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Data is King. Who has it and who wants it?
This article is a compilation of articles published in Appraisal Today and was written by Ann O'Rourke.
It is copyrighted. For reprint permission, Contact Us.
For the latest news on this topic, go to the
News Section. For links go to the Technology page.
In the real estate industry, Data is King,
whether it is MLS data for real estate agents or closed sales data for commercial
appraisers.
I don't know any appraisers who are completely satisfied with their
data. We tend to be very picky, always looking for more and better data.
Many in the real estate industry think appraisers are the best source
of data. Many want to purchase appraisal data.
A recent development is the Appraisal Institute National Residential
Database, which is a "go." Their National Commercial Database is still "not
officially approved."
What types of data are sold?
The two primary types of data are publicly available and privately
collected data.
Public real estate data includes deed recordings, property
characteristics from assessors' offices, recorded leases, sales prices, owners' names and
addresses, etc.
Most publicly collected raw data is enhanced by data providers by
cleaning up errors and inconsistencies.
Privately collected data includes information collected by appraisers
(CMDC, Redlink) and employees of data companies (COMPS, Inc.).
Many providers sell pieces of their data, dicing and slicing it to
match customer's needs. For example, most restrict the sale of the property
characteristics part of appraisal data by not reselling it to large data companies such as
TRW/REDI (Experian).
Others sell addresses to mailing companies, sales data to appraisers
and real estate agents, etc.
Selling data piece by piece is typically the way to make the most
money.
Who buys data?
Although we think of appraisers as a main source of customers, it is
actually from title companies, credit bureaus, real estate brokers, other data providers,
mailing list companies, insurance companies, investors, local corporations, and many
others.
In a data business providing public data, most of your customers will
not be appraisers. Businesses providing appraisal data also sometimes have other customers
such as real estate agents.
The commercial real estate market is particularly data-starved,
with few sources of data.
Who's selling data now?
Although we think of big companies like TRW/REDI (now Experian) when we
think of real estate data, actually most of the companies in the data business are small,
with under $1,000,000 in annual revenue.
Fifty percent of the membership of the Real Estate Information
Providers Association (REIPA) has revenues under $1,000,000, 28 percent have revenues
between $2 million and $5 million, and 22% have revenues over $5 million. We suspect that
larger firms tend to join REIPA, so the actual percent with revenues under $1 million is
even larger.
Why do we have access to public data?
Since the founding of our country, open public records have been a key
element of democracy.
The founding fathers of our country, particularly Thomas Jefferson,
believed that in a democracy people should be on equal economic footing. Political power
was diffused by the diffusion of economic power.
In the Old World, kings owned the land and gave it to people. In the
New World, a system of public land surveys was set up in 1785, using the most advanced
technology at the time, surveying.
The purpose of publicly accessible government information is so
citizens can know what governments are doing.
From our earliest days, the information that was collected by
government for ownership and sale and transfer of real estate has been subject to public
review, both for the purpose of promoting a democratic government and restricting
opportunities for secret dealings and dishonest and unfair property accumulation.
What are the political problems in accessing public data?
From a commercial property provider's prospective, overall the biggest
problem is not being allowed to easily access public data because you are a commercial
company.
Several reasons for government agencies not wanting to allow access
are:
• They want to sell the data themselves.
• They don't want the public to have to pay for the data twice: once from their tax
dollars and then to a data provider.
• Records are paper-based and it's too much of a hassle.
All states have laws requiring public access, but many don't define who
"the public" is, don't set payment rates, etc.
What are the problems in data businesses?
The data business appears deceptively simple. It is difficult to do the
apparently simple functions.
Some of the problems mentioned by data providers are:
• Matching deed and mortgage information to assessment records.
• Getting timely access to public information.
• Getting public data in a usable format.
• Inaccurate public information.
• Government agencies reluctant to provide access to data companies.
• Local governments charging high fees for access to public
data.
• Limited ability to resell appraiser data.
• Financing the database while it is being set up and you have no income.
• Not enough customers. A common problem in counties with small populations.
MLS data
MLS data used to be the proprietary property of real estate agents. Now
it is being published on the Internet, and MLSs are becoming data providers.
Nationally, well over 80% of all listings are on the Internet. How do
the MLSs make any money? Our local MLS sells data to four data providers who publish it on
the Internet.
To me, the most useful information is closed sales data. Our local MLS
provider has chosen not to publish it on the Internet, but to sell it themselves.
Data standards
One of the reasons for both the opportunities and frustrations in real
estate data is the lack of standards.
Lack of standards means opportunities for small data companies selling
to small markets, but is a significant problem if you want to resell your data.
Real estate data standards don't really exist at present.
REIPA has a data standards committee chaired by Tom Fore of Market Data
Center in Atlanta, which is working on the issue.
The Appraisal Institute has data standards committees for both
residential and commercial data.
Who wants commercial real estate data?
Many people in the commercial real estate industry want data:
appraisers, lenders, Wall Street, life insurance companies, real estate brokers, corporate
real estate managers, investors, etc.
Uses include valuation, portfolio analysis, and quality control.
Appraisers - the best source of data
Most participants in the real estate lending and investment industry
agree that appraisers are the best data source.
The much maligned, and now defunct, NPDS (National Property Data
Service) funded a study of residential data, which came to the same conclusion: appraisers
are the best source of data.
The only national sources of data are: MLS (typically residential
only), public records, and appraisals.
MLS data is available throughout the country, but is provided by
listing agents, who are motivated to sell the property. Also, MLS does not include FZBO
(for sale by owner) sales.
Public records data is not available in all states, and availability
can sometimes lag months behind. Also, there are many typos due to rekeying errors and non
open-market sales such as exchanges and family sales.
Appraisal data is provided by a disinterested third party. However, it
is not as available as the other two sources.
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