The following comments were sent to the GREAB regarding the proposed rules shown on the GREAB
Regarding the definitions of Disposition Value and Liquidation Value:
Problem with use of the term “average market exposure:”
The definition of value is often provided by the client. The client’s definitions may call for value estimates to be based on exposure periods that are less than exposure periods used to estimate market value (of course, the definition of market value is open ended – using the expression “a reasonable amount of time – providing flexibility based on market conditions”). However, those terms may be different from the terms being defined by the proposed rule. In addition, the definitions are vague and unenforceable for the following reasons:
Both definitions refer to “less than the average market exposure” – but the definitions do not state what that is or what the basis for it is. Does “average market exposure” refer to the average market exposure required for a “market value” estimate – which is a reasonable amount of time? Does average market exposure refer to the average market exposure shown in the report (and will that now be mandatory to show in the report – USPAP requires it to be in the work file and GA rules are silent)? What is going to be the basis for what the average market exposure is? Will it be the mean average of days on market for all sales in the past 30, 60, or 90 days?
Problem with “less than” and “significantly less” than average market exposure:
How is “less than” and “significantly less” going to be determined. Is “less than” going to be “anything” less than and “significantly less than” going to be 50% shorter than the “average market exposure?” How are the appraisers supposed to know how to comply with these definitions?
Why not just require each appraisal report to prominently display the type and definition of value sought? That way there will flexibility to accommodate the various requests made the users of the appraisal services.
Regarding Standards for Development and Reporting an Appraisal
The standard will only apply to Independent Appraisal Assignments
Because “client” has been defined to only include independent appraisal assignments the new rule will only apply in those situations.
Problem with average market exposure period for the subject neighborhood:
First, of course, is the problem with what is the “average exposure period – is that the average based on the market value?
Second, problem is that the neighborhood may have several “average exposure periods” depending on the type of property.
Third, the requirement to provide “any other criteria established by the client” – does that mean pertaining to the value estimate only? Or, that does that mean all other client criteria?
The solution seems to be to require the appraiser to prominently display in each report the type and definition of value sought and always include the average exposure period for market value estimates of the type of property being appraised as well as the exposure period required by the client (which should be in the definition of the value sought). Also, if this is to apply to all appraisals, the definition of “client” should be changed to reflect the more inclusive wording found in USPAP – the party engaging the services of the appraiser.