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How serious are the errors in MLS sales price data? [stats]

For the first time ever, the accuracy of sales price data in the MLS has been analyzed, and the study’s authors express to us how these inaccuracies could have happened and what we must do now.



For years, appraisers, economists, and other experts have quietly questioned the discrepancies between multiple listing services (MLS) prices the legal prices recorded on HUD-1 forms (and filed in local jurisdictions).

A new study published by the journal of the nation’s leading appraisal organization provides the first hard evidence that errors in sales prices reported by MLSs could be significant, especially when peak prices start to decline.

Though the study’s scope was limited to one large MLS, its findings suggest that potential for similar errors in the nation’s 800 multiple listing services could have such serous impact on consumers that the three economists at Florida Gulf Coast University who conducted the study advised appraisers that are suspicious of a price to use another source for verification.

l6.25% of transactions overstated HUD1 data

Reported Price Errors: A Caveat for Appraisers” by Marcus T. Allen, PhD, Kenneth M. Lusht, PhD, MAI, SRA, and H. Shelton Weeks, PhD is published in the current issue of the Appraisal Journal.

The economists looked at 400 transactions in a Southeastern state from 2004 to 2008, including the two years prior to the peak price year of 2006 and the subsequent two years. They compared data from HUD1 forms with prices reported to their MLSs by listing brokers, usually after sales contracts were signed by before settlement.

They found that MLS-reported prices differed from HUD1 prices 8.75 percent of the time over the four-year period. Some 6.25 percent of the transactions overstated the HUD1 data and 2.50 percent understated the HUD-reported prices.

The largest overstated error was 21.44 percent of the of the HUD-reported price and the largest understated error was 1.09 percent of the HUD-reported price. The average overstated price was $14,038, or 6.69 percent of the HUD-reported prices.

Data suggests that errors were not random

Considering the size and complexity of MLS databases, an error rate of less than 9 percent of all sales over a four-year period is an issue to be addressed but not unexpected.

What rings alarm bells is the timeframe in which the errors occur.

Errors weren’t spread evenly over the time period, but doubled in 2006 to more than 15 percent of transactions, when prices peaked and began to fall in the Southeastern state, followed by nearly as many errors in 2007 and 2008, when the crash accelerated.

The timing of the errors suggested they were not random mistakes but were driven by marketplace conditions.

Are prices intentionally inflated?

From the evidence, the authors suggested two viable explanations for the market-driven error rates. The first was that some brokers intentionally inflated sold price information in the MLS, perhaps to make it appear that they negotiated a higher price for their clients.

If brokers and agents were overstating sales prices to bolster reputations seven or eight years ago, what’s happening today?

MLS sales price data is more important than ever for agents who want to “prove” their value to customers. The emergence of ratings services that use MLS sales data to rate agents and brokerages increases the pressure on brokers and agents to quantify their value to their customers and clients. Some rating services use public sales data to assess sales prices, others use MLS sales data and others allow agents to enter their own. MLS sales data also gives brokers a way to assess the value of agents in their local markets.

What could have caused the misstated prices

“I don’t think agents were deliberately misstating prices, though that’s a story that fits the facts,” Dr. Kenneth M. Lusht, one of the study’s three authors, tells us. Lusht is a Distinguished Professor of Real Estate at Florida Gulf Coast University, past president of the American Real Estate and Urban Economics Association, and a past trustee of the Appraisal Foundation.

“The second thing that could have happened, and it’s pretty likely, is that when you’ve got a down market, buyers get cold feet. They start thinking about not going through with the sale and giving up their deposit. So another story that’s consistent with what we found is that the price the broker submitted was the agreed upon price but between that the time he submitted it to the MLS and the settlement day the price was changed and the broker never changed the data because there is no incentive to do so.”

Lusht added that conveyances can add to the post-contract price. “In a down market that’s more likely to occur when a seller says, ‘Look, I’ll throw in the furniture to try to make the deal.’” Likewise, in down markets, sellers are more likely to subtract the cost of repairs rather than quibble over them at closing.

Whatever the cause of the errors, the study concluded, “Regardless of the motivation or source of the error, the result is the same – a misstated price.”

More research is now necessary

The authors admit that the study’s small size limits the generality of its conclusions. The geography and time frame might also be an issue. Prices in the Southeastern markets they studied were some the most volatile in the nation during the four years of the study – it was the height of Florida’s foreclosure crisis. Only one MLS was involved and policies toward gathering and checking price data vary by MLS. Much has changed in the world of MLS data and appraisal standards since 2008.

However, Lusht maintains that the problem of MLS errors is longstanding and certainly not limited to one or two markets. “I would say that any appraiser who has a reasonable amount of experience already knew there were errors in the MLS. They knew that it is very possible some of the prices weren’t right. But no one has ever measured it before and found how frequent the errors were or how big they might be.”

The study is receiving a lot of interest and Lusht believes more research is warranted.

“Maybe someone else will get interested in it and look at different areas to see if what we found is typical or not. My guess is that what we found here, we will find in other markets, especially during down markets,” he said

In search of a solution

MLS price data is valuable because it is current, and available within days of settlement. But if the Florida Gulf Coast University study is right, an average or one out of every twelve sales prices is wrong, and one out of every seven during down markets.

It can take local governments as long as three months to post official sales price data.

That’s why price reports like Case-Shiller and CoreLogic that only accept public data come out as late as two and a half months after the fact. That’s a long time when you’re a home seller or buyer trying to figure out what prices are doing in your market.

There’s no doubt that long delays seriously compromise the usefulness of public data.

Currency is a major reason the use of MLS price data is widespread. Hundreds of MLSs themselves and Realtor associations at the national, state, and local levels use the data in market reports for their members and the general public.

