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Data is King for Appraisals
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.
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.
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.
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 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.
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.
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 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.