Graphs, Actives, Pendings, Recently sold, yadda, yadda. I have been reviewing the market reports across a variety of brokerages recently. They all seem to be missing the same little touch of information – an AVM. What Is A Market Report? The definition of a market report is hard to pin down. They are automated reports that tend to change based upon the state of the consumer. If the consumer is actively looking to buy or sell, the market report is like a listing alert. If the consumer is not in the market, the market report is like a stock portfolio summary. Why Brokers Need to Deploy AVMs Automated Valuation Modeling, or AVMs were developed to help banks measure their loan portfolio. You put hundreds of thousands of homes into a mathematical equation and it spits out estimated home values. These AVMs are considered excellent when they come within 5% of the value of a home 90% of the time. In other words, the best they can do is get close enough for horseshoes. Perhaps you may have had experience with AVMs on a consumer site called Zillow®. Their AVM is the Zestimate™. When Zillow launched their Zestimate, they crashed their servers. Consumers were so excited that they overwhelmed the young start up. They replaced a lead form on broker and agent websites. That was in 2006, nearly a decade ago. Today, only a scarce few number of brokers have Zestimates on their website. AVM Best Practice The industry hates Zestimates because pricing a home is sacred ground. Even if the Zestimate were perfectly correct every time, the industry would still hate it. Its time to get over it and introduce AVMs into all of your consumer facing products. Don’t deploy AVMs with one solution. You know and I know that they are only horseshoe accurate, so show that to the consumer. When you deploy AVMs, put two or three of AVM solutions on the property. Fox and Roach launched this solution last month. When you show more than one, the consumer recognizes the margin of error for each solution. It invites a conversation with the consumer about what AVMs are, how they work, the range of error, and most importantly – pricing strategies. AVMs will actually set the REALTOR® up for the conversation that they need to have with every buyer or seller. Be sure to tell them that mortgage […]
One of the core services of brokerages and their agents is pricing property. In the olden days, it was less scientific than it is right now. On an individual property, agents deliver CMAs or BPOs. Today, using MLS data, brokers are now automating their services. Sometimes this service is called Automated Valuation Modeling, or AVMs. There is a healthy and robust marketplace for AVMs in the financial services industry. Banks want to know the debt-to-equity ratio on homes they hold mortgages on. They also want to use AVMs as a method to validate home appraisals. Government uses AVMs to make monetary policy surrounding affordable housing and interest rates. Of course, the government also wants to make sure that their sponsored entities like Fanny Mae and Freddie Mac are making healthy loans. Insurance companies want to use AVMs to calculate property insurance rates and claims. Investment analysts use AVMs as a measure of the health of the real estate market that correlates to an exhaustive set of predictors on where stock prices are going for both individual companies, as well as sectors of companies. Largely speaking, brokers have been cut out of this marketplace. Historically, the financial services industry has been fed AVMs that are based upon public record data. As industry experts understand, public record data lags behind MLS data by weeks or even months. Moreover, the detail of the property tax record is simple, and does not take detailed housing features into account. The National Association of REALTORS® worked with the federal government and other entities after the housing crisis to point out that using active listing data in monitoring the health of the real estate industry would have allowed them to “see” the housing bubble as the number of for sale homes in the MLS swelled, and along with it – days on market and wider gaps in list-to-sell ratios. MLS users knew what was going on well in advance of public records. Public records first displayed lower volume and, along with it, lower prices. It was not until pre-foreclosure and foreclosure records began to hit public records that the financial market saw the bubble. By then, it had already burst. Knowing that a broker’s data in the MLS has value to the financial industry, the National Association of REALTORS® founded a company called Realtors Property Resource™ or RPR. RPR is unique in that it combines public record […]
