Realtors® Giving Too Much Power to RPR®

“Since then, we’ve become RPR’s biggest fans. It has helped grow our business because it has given us more credibility.” A recent article talks about the benefits of using the Realtor® edition of online home valuations. This growing trend is frightening for home owners as more and more agents rely on computers to price real instead; instead of using their time, skill, and research to calculate home values the right way. When it comes to determining the price of most people’s single, largest, lifetime investment, shorts cuts are NOT a good idea. Money matters, and getting a suggested listing price based on a computer and not a licensed professional’s skill, is the new trend and it is very bad for consumers.

“That first phone call is critical, I’ll immediately pull up RPR on my tablet and start researching the seller’s home while asking questions at the same time. I quizz the seller to confirm the home’s basic facts such as number of bedrooms, baths, square footage, etc.

Stop the presses! This is a licensed real estate professional, responsible for pricing people’s homes and financial futures, that proudly announces to the world that she accepts whatever information she can find online, or better yet, that the seller provides her. Just WOW! The square footage totals agents rely on are one of the most important items when it comes to pricing a home. Tax records are notoriously inaccurate, and how are the owners supposed to know what size their house is? Most know what is in tax records. The “Official Record” for square footage is a myth started by an agent that didn’t want to be responsible for measuring a house. I actually don’t think agents should measure houses. They can’t be experts at everything. However, finding the correct square footage is a vital part of pricing the house and providing that data has always been part of the real estate agent’s duties. Ask 100 home owners where their agent gets their square footage total and they will tell you – that’s part of the agent’s job.

gents say square footage is not that important and so they can use tax records to get close enough. On the one hand, they say square footage is not that big of a deal. But, then you look at every CMA they create and there you have it – a price-per-square-foot formula used to price the home. You just can’t have it both ways. It’s either important or it’s not. The fact is – if you change the square footage total used in the price-per-square-foot formula, you change the listing price. Often, by tens of thousands and much more. It absolutely changes home values and this is not just a number, it’s real money from real home buyers and sellers.

If Realtors® want to use RPR, more power to them. The graphs are wonderful. But, if you (or your computer) is going to use a price-per-square-foot formula – then have each listing measured BEFORE you give the owners a suggested listing price. If you don’t, you’re cheating consumers every day. Not an opinion, a fact of the real estate business. Size does matter!

Fannie and Freddie, Still Stealing Data

No matter how you sugar coat it, Fannie Mae and Freddie Mac have been stealing data from independent appraisers for years. The information gathered by licensed appraisers and delivered to their clients, is sold to one of these two GSE’s, who then store all the data under the auspices of appraisal quality review. Appraisers are not even allowed to see the info because it’s only for the lenders who hire the appraisers in the first place.

Now armed with years of appraisal data (which I firmly believe is gathered illegally and an entire industry is virtually blackmailed into having no control over the data they create/own?), now this data is being used to put the very people out of work who provided the data in the first place.

Fannie and Freddie are upping the stakes as they increase their appraisal waiver programs to allow the use of more automated valuations (they say only 50,000 less appraisals next year), whenever they have a previous appraisal report in their database. In one place they state the program is a no cost service to consumers and in another, this no-cost service can be provided for only a $50.00 fee. Hmm… So, they get to use the appraiser’s report twice for only one fee? Think about this – appraisers get paid for their opinions of value – not for the individual data they collect in the process of determining that opinion of value. The GSE’s are using appraiser’s own data to take work directly away from them.

There’s something downright Un-American about this whole system and the appraisal industry has been punished long enough for sins they never committed. Big Banks started the problems and, once again, the system is being driven by the “Golden Rule.” As for Big Data, it will never accurately price real estate. It simply isn’t possible using the information in public records. I am hopeful the new administration will stop the bleeding and restore some integrity to the appraisal regulation industry. No industry in history has been subjected to the turmoil imposed on the appraisal industry, that all started with the HVCC and went downhill from there. It’s time to bring back sanity to the mortgage lending process.

 

Big Data, A Bold Lie

With Fannie Mae and Freddie Mac’s new appraisal waiver programs, these GSE’s are pushing to use less appraisals and more AVMs. “Big Data” is pushing appraisers out of the lending process. But, just like Zestimates®, all AVMs mislead homeowners with inaccurate home values. They are an equal opportunity offender and the values may just as likely be too low as too high. Homeowners are often far too trusting in this systems, as they believe they are similar to an appraisal and any differences are only listed in the very fine print. However, any computerized valuation is based in part on public records. Regardless of how elaborate their algorithms or formulas, they far too often depend on a price-per-square-foot formula. This over simplified formula only considers two numbers – the sales price and the square footage. If the square footage data is taken from public records (which many people believe is the “official record” for square footage – another myth), when you rely on only two numbers and one of those numbers is wrong the majority of the time, then any home values they create are also in error. It’s just the facts of life. The tax department does not need precise square footage data and does a great job gathering the data they need. The data they need has nothing to do with the data the real estate industry needs and Realtors® stopped measuring homes in the mid-nineties when tax records first started being available online. While some agents still measure or have their listings measured, there is a very large percentage that take the square footage numbers from tax records and both MLS and tax records have wrong data. Big data has zero to do with quality. The bottom line is that AVMs, by design, are not capable of providing accurate or consistent home valuations. However, their use continues to grow, not because of their quality, but simply because of their potential profits.

Appraisers are the only unbiased party in any real estate transaction and without them, be prepared for what comes next-real estate crisis-act II. This is real money to real people and the myth of “quality” automated home values is a bold lie being force fed to a nation by big banks, simply trying to take the only true consumer protection (appraisers), out of their lending process. All the time, with plans to add appraisal profits to their own books. With appraisers out of the way in more and more home loans, lenders are free to “bend the rules,” and this will lead to another lending frenzy with catastrophic results inevitable. Don’t fall for the hype. Big Data is NOT the answer to appraisal quality. More information does not solve the big problem and more bad data just furthers the errors in home valuations. “Better Data” is the real answer, and it starts with each individually owned MLS system and more educated Realtors®. Until the MLS is improved any home valuations are at risk. If you’re sick, don’t go online-call a living, breathing, licensed, highly trained doctor. If you need to know the true value of a home-don’t go online – call a living, breathing, licensed, highly trained appraiser. Your money is too important!