A national property database to be rolled out by a new subsidiary of the National Association of Realtors in April could give its members a bigger say in property valuations — if their multiple listing services agree to participate, backers say.
NAR’s Realtors Property Resource (RPR) database will attempt something that’s never been done at the national level: integrate public property records, residential and commercial, with information gathered by Realtors and others when properties are listed in multiple listing services (MLSs) and commercial information exchanges (CIEs).
Although the database will offer sophisticated search capabilities for property information, including details about active and sold listings, it will carry no offers of cooperation and compensation.
Rather than serving as a "national MLS" — an idea many Realtor associations and MLSs might see as too radical and decline to participate in — RPR’s backers say it will be a research tool to help Realtors analyze market conditions and value properties on behalf of buyers and sellers.
MLS data is often more accurate, detailed and current than public records on file with county recorders’ offices, and should improve the quality of market reports and automated property valuations produced using the new database.
RPR’s backers say lenders, mortgage guarantors like Fannie Mae, and government agencies like the Federal Reserve are interested in harnessing the power of the new database.
In fact, the business model for RPR depends on selling analytic products like market reports and property valuations to non-NAR members such as lenders and government agencies.
NAR has invested $12 million to acquire technology and data aggregation services from LPS Real Estate Group, including code developed by LPS Real Estate for its Cyberhomes.com consumer Web site. NAR expects its new startup company, Realtors Property Resource LLC, to lose another $9 million in the first three years of operations before becoming profitable in 2012.
According to Dale Ross, the former MLS executive who’s been tapped as the company’s chief executive officer, there’s a potential for the business to generate $60 million to $80 million in annual revenue. After covering the company’s operating expenses, any profits — projected at $8 million for 2013 — would go back to NAR to repay its capital investment, Ross said in a webcast presentation to NAR members.
Nonmembers won’t be allowed to access the RPR database itself, but will be able purchase "derivative" products like automated valuations. NAR says the revenue generated by that business model will allow it to provide members with free access to the database beginning next year.
Ross said he has talked to the heads of Fannie Mae and its regulator, the Federal Housing Finance Agency (FHFA), as well as Federal Reserve Board member Elizabeth Duke, who expressed interest in the idea.
"They all said if we had had this model four or five years ago, maybe some of the problems that we incurred in the real estate market in the last year or so could have been alleviated," Ross said.
The kind of insight that can be extracted from the RPR database "has significant value to the federal government, it has significant value to Wall Street," Ross said. "As we have talked to some people in Wall Street as well as the federal agencies, they (have indicated they) will participate in buying that analytical product."
Unlike automated valuation models (AVM) in use today, which may rely solely on public property records, RPR-based valuations will also take into account more recent sales entered into the local MLS but not yet on file at county recorders’ offices.
In addition to tracking down more recent "comps," or comparable sales, RPR’s AVM will consider details on active and sold listings from the MLS that aren’t found at all in public records, but which can be vital in making a valuation.
Those details may include concrete information like a property’s asking price or the amount spent on a kitchen remodel, or more intangible factors like a Realtor’s assessment that a property has better-than-average "curb appeal."
The combination of real-time MLS data and public property records into a single database is so unique, backers of the project have coined a new acronym to describe the property valuations that can be derived from it: "Realtor valuation model," or "RVM."
"We believe the analytics that come from the integration of MLS and public records data contained solely in RPR will become the new gold standard for analytics, and can provide the revenue for the system, allowing us to offer it to (NAR) members for free," said Jeff Young, a member of the RPR LLC management team.
Young, a former broker-owner and past president of the Michigan Association of Realtors, was hired by NAR last year to help develop RPR. Young said he joined the project because he saw it as a way to help Realtors maintain their central role in the home transaction process.
Realtors — real estate agents and brokers who are NAR members — will be able to access the RPR database as soon as it launches, regardless of whether their broker or MLS is a participant.
"This has to be a member service first," Young told Inman News. "So, on day one, Realtor members will be able to (access public records in RPR) to do research, and be of more value to consumers."
As an incentive for their participation, RPR will provide data at no charge to MLSs, commercial information exchanges and real estate brokerages that agree to contribute listings data to the database. Ross, the co-founder of the Metropolitan Regional Information System (the country’s largest regional MLS), said there’s a potential for MLSs to save a combined $25 million to $50 million a year by participating in RPR. …CONTINUED
Many MLSs already pay a third-party data aggregator for the kind of public property records RPR will provide for free. Other MLSs that aren’t providing access to the records will be able to provide an additional service for members without the added cost burden, Young said.
As MLSs come on board and add their detailed information on active and sold listings to the RPR database, Realtors will be able to access that information, too.
Realtor input on valuations
RPR’s backers think Realtors will also benefit if lenders are able to order RVMs, RPR-based property valuations that take into account the details Realtors have entered into the MLS.
"The best data in the industry is from MLSs, and it’s created by Realtors every day, walking through homes, inputting solds," Young said. A listing is "a snapshot of a property," he said, with "no time bounds — it’s a history, or an encyclopedia, of everything you can find on a property."