The Minneapolis Association of REALTORS developed a company called 10K a few years ago. The mission of the company is to offer REALTORS outstanding market analytic reports. They have been canvasing the country offering the product through MLSs and REALTOR Associations. Pacific West Association of REALTORS (PWR) is a large and recent new customer for 10K. WAV Group had a Q&A session with Lalaine Castillo, PWR VP Marketing and Communications to understand the strategy behind their vendor selection. Question:What differentiated 10K from other stats vendors? Answer:10k understands the business of REALTOR associations and our members, having deployed similar solutions for other associations. Also, Greg Sax and his staff were great to work with (accommodating, responsive.) Question:How are you deploying the 10K products to members? Answer:Members go to our website, click on the PWReports icon, & enter their username & MLS pw to gain exclusive access to PWReports Question:What is your communications plan? Answer: Periodic emails explaining value, flyers/handouts through new membership orientation, coverage through local papers (2 papers agreed to allowing PWR be the exclusive provider of market data in our area) and a live demo during our annual Tech Day event. We are also considering a youtube “training” video, and a live class on how to effectively use the reports. Question:Are there already other solutions within CRMLS? If so, why add another? Answer:Other solutions are either paid solutions, or the data is not readily assembled in a usable format (for example, you’d have to “crunch” data on your own then develop your own spreadsheet or bar chart.) Question:Is this a member benefit? Answer: Yes, PWR will be adding the service without any dues increases Question:How is this different from the CAR-provided solution? Answer:CAR’s “Market at a Glance” Solution covers aggregate data for the entire state of California, where as PWReports gives detailed information on the specific cities & ZIPcodes for PWR’s market area (OC & South LA.) Question:Can agents share any of this publicly in their own marketing? Answer:Yes, agents can use this data on their website, listing presentation, or for reporting purposes. Pacific West REALTORS (PWR) is a local chapter of the National Association of REALTORS active in Orange County and South Los Angles, California. They are among the largest Associations of REALTORS in Southern California. PWR provides MLS services in cooperation with the California Regional MLS or CRMLS. CRMLS is a participating member of the Southern California […]
MLSs are under siege right now. Since they control the most consistent and profitable cash flow source in the industry, they are very attractive targets. They need to continue to innovate to increase their value and relevance since many are chipping away at their positions right now. It’s clear from the work we’ve done with MLSs. Data quality and comprehensiveness is the core value proposition common to all MLSs. No other organization has figured out a way to deliver the breadth and depth of quality real estate information that MLSs offer today. Even well financed venture-backed start-ups have not figured out a better way to gather, aggregate and report property information than the MLSs currently own and control. It doesn’t mean that many organizations aren’t trying to steal energy, budgets and eyeballs away from MLSs, however. Every time another organization becomes “THE” go to place for real estate information, REALTORS® and the MLS organizations that serve them are weakened at some level.
On the heals of settling the Civix lawsuit, MLSs are aware that litigation can have significant impacts on the services they offer to their members using third party service providers. The Civix settlement was arranged by NAR legal council and cost MLSs about $9.06 per subscriber. There are other ongoing patent infringement lawsuits for mobile that could also have significant impacts on MLS service providers, but a recent Inman article brought my attention to a suit that CoreLogic has pending against LPS, and by association, RPR™. CoreLogic® has patents on their Automated Valuations tools and claim that LPS and the RPR™ REALTOR® Valuation infringe on their patent. I do not know the quality of the case or defense, but I do know that MLSs and Associations do not want to get sucked into litigation or a settlement as a result of the litigation. As each Association of REALTORS® and MLS go through their decision making process on data licensing, consideration should be given to mitigating future exposure related to this lawsuit and other lawsuits. The concept is indemnification. MLSs are insured, but litigation is painful and time consuming. NAR sanctioned MLS are insured by NAR for lawsuits after a deduction of $100,000 – any expense up to the deductible are your responsibility. This may all be avoided if MLSs negotiate indemnification language into their vendor agreements. As it relates to data licensing: regardless of your preference for CoreLogic’s Property Infonet, or RPR, or both, or none; be sure to address indemnification from the lawsuits between these companies. Keep your MLS business out of it.