The Comps and Data Share Debate: Does Size Really Matter?
Woody Fincham, Research Fellow
See also: Collaboration and data sharing: Let's talk about why and how by the same author.
As I wrote in the conclusion to my last article, I expected to receive feedback with both supportive and less than supportive remarks. We got a little of both and I am sure the amount of feedback will increase as the labs project picks up steam in the public. The article was subtitled, "Let's Talk About Why and How." I have talked about the "Why" of comps and data sharing with just about every appraiser I have spoken to in the last month, and everyone seems to have their own perspective on it, ranging from welcoming the idea to condemnation as outright blasphemy.
Within the labs group, we have been talking "How" just as often. We meet weekly at a minimum to discuss ideas and directions for each project we are working on. We also do some brainstorming for improvements to existing products. During these meetings our group has sort of moved into two different collaboration camps: one that likes the idea of a large system, and those that would like to see it done on a peer to peer basis only. I think that both sides have good points and not so good points. Here we will take a look at both sides as I see them at this juncture.
Large Cooperative Data Sharing
In a large, user contributed system, all users would share their property data, and would be able to use the collective data to help identify comps more readily, and to have a source that was better verified than just MLS and municipal tax services that are often times outdated or just wrong. This would likely be a subscription fee based system that would use revenue from members to maintain and update the system over time. In a nutshell, it would be an MLS–type system that would be controlled by and used only by appraisers. Participating appraisers would license their data on a limited basis for particular use by particular colleagues, i.e. other subscribing appraisers doing other appraisals.
But should something like this be done on a regional level by a company specific to that area, or by a company that would oversee each regional area, but do so over the entire country? In the case of regional only, each area would be handled differently and independently. This could be beneficial for small one man shop shops, as it would limit competition from the companies out there that are doing work by illegally supervised trainees (where a supervisor has never worked in an area that the trainee lives and works in, often times in such a case the supervisor lives hundreds of miles away, or even in different states, but signs the report as a supervisor thusly violating the geographic competency requirement in USPAP).
It also benefits the user by granting access to information and comps that they would never had knowledge of before. Smaller shops after all are increasingly feeling pressure from larger offices and groups. I know what I can accomplish with my staff is by far superior to what a single man shop can do, and I have been in both environments. The ability to data share will extend some of the benefits of having a staff of appraisers, without having to give up the freedoms of working for yourself.
In a national service that is done regionally, all areas are uniform and for the firms that handle two areas or more, I do believe it should only be accessible to appraisers that are working in the regions they have access to, and each regional area should require a subscription fee. This would dissuade companies that are performing work outside of their geographical competency, and keep the network in line with USPAP. To further that, I believe that it would be very easy to require each member accessing the system over multiple regions to either have a licensed or certified appraiser that is working in that area and can prove it, or that it is typical and normal for them to handle areas that seem larger than what would be typically handled by one firm/person. Licensed Trainees and un–licensed assistants should only have access to regions that their immediate supervisor handles directly.
I see benefits in both of these schemes. I do think that access in all cases, should be determined by very clear license requirements and professional histories of each member. If an appraiser has been sanctioned for dishonesty or serious reporting errors by the state board, or other professional organization, they should not be allowed to use the system. It would need to be expressly contractually forbidden – and not only a violation of U.S. Copyright law – for any user to willingly provide the data to other companies that re–sell or re–package it for AVM or other types of fee appraisal work that competes with us, the independent fee appraisers of the world. Being a privately run and maintained system, we would have carte blanche to require whatever we felt as a group to protect the integrity of the service.
Peer to Peer Data Sharing
While I would love to take credit for the idea of peer to peer data sharing, I cannot. This was one that the group all played a role in, and I was the one person who at first did not warm up to it. Now it has grown on me, and this is why:
The general idea is to allow interaction between small groups of appraisers to share between them and them only. It would be similar in concept to how "buddy lists" work in instant messaging applications. You would have a list of firms, or individual appraisers that you want to share information with, and you send it back and forth between you. This type of sharing would be more intensive on the user to update and maintain, as you would manually select information that would be shared.
One major benefit of this sharing option is that you have less concern about "bad" appraisers using your information. In a sense my competitor is my enemy, and business is war. I would not be successful if I did not separate myself from the pack and keep an edge on the competition. However, I do see a community effort being beneficial to all appraisers in the fee world. To repeat one of my points in the last article, working together as an industry, or community, strengthens our importance and place in the market. Whether it is done peer to peer or on a larger scale, it is an endeavor that we can be involved with and control how it works. This is better than using data systems that were never really intended for us in the first place, like MLS.
This type of sharing would also be more customizable, as each group of people sharing data could specify what data is included or excluded. It would possible also be of a higher degree of types of data, where a nationally run database would be less likely to include much more than formatted text information. Peer to peer could include formatted text, maps, sketches, and many others types of information.
In Defense of the Concept
You will not be surprised to know that there are appraisers who think you will have to pry their data out of their cold, dead hands. Some of these folks think it is non–compliant with various requirements; some are just very parochial when it comes to their work. Considering that the work and reporting that we develop is our own intellectual property, we pretty much have the ability to do with our work as we please. The one area that we have to protect carefully is assignment details such as items that fall under assignment specific information: value opinions, client information and other items that would fall under disclosure laws.
We find most of the concerns to be misplaced. The information we put into our reports is being stolen, admittedly, by AVM companies, and most of our MLS services are operated by companies that supply front end information, and /or are AVM providers to the mortgage industry. Sharing our data within our industry empowers each one of us to become better appraisers by having more accurate information. The thought that we should not help" our peer competition does not square with the fact that there is far too much business out there as it is.
I live in a major metropolitan area that does not have a major league sports team of any kind, so we are smaller than most large city areas. I still get solicitations from out of state brokers who are trying to find an appraiser, and if they are looking by cold calling they are doing enough business for everyone. This is considering that the local real estate appraisal school is graduating 60–90 people a quarter, and has been for the last four years. I learn of companies and appraisers I have never heard of all the time in my home town, and I am not worried about losing business to them in the least.
I support the idea of sharing data because I want better and more accurate information to use in my reporting. The further I get away from ambiguous agent remarks, and not having access to FSBO (for sale by owner) information, the better I will feel about my reporting. I do not worry about losing to them, because they have to do more than just report correctly, they have to compete with the other areas that I excel at besides appraising: marketing, managing and customer service.