Since the introduction of the Home Valuation Code of Conduct — new appraisal guidelines adopted in May by Fannie Mae and Freddie Mac — many Realtors have complained that appraisers sometimes don’t take into account the peculiarities of a particular property, neighborhood or market.
Jay Gaskill, president of LPS Real Estate Group, sees the potential for RVMs to improve the valuation process and smooth out some of the friction between Realtors and lenders.
"When you can have a place where the loan officer and real estate agent are looking at the same RVM … that helps appraisals," Gaskill told Inman News.
Marty Frame, who has moved over from LPS to RPR LLC to become president of the new NAR subsidiary, agreed.
"Getting all the parties to agree on values is the No. 1 source of friction and work on a transaction," Frame told Inman News.
Not all appraisers are NAR members, and LPS Real Estate Group hasn’t been authorized to market RVMs and other RPR analytic products to groups other than lenders and government agencies.
But AVMs are used for more than 70 percent of mortgage and home-equity applications, and throughout the collateralization and asset management process, Ross said.
Known in the real estate industry as a technology innovator, Frame led the development of LPS’s consumer-facing property valuation and listings site, Cyberhomes.com. He said most third-party evaluations rate the site’s AVM as the best in the industry.
The programming code for the Cyberhomes AVM, which will initially be used for RPR, generates valuations that are within 10 percent of a property’s actual appraised value 75 percent of the time, Frame said.
Although that may not sound that impressive — especially to Realtors who take great pleasure when AVMs like Cyberhomes, Zillow and eppraisal.com generate valuations that are far off the mark — Frame said the Cyberhomes AVM is the state of the art.
"The base product that NAR purchases is an AVM better than all the commercial and consumer AVMs" on the market, Frame said. "It’s a really refined product to begin with, but it is a public-records-based product."
Gaskill said LPS Real Estate will develop a new valuation model — an RVM — "from the ground up," to take advantage of the additional MLS data in the RPR database, which it will share with RPR.
An MLS listing may include hundreds of data fields. Realtors have additional awareness and knowledge of a property and its market, Frame said.
RPR "will give you the facility to annotate the properties as you use them, and adjust the facts and make adjustments for intangibles to reflect your individual knowledge," Frame said. "That’s another source of data that gets incorporated into this AVM. We want to combine your individual or social knowledge, MLS data, and public records to make the best valuation available." …CONTINUED
While the consumer-facing Cyberhomes and Zillow AVMs already allow for similar user inputs, only Realtors will be able to tweak the facts associated with a property and make other annotations in the RPR database that could affect valuations.
That capability, if abused, could just as easily become a liability as an asset, Frame acknowledged.
"When you let users loose on a system, saying ‘We trust your local knowledge,’ you have to assume some will try to game the system," Frame said.
Internal controls to combat gaming will include tracking each user’s actions and their relationship to transactions. While the sheer number of Realtors using the system will provide checks and balances, "We will also be looking for consistency of usage — when people make changes, the degree of changes, and whether those things are realistic," Frame said.
The business model
Gaskill said he’s confident lenders will see the advantages of an AVM that builds on the code developed for Cyberhomes in order to take advantage of access to MLS data.
"One thing NAR has asked us to do is monetize the RPR, and we are going to go out and sell this RVM to the lending community" and government agencies, Gaskill said.
He thinks the new product will appeal to lenders in part because it will build on a known quantity — LPS’ data and intellectual property, and experience in the AVM field.
As a division of Lender Processing Services, which offers a mortgage servicing application that’s used by most of the biggest loan servicers, LPS Real Estate Group has strong ties to the lending industry.
When it launches in the second quarter of 2010, NAR estimates RPR will include information on 147 million property parcels, providing nationwide access to public record information such as tax and assessment data, liens, zoning, permits and environmental information, plus information on neighborhoods, school districts and community demographics.
But it will be up to NAR and its RPR LLC subsidiary to get permission from MLSs and brokers to feed their listings data to the RPR database.
Once MLSs and brokers agree to supply listings data to RPR, those data streams would also be managed by LPS Real Estate, which has expertise in the area as the provider of the Paragon MLS system and other software applications used by more than 350,000 real estate agents.
If NAR can’t convince an MLS to join, RPR won’t have MLS data in that market, and LPS Real Estate won’t be able to market RVM analytics products in those areas.
But Young thinks MLSs will be willing to join because they will gain access to RPR’s public records data, without having to grant a license to export their data from the RPR system. Only "derivative products" like market reports and property valuations will be provided to non-NAR members.
That Ross, co-founder of MRIS, has been tapped as CEO of RPR LLC may speak to the importance of MLS participation in the project. Stuart White, chief executive officer of a regional MLS in Tennessee, RealTracs Solutions, has been named to the company’s board.
In the past, "NAR has been extraordinarily effective in getting local Realtor organizations to participate in their initiatives," said Brian Larson, an attorney who counts a number of MLSs as clients. Larson cited the nearly universal willingness of brokerages and MLSs to send listings to Realtor.com today, despite initial resistance to the idea. …CONTINUED
Larson, who foresaw RPR’s business model in an Oct. 19 blog post, said the big question is whether RPR can generate enough revenue from the sale of analytic products to be self-sustaining.
