The removal of buyer-seller compensation offers from most MLSs across the country – as mandated by The National Association of Realtors’ The commission’s agreement (NAR) to settle cases – was a big change for real estate agents and sellers. But real estate professionals aren’t the only ones affected by these changes.
Real estate appraisers also rely on MLS data, including information about buyer-seller compensation and seller agreements, to accurately analyze properties for home buyers and lenders. But with the terms of the NAR agreement now in effect, much of that data is no longer available through the MLS.
“We’ve taken a step back with data visibility since the NAR case,” said Ryan Lundquist, an appraiser based in Sacramento, California. “Agent compensation has historically been separate from the concession field in the MLS, but after the NAR case, the concession amount field was also removed.
“In practice, this means that appraisers need to reach out to agents to find out if there is a permit, as opposed to that information being readily available on the MLS.”
The lack of clearance and commission information in the MLS is a distraction for appraisers, forcing them to call agents involved in similar transactions. But inspectors say that even before the Aug. 17 changes, many found it best practice to contact an agent and verify this information.
“If a real estate appraiser believes that a home will make a good comparison, he must understand all the terms regarding the sale of the property, so it has always been important to contact the real estate agents involved to understand if there are any seller’s permits. Any terms the appraiser should be aware of before using the property as a comparable,” said Shawn Telford, chief inspector at CoreLogic.
Going forward, Telford expects further variation in broker approval and agent compensation due to NAR payment terms. For him, this makes calls with agents not only best practice but absolutely essential.
In general, testers say agents are good at taking calls and providing accurate information. But with so few real estate sales happening, Lundquist said he sometimes has to use very old comps — and sometimes agents don’t remember the exact details of the transaction.
“Locally, sales volume is down about 35%, and that means I have 35% fewer comps to choose from,” Lundquist said. “Therefore, old sales will be more important in the future. I absolutely do not want to increase any amount due to limited access to consent information and unresponsiveness from other agents.”
Despite having to make a lot of calls, appraisers say they’ve never felt the big impact of settlement-driven business changes.
“Researching data, collecting data and validating data has always been an important part of what auditors do,” Telford said. “So, whatever has happened with the changes in the way real estate agents work has not really changed the job of the appraiser to understand the terms of the sale.”
Kenon Chen, senior vice president of strategy and growth at Clear Capitalyou have the same idea.
“We don’t really see anything that needs to be handled differently,” Chen said. “There are certain markets where agreements have become more common or more challenging, but we have not seen the effects yet. But it’s still early.”
Looking ahead, Lundquist fears the future may not be so bright. He believes there are a few things appraisers should keep an eye on. This includes identifying any differences between homes where the seller pays the buyer’s agent’s compensation, compared to those where the buyer pays out of pocket.
“We have to know why some properties may be foreclosed on at different prices, and find out where the market value is in between,” he said. “So far, it seems like business as usual in most operations, but we have to critique future computers to understand how the commission – or lack thereof – affects the final price.
“What I have seen is that this idea has become almost offensive to some who work at home, but I don’t know how we can ask this question if we are determined to make a direct prediction. The truth is that when laws or practices change, sometimes the questions we ask also change. “
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