necessary to discuss reasonable exposure time. If the market analysis reflects balanced and ordinary market conditions and typical buyers and sellers, then it would not be necessary to discuss reasonable exposure time in the report, i.e. the report could be properly understood without a discussion of exposure time. Reasonable exposure time should always be considered, however, in the development of the appraisal." ("Launching Your Appraisal with USPAP" Novotny, 2007)

As you might expect, a reasonable exposure time will be different depending on the type of property, the market conditions, and the expected value range. As examples, a sale at market value for property in high demand would require a shorter exposure time than common items which will go wanting. Exposure time will be lengthier within a buyers' market where similar properties are plentiful as opposed to a sellers' market in which properties are scarce. Property that is priced at a price level which informed market participants feel unreasonable will require a longer exposure time to sell than property participants feel is fairly priced.

The opinion of a reasonable exposure time is based on information about past sales of comparable properties as well as interviews with market participants such as other buyers and sellers of similar properties.

Example 1: Lenders contemplating a collateral-based machinery and equipment loan in a market where liquidations require a six or nine month exposure time may adjust their underwriting requirements (a reduced loan amount allowed or a higher interest rate charged) in the face of the possibility of the lengthy time frame associated with getting their money back should the collateral need to be liquidated.

Example 2: "A client requests a market value appraisal for a sales advisory purpose. The appraiser researches the retail market, determines the value at the retail store pricing level and reports back to the client. The client subsequently hires an estate sale agent to sell the property and presents the agent with the appraisal and the expectation that the agent achieve the appraised retail values. The agent was contracted to conduct an orderly liquidation and quickly realizes that the property will not achieve the retail value reflected in the appraisal and expected by the client. In the retail market it typically requires months (and sometimes years in the antiques business) to achieve a sale at the retail price level. The stated values in the appraisal report will not likely be achieved within the few days available for an estate sale, even at an estate sale that is well-advertised. A consideration and discussion of reasonable exposure time would clarify these related issues that are relevant to the two conflicting intended uses. Proper discussion of exposure time in the appraiser's report would have helped eliminate confusion and prevent unrealistic expectations of the probable selling price." ("Launching Your Appraisal with USPAP" Novotny, 2007)