Sunday
November 23, 2014

MLSs Must Share Data for Use in AVMs

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MLSs Must Share Data for Use in AVMs

The new requirement that MLSs provide data that brokers can use in the creation of automated valuation models provoked debate over data privacy and the role of broker websites at the 2014 REALTOR® Party Convention & Trade Expo.

After fighting the intrusion of automatic valuation models, or AVMs, from third-party content providers, some brokers are ready to get in on the action.

And now they have a change in MLS policy to thank for making the creation of AVMs easier to pursue. On the final day of the 2014 REALTOR® Party Convention and Trade Expo in Washington, D.C., this month, the Board of Directors of the National Association of REALTORS® voted to approve a proposal by the Multiple Listing Issues and Policies Committee to change the way MLSs make information available to participating brokers.

The policy in question is in section 7.79 of MLS policy, regarding reproduction of MLS information. The current policy did not spell out whether MLSs should be required to make data available for brokers to use in creating AVMs.

The issue was brought to light by The Realty Alliance, which sent a letter this January to the MLS Technology and Emerging Issues Advisory Board of the Multiple Listing Issues and Policies Committee. The letter asserted that, while they believe that MLS policy already permits participants to use MLS data to create AVMs, some MLSs disagree with the usage. The letter requested a change in policy to require MLSs to provide data feeds that would facilitate the creation of AVMs using third-party software.

As a response, the advisory board created a series of amendments to the options available to MLSs in the policy to require that MLSs make their data available to brokers who wish to do so, allowing them to charge for the service. 

“Some MLS feeds are inadequate for AVMs,” said MLS Technology and Emerging Issues Advisory Board Chair Robert Bailey when he introduced the proposal Thursday. He added that “this information is being used for the participants, not an outside entity.”

Jon Coile, CRB, CEO of Berkshire Hathaway Affiliate Champion Realty Inc. in Maryland, who has served the Realty Alliance board in several roles, told the committee that the change was needed in order to compete with Zillow and other third-party real estate websites.

“They’re eating our lunch,” Coile said. “We’re all in this together, and we need to circle the wagons.”

The main opposition to the proposal came from Utah. Mike Ostermiller, CEO of the Northern Wasatch Association of REALTORS®, said the change would represent an affront to the way real estate professionals handle private information in his state.

“We have dogmatically defended our status as a nondisclosure state,” he said. Ostermiller added that the proposed change would require the disclosure of home sale prices and disrupt the industry in Utah.

Bailey clarified that “where NAR is in conflict of state law, state law trumps that.” However, Ostermiller countered that in Utah, there is no specific state law that makes it a nondisclosure state, so they would nonetheless be bound by the MLS policy change. “There is not a statute,” he said. “The law is simply silent on the issue.”

Rebecca Jensen, CEO of regional MLS UtahRealEstate.com, said that part of the benefit that Utah home buyers and sellers see in hiring a real estate professional is that they know their information will be kept confidential.

“Privacy is a big issue in Utah,” Jensen said. “I take phone calls directly from buyers and sellers who are concerned about how their sensitive information is going to be used.”

Several amendments were introduced to the proposed change in committee, most of which sought to make the new policy non-mandatory or “subject to local choice.” However, the amendments were voted down because they caused unintended consequences (such as preventing brokers from issuing broker price opinions or comparative market analyses) due to the existing language in the proposal. In the Board of Directors meeting Saturday, those opposed to the change suggested both sending the proposal back to the MLS committee and changing the AVM data feed requirement so that it would only apply in states where disclosure of sales price is mandated by state law. Neither attempt succeeded.

Aside from the issue of data privacy, the debate in Thursday’s MLS committee meeting also included a discussion of the quality and usefulness of AVMs.

“AVMs are not the way to go,” said Chris Nichols, managing broker for Prudential Utah Elite Real Estate in American Fork, Utah. Nichols had already published a blog entry about the detrimental effects that inaccurate AVMs can have on the home sales process on NAR’s live blog for the conference. “Data is not knowledge. … Today’s consumer is drowning in data and thirsty for knowledge.”

Henry Brandis, senior vice president of corporate services at Edina Realty in Minneapolis, Minn., said that regardless of their veracity, AVMs are what the market demands, and brokers should be able to provide them.

“Our competitors have them. The consumers want them,” Brandis said. “RPR makes money off MLS data. Some MLSs make money off of MLS data. Are we really going to say that brokers are the only ones who cannot make money off of MLS data?”

Coile said that broker-generated AVMs are functionally nothing more than “a digital BPO,” and stopping brokers from creating such tools might push them away from MLSs and the association.

“They may figure, ‘If I’m being hindered by being in here, maybe I should leave this tent,’” he said. Coile added that there was an element of déjà vu to the opposition: “Two years before Zillow came out with their AVM … realtor.com® was ready to go with something similar,” he said. “But we shot them down. We were afraid of that.”

Several members of the MLS committee pointed out that some MLSs across the country already provide the information necessary for brokers to create AVMs. However, this new requirement may very well change the way brokers provide client services, especially online. Stay tuned to REALTOR® Magazine for more insight from brokers across the country on this issue.

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