Realtors® Giving Too Much Power to RPR®
….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….
“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 estate 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 quiz 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.
Agents 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!
- No Appraisals Required. The End of Appraisers? - March 9, 2023
- Is ANSI for Appraisers Really the Answer? - November 18, 2021
- Statistically Supported Appraisal - June 9, 2021
Your lucky to have agents even try to utilize Public Data for GLA and room count. That would be a great improvement in my market. Most are Zestimates, Seller quotes, or pulled out of the air numbers. I’m lucky to have great Tax records online. They are almost always within 2-3% of my final fiqures (adjusted for interior GLA, Tax data vs exterior, my data) Utilizing the Realtor driven RPR is insanity at best, the poor consumer. Why should Realtors even get a license if they are too lazy to determine there own values without a database matrix derived from a Garage somewhere in Idaho using bad Realtor data to begin with.
Per MLS Corelogic Matrix, the tools are common. With matrix you can automatically get a 3 up insta comps estimate, a realist avm value estimate w/ range, and import all data automatically. Agents don’t have to do anything except rely on automation if they so choose. This is the Corelogic method. The initial roll out of the Matrix had an option where agents could enter where they acquired size data from; measurement, appraiser measurement, or online data. I think those were the three options, can’t remember for sure. One time I ran across a home mis stated size, basement included in agla wrongly. Agent had stated the appraiser option measure and I challenged via MLS to prove it. The MLS removed the option for everyone shortly there after. Agent did take the opportunity to cost me the client though, apparently him and the mb were cozy customer steering partners. An older realty lady told me just yesterday they’re having problems with competing agents who don’t even inspect properties, they have unlicensed people do that then just list it. Such a process of not actually having to go there yourself to provide professional services should not be allowable for either an appraiser or a realty sales agent.
WHAT TO DO WHEN THE APPRAISAL COMES IN LOW? You are one of those unlucky buyers who searched the world over and finally found the home of your dreams only to have some nitwit appraiser come in LOW and kill the deal. What should you do? Well turn to the real estate professionals! Look on Youtube for one of dozens of videos where the real estate agent explains how appraisers may need the seller or buyer’s help! Of course YOU will need to provide COMPS to this novice appraiser who obviously cannot find these on his/her own. You need to explain that you replaced the water heater four years ago. On and On and ON. Do a Youtube.com search for: What to do when the appraisal comes in low? Once you read how appraisers are perceived by real estate agents, mortgage brokers, etc. you will understand why we have problems bigger than should the portal fee be disclosed. Really, watching some of these folks explain how every “low” appraisal is just because of an untrained or inexperienced appraiser. If the appraiser does not live in the area he/she is suspect. Only your trusted real estate agent can provide the guidance needed. “We could provide the right comps to the pitiful appraiser but we are not allowed to discuss this with them”. Therefore you the buyer, seller, candle stick maker and anyone else should complain to the lender, the state, the whole damn world about this injustice! Ok, LOL…I put it on a bit thick but you get the point! Please look at a few of these videos before you comment.
It’s the same tedious detailed methods which make me good at what I do, not time saving short cuts or the location of the property being appraised. Those guys give the rest of us a bad rep and the agents are very keen to follow the popular catch phrases applied. Appraisal is an art not a science. It’s a logic game not a tech or time saving exercise. An appraiser must at least match the sales skills with the salesmen, or they’ve got no business being an appraiser. The very reason such advice is in fact applicable and popular, is that the appraisers really do run in and out in 10 minutes. An integral part of the competent appraisers approach is to itemize the improvements and talk about investment costs. 10 photos with a runner does not cut it.
Per the article lead. Guess what the listed price will be. Hint: It will be the highest indicated number the majority of the time.
I am conflicted. I commend agents for wanting to be more accurate. On the other hand I am depressed that they are too ignorant to know how to price property without a computers help.
Perhaps its because I remember back to being a young agent ‘almost’ but not quite 21 years old; hardly an expert about anything other than hitting what I aimed at with an M-14.
Before my supervising broker would allow me to place a new listing on the mls, I was required to (manually) grid six sales and place them in the property folder for the time it sold and an appraisals was to be ordered. He was REAL picky about the best three of those.
NO listing was accepted by our local board without all sections filled out OR EXPLAINED. We used a qualitative approach first, and then lump sum estimates for differences that were the offices consensus of the benefits of special features. In all honesty we (pre Prop 13) allocated ‘value’ between improvements and land based on assessments for GLA adjustments. Our assessor used to assess at 25% of MV but their opinion of MV was also almost always 25% low so we’d use 20% as a guideline (AV/0.20=MV Guesstimations) but even that fancy calculating took hind seat to the office consensus.
In a ten agent office we had over 250 years of combined agent experience in our markets. Half the office were also buyers themselves if upside profit were possible.
On ‘caravan day’ we’d drive around all the new listings, and leads. Most of the time, 90% of us would eyeball a property from the front and be able to guess its selling price to within $1,500 to $2,500 on a bad day.