There are upwards of 900 MLSs in the U.S., and "obviously, for those (RPR analytics) products to work, you’d have to have a substantial number of markets participating," Larson said.
NAR can offer carrots and sticks, but "MLSs will have to make their own decisions about what is offered in trade — I don’t know whether MLSs would benefit."
Even if MLS participation is high, Larson thinks the vast majority of brokers and agents wouldn’t use RPR unless it’s built into their MLS’s front end.
"Most brokerages don’t like to use additional (software) systems," Larson said. "We know that because if MLSs pool data and offer it to subscribers through a new interface, they never use it."
Frame said he and other leaders at RPR LLC are aware of that issue.
"We definitely want to focus on making MLSs the delivery vehicle for this," Frame said. The goal is to provide a single sign-on for members of participating MLSs, and to offer RPR in a branded environment, he said.
An application programming interface, or API, will be a "primary mechanism" for providing RPR’s public property record data at no charge to participating MLSs.
Realtors whose MLS or broker is not participating will still be able to access RPR through a dedicated Web site.
The fallout
NAR’s formal announcement Monday that it had formed RPR LLC to launch the new database generated considerable interest among Realtors, real estate professionals and companies that serve them.
There was some initial confusion over whether NAR would be providing RPR data to consumers through another Web site, HouseLogic.com, that’s scheduled for beta trial launch Thursday. NAR broadcast a webinar Friday in which both projects were discussed. But Young and others connected with RPR said the projects are unrelated, and that only Realtors will have access to the RPR database.
Consumers in some markets already have access to MLS sold data through Web sites operated by Seattle-based brokerage Redfin and Sawbuck Realty in Washington, D.C., as examples.
In announcing last week that Redfin had begun posting the sales price of homes as soon as they are sold, along with photos and other details, Chief Executive Officer Glenn Kelman called the ability for consumers to create their own comparative market analyses one "obvious" application (see story).
There has also been some speculation about whether NAR is embarking on a course that will put it into direct competition with Move Inc., which operates Realtor.com, the most popular real estate portal on the Internet, under contract with NAR.
That agreement prohibits NAR from launching its own listings portal in competition with Realtor.com. Incoming Move Chief Executive Officer Steve Berkowitz has said he wants to aggregate property information from MLSs and public records, and help real estate agents and brokers market themselves to consumers by "adding value" to that data (see story).
Because NAR actually hired Move to lay much of the groundwork for RPR, some have speculated that Move could launch a competing effort directed at consumers. …CONTINUED
"Move isn’t the (RPR) vendor, and it seems to me they have some cool stuff on their hands they will probably offer to consumers on Realtor.com," Larson said. "If they do that, what’s the value of RPR?"
Alternatively, RPR might take business away from Move, if Realtors who currently pay Move to use Realtor.com and Move’s customer relationship management application, Top Producer, to produce reports and drum up business, rely more heavily on RPR.
Young said that won’t happen automatically. Just because RPR will be free to Realtors may not be enough — it must also be better.
"When I ran my business back in Michigan, I was a showcase (listing) subscriber to Realtor.com … I was a TopProducer 7i user," Young said. "As an agent, I thought Move provided great tools."
He said RPR LLC’s goal is "to generate the very best data — the aggregation of all these data sets — which we believe will create the best reports.
"Once the MLS participates, the Realtor valuation model will provide the most accurate valuation possible. Why use RPR as opposed to Top Producer or Realtor.com? The bottom line is we’re offering something (in which the) data is better, and the fact that it’s made available at no cost (to members) is what NAR is all about," Young said.
Errol Samuelson, Move’s chief revenue officer and president of Realtor.com, said the site is already offering much of the "property centric" information Berkowitz has talked about using in addition to listings in order to attract consumers through the entire homeownership lifecycle.
Realtor.com has a "Find Home Values" section, for instance, that provides data on recently sold properties, and other "property centric" data such as tax records, market trends and demographic info.
"We’ve been building this database for the last couple of years and actually leveraged that work" in serving as the initial contractor for RPR, Samuelson said. In early testing, he said "the end users were blown away, and NAR was very happy with the work we were doing but decided they wanted to take it in-house."
Move continues to develop Realtor.com’s "property centric" capabilities, and will roll out additional features in the next six to 12 months, Samuelson said.
While some of the underlying content provided by Realtor.com and RPR may be similar, Samuelson said the way it’s presented to consumers "requires a slightly different touch, and guidance in terms of how you do it."
Gaskill said that for its part, LPS Real Estate Group doesn’t view RPR as a competitor to its existing services. The agreement with NAR is the first of several planned deals "moving us out of the B-to-C (business-to-consumer) space" to an all B-to-B (business to business) model that already generates about 90 percent of the company’s revenue, he said.
LPS Real Estate retains ownership of the Cyberhomes.com site, although NAR purchased technology employed by Cyberhomes and key Cyberhomes employees including Frame and Mona Steen are making the move to RPR LLP.
"We won’t be a competitor to any group that has B-to-C aspirations," Gaskill said.
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