The removal of offers of buyer broker compensation from most MLSs across the country — as mandated by the National Association of Realtors’ (NAR) commission lawsuit settlement agreement — was a massive change for real estate agents and brokers. But they aren’t the only housing professionals impacted by these changes.
Real estate appraisers also rely on MLS data, including information about buyer broker compensation and seller concessions, in order to accurately appraise properties for homebuyers and lenders. But with the terms of the NAR settlement now in effect, much of that data is no longer available via the MLS.
“We’ve taken a step back with data transparency since the NAR lawsuit,” said Ryan Lundquist, a Sacramento, California-based appraiser. “Agent compensation has historically been separated from the concessions field in MLS, but after the NAR lawsuit, the concessions amount field was also removed.
“In practical terms, this means appraisers need to reach out to agents to find out if there were any concessions, as opposed to that information being readily available in MLS.”
The lack of concession and commission information on the MLS is an inconvenience for appraisers, forcing them to call the agents involved in a comparable transaction. But appraisers say that even prior to the Aug. 17 changes, many considered it best practice to contact an agent and verify this information.
“If an appraiser believes a home will make a good comparable, they need to understand all the terms around the sale of the property, so it has always been important to make contact with the real estate agents involved to understand if there were any seller concessions or any terms the appraiser should know about before using the property as a comparable,” said Shawn Telford, the chief appraiser at CoreLogic.
Going forward, Telford is expecting even more variation in seller concessions and agent compensation due to the terms of the NAR settlement. To him, this makes phone calls with agents not only a best practice but an absolute imperative.
Generally speaking, appraisers say agents are good about taking calls and supplying them with accurate information. But with fewer home sales occurring, Lundquist said he sometimes has to use comps that are much older — and sometimes the agents don’t recall the exact details of a transaction.
“Locally, sales volume is down by about 35%, and that effectively means I have 35% fewer comps to choose from,” Lundquist said. “So, the older sales are really going to matter ahead. I certainly don’t want to inflate any value in light of having less access to concessions information and not hearing back from some agents.”
Despite having to make more phone calls, appraisers say they have not experienced a massive impact from the settlement-driven business practice changes.
“Researching the data, gathering the data and verifying the data have always been an important part of what the appraisers do,” Telford said. “So, whatever has happened with the changes in how real estate agents operate hasn’t really changed the responsibility to the appraiser to understand the terms of the sale.”
Kenon Chen, the executive vice president of strategy and growth at Clear Capital, shares a similar view.
“We are not really seeing anything needing to be handled differently,” Chen said. “There are some specific markets where concessions are becoming more common or more of a challenge, but we haven’t really seen any impacts yet. But it is still early days.”
As he looks ahead, Lundquist is nervous that the future may not be so straightforward. He believes there are a few things appraisers should be keeping a close eye on. This includes identifying any differences between homes where the seller pays for the buyer’s agent’s compensation, versus the ones where the buyer pays out of pocket.
“We have to know why some properties could potentially be closing at different price levels, and figure out where market value is in the midst of that,” he said. ”So far, it seems like business as usual in so many transactions, but we have to really critique the comps ahead to understand how the commission — or lack thereof — is affecting the final price.
“My observation is this idea has almost seemed offensive to some who work in real estate, but I don’t know how we don’t ask this question if we are serious about accurate valuations. The reality is when laws or practices change, sometimes the questions we ask also change.”
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