Not too bad for $22,500 to $30,000 ranges.
At our own office meetings later, we’d review all our own unsold listings. Anything over 30 days with no activity got high high pressure on the listing agent to either get a reduction, concession, selling agent bonus, or to fix whatever deficiency was resulting in no offers.
Nearly all the successful but competing brokers in our area had been trained by the same guy, Herb Rosenkrantz of Tarbell Realtors (before NAR got real sticky about the trademark) in the mid 1960’s. Even my own father.
They were the only competition we worried about. We’d never admit it, but they were just as good as we were. Extra service and convincing sellers that we really WANTED to do all we could to sell their property was the main difference.
No appraisal was ever allowed to be scheduled without the listing agent; or in extreme circumstances an experienced associate to go meet and try to schmooze the appraiser. We never coerced or tried to intimidate or coerce. Trick, con, hide or paint over…you betcha!
Mike:
Your Real Estate Board ‘back in the day’ wouldn’t allow a listing in the MLS unless your provided this comp-spreadsheet filled out?
IF there was a blank on the form the listing was not accepted. Agents would be required to either fill it out at the counter or take it back to their office. BROKERS signature was also required to submit a listing.
MLS didn’t require a spread sheet or comp listings – the brokers in better offices did. They had to pay fee for every listing submitted and didn’t want to waste money on listings that had no support.
My experience with Realtors providing a square footage on a listing is that they can’t measure and represent the size of the home because some have been sued for being wrong! They don’t give a rat’s ass about anything but the highest sale price which will yield the highest commission. Listing agents used to do their own competitive market analysis until computers gave them all that “averaging” and smoothing, that protects the agent and broker from lawsuits, so they invent another computer program they can use to “sell” the seller on listing with them, because they have the highest asking price! Once the listing agent has the signature of the seller on the listing agreement, the agent can just hang out and wait for it to sell, knowing they will get half the commission.
The RPR is used in Oregon where I live, and I have checked into it; it is not accurate; I was in court testifying on a value for a property and the Realtor on the other side used some CMA to “determine” the value of the subject property. I blew her out of the water in a NY minute, discrediting her with questions I fed to the attorney to ask her. I checked out all the comps and there were multiple property types, spread around a greater area in a rural location, making the “comps” used in the CMA complete nonsense. This happens when Realtors who know nothing about valuation methods expose themselves as charlatans.
Real agents back before computers actually did a bit of homework and printed out a sheet to take to the seller when trying to get the listing. Some sellers get three agents to do this, then decide who they think will get them the most money. I think listing agents are lazy, and some are stupid if they think a computer tells one about the value. Appraisers are equally as stupid if they think they can use a regression analysis to estimate market value; when you have all the data on a scatter graph you can see the data points; the subject may be somewhere in that range or out of it; appraisers are needed to do the ones which are not cookie-cutter homes in conforming neighborhoods where homes are near original improvements, making nearby sales in the same tract actually comparable. Realtors who get this actually will look at the comps and do their gut comparison; if they are experienced in the area and good at what they do, then they may predict the eventual sale price, then add some to give room for negotiations with the buyer’s agent. When they are the listing and sales agent (working on their own office’s listings) then they get all the commission, after the broker is paid. Now there are many more expenses being an agent, but the big one is giving a broker part of your commission; only how much do the brokers getting that commission train their people how to understand their product and how to sell it. Now when it is a seller’s market as it has been in the recent past, it is a no brainer to sell anything; fixer, or upgraded; people need houses because they think it will always go up. There are always a group of people who lose their downpayment plus when the market turns, and we see in hindsight they paid too much. This situation is not new, these are the first casualties; the recent buyers, or the people who use the home as a piggy bank, watching zillow tell them their equity is going up every month. That’s what alogrhythms and computer-generated appraisals will give you.
This is no way to secure a loan, but now Freddie and Fannie want to use computers because we appraisers are just not instantaneous and we don’t always give them the answer they need to make the loan. Our entire economic security is being compromised while they try to rid the world of valuation experts, but then they are only thinking short term. It’s called cut off your nose to spite your face!
Real agents can’t secure and close sales at any listing price, unless there is a buyer. Not any price will close a deal. Realtors are as conscience as are appraisers. Their are lots of reasons for the measurements to be wrong, we appraisers know most of them. Many of those called lazy use the same tactics as appraisers. Maybe Oregon is different from California. Maybe some of the fruits and nuts moved from CA, moved to Or. Realtors work hard and Continuing Ed. is important for realtors as it is for appraisers. I’ve always kept a file of the agents considered reliable, I imagine that the Realtors keep a file of reliable appraisers. Good independent appraisers will always be in demand and as LOAN LOSS’s increase so will good appraisers who identify themselves by collecting appropriate fees.
I remember, before licencing that some appraisal shops ONLY hired licensed agents, for appraisal work, because they had something to loose
Remember appraisers work larger geo areas than Realtors, Real Estate is local, Economics are regional.