The National Association of Realtors is reviewing a proposed policy amendment that would require multiple listing services to provide data feeds to brokers who want to use them to establish automated valuations of properties, Inman News reported May 14.
If adopted, the policy would also not allow brokers to opt out of including their data in these feeds.
Many brokers reportedly are against the proposal, which was partly developed from data NAR received from the Realty Alliance, a network of about 60 large brokerages representing more than 100,000 realtors across the nation. These include major firms like HomeServices of America, Long & Foster Real Estate and Crye-Leike Realtors.
Realty Alliance CEO Craig Cheatham asked for the policy amendment in a January letter to NAR. He said MLSs should provide participant brokers with a source of MLS data, which would include feeds of active, sold and off-market properties that brokers could use to generate automated valuation models. They could then sell those AVMs to banks in exchange for a fee that would be separate from a real estate sales commission.
According to Inman, the proposed amendment says that the MLS content currently available to brokers for brokerage purposes must also be available to them for valuation purposes through an existing or separate data feed.
In a recent blog post, Brian Larson, an attorney and consultant at Larson Skinner PLLC, said the policy appears to treat comparative market analyses, broker price opinions and AVMs the same. That means listing brokers could not opt out of having their data included in feeds for AVMs.
“Listing brokers have never been asked, in general, how comfortable they are with their listing data being used in valuations (like AVMs) where no professional judgment is involved,” Larson wrote. “They are, of course, well-accustomed to valuations (like CMAs/BPOs and appraisals) where professional judgment is involved.” He said the proposed policy should be changed to explicitly explain whether AVMs are considered the same as CMAs and BPOs and whether listing brokers can opt out.
Cheatham disagreed, however, telling Inman, “If we have to go to those lengths throughout our MLS policy document, that exposes a real rift in the agendas of MLSs and brokers, when MLSs’ agendas should be in line with supporting the needs of broker participants.”
Stephen Roney, owner and CEO of Prudential Utah Real Estate, said brokers shouldn’t be allowed to opt out because doing so would result in an incomplete picture of the market for buyers and sellers.
However, plenty of brokerages disapprove of the policy amendment. UtahRealEstate.com President and CEO Rebecca Jensen said more than 85 percent of brokers in her MLS oppose it due to concerns about client privacy, broker control of data and unreliability of AVMs.
“An AVM is a product that does nothing more than strip out the knowledge and expertise of local Realtors in order to derive a questionable property valuation, which could threaten the very lifeblood of the industry: the successful real estate transaction,” Jensen said in a letter opposing the change.
Cheatham said concerns that real estate deals will fall through because of AVMs are unfounded. He said banks do not use AVMs to deny loans.
“AVMs are taken for what they are by those that buy them, and thus AVMs do not carry the expectation that a BPO or an appraisal would and are used for purposes for which quick, automated valuations are appropriate,” he told Inman.
Larson said he is worried the proposed policy change could result in the creation of what he calls “paper appraiser firms,” where appraisers could join MLSs to get data feeds for developing AVMs.
“Appraisal participants in MLS are not required to meet even the basic requirement that brokers must to be actively engaged in brokerage. Such an appraisal firm might never actually do appraisals, it would just sell AVMs. Could MLSs deny participation to such appraisal firms?” Larson asked.