National web sites and brokerages, from to Redfin and RE/MAX use MLS price data in their reports. Hundreds of thousands of agents and brokers rely on it to counsel their clients and customers.

For MLSs themselves, the sale of data, including price data, has become a significant source of income that would be even more valuable if this issue of price errors can be resolved successfully.

And now for the solution

So where’s the solution? Is there a way to make MLS data more accurate or public data more timely or both?

One possibility has been created by TRID, the new closing process that took effect last October.

Lenders are required to provide their borrowers with final costs, including final prices three days before settlement. With final numbers available earlier than ever, will brokers be able to report prices to their MLSs months before they are posted in the courthouse?

Unfortunately, this solution may not be as easy as it looks. Privacy concerns are an issue and many lenders are resisting making the new TRID forms available to agents. Discussions are underway to work out a solution.

Other parts of the solution might include:

  • Double checking broker-supplied data when public data becomes available, an expensive proposition for MLSs that corrects errors after the fact, but doesn’t really solve the problem;
  • Better education and training to encourage agents and brokers to file corrected contract prices that have changed between contract signing and settlement;
  • Clearly label contract prices as pending sales and be sure they are replaced with sold prices after settlement. This might include user-friendly software, including mobile apps, that reminds agents to file price data and makes it easy to enter data. The software could also aggregate accurate price and sales data for agents and brokers to use in their marketing efforts;
  • Conduct additional research that builds upon the Florida Gulf Coast University study to identify market conditions, geographic regions, property types, seasons of the year and other factors that correspond to increased errors; and
  • Undertake periodic analyses of errors by MLSs to identify specific brokers and agents who might account for a preponderance of errors.


Steve Cook is editor and co-publisher of Real Estate Economy Watch, which has been recognized as one of the two best real estate news sites in the nation by the National Association of Real Estate Editors. Before he co-founded REEW in 2007, Cook was vice president of public affairs for the National Association of Realtors.


Why it’s about to get more expensive to get a mortgage

(FINANCE) Borrowing money is getting more expensive, especially for those looking to get a mortgage. But why?



bonds and mortgages

Although there have been some blips, bonds have grown substantially in value since the 1980s. They’ve performed extremely well for a number of reasons, not least of which is the big slowdown in inflation over that time period.

The result, for investors, has been that anything “bond-lik,e” i.e. capable of paying a regular income – like a high-dividend stock or even a property like your home – has shot up in value. A reversal of bond prices would mean less support for such investments.

That’s what the economy is currently experiencing. According to Financial Times, American worker wage growth is hastening the sell-off of bonds by the US government, which is decreasing the overall price of bonds. As bond prices go down, the interest rates that they offer new investors go up. That rate jumped to 2.85 percent last Friday, the highest level since 2014.

Since the rates at which banks lend their money are largely based on the interest rates offered by bonds, regular folks looking to take out a mortgage or a loan are facing higher costs.

How does this work?

If we’re talkin’ bond prices, we’re talkin’ yield. When the price of a bond goes up, the yield of that bond goes down! Let’s say you’re getting paid $5 each year. If you pay $50 for that right, then you’re making a 10% “yield” (5/50 = 10%). But if you pay $100 for that right, then you’re making a 5% “yield” (5/100 = 5%).

It’s the same thing with the price of a bond because the amount a bond investor gets paid (usually) is fixed. And so, when the bond goes up in value, the “yield” goes down – and vice versa.

For realtors, its important to help clients shop for the best rates to improve their confidence in this market. Leveraging the right online and local financing resources can help potential buyers get the best deal. Explaining broader market context is also critical. Historically, a three percent interest rate is still very low.

According to Investopedia, mortgage rates averaged 7.81% in 1996 and 10.19% in 1986. Instilling confidence with information will put buyers and sellers in the right place to make moves.

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Real Estate Big Data

Murdoch wants FB to pay for content – should RE search sites pay for listing data?

(DATA NEWS) Rupert Murdoch argues that Facebook should pay to feature trusted news. Sounds like a familiar argument that real estate practitioners have made for over a decade.



rupert murdoch

There’s an old argument in the real estate industry that you’ve probably heard – listing data is aggregated by real estate search sites like Zillow, which makes big bucks on that free firehose of data, but doesn’t send a cut of said profits back to the content providers (and should).

This conversation is being revisited after Facebook’s announcement that they’re going to restructure how data flows. Just as publishers are asking why Facebook doesn’t pay for content, the real estate industry is again asking – why is the data real estate professionals produce aggregated for someone else’s financial benefit?

Media mogul and Executive Chairman of News Corp, Rupert Murdoch, issued a press release outlining his urgent belief that Facebook and other media giants should pay publishers for their content, rather than benefiting from the content, keeping the profit to themselves, and padding their stock prices. This comes at a rather interesting time, given many media giants are changing they way the game is played: YouTube is causing a bit of a stir with their top contributors, Facebook has vowed to get back to their roots, and it won’t be long before other social media and marketing sites follow suit.

Amidst these changes, though, where are the benefits for the content creators?

There are influencers on YouTube that promote new products; Facebook and Twitter users who supply endless amounts of content from which other companies/brands benefit, and to apply this to real estate, Zillow, Trulia, and others who aggregate brokers’ content into their platforms and benefit tremendously. It’s shrewd business.

This is especially frustrating when you consider, as Murdoch points out, “publishers are obviously enhancing the value and integrity [of the platform] through their news and content but are not being adequately rewarded for those services.” Realtors® create data for aggregators by listing properties in the MLS, then, they are charged to be showcased on the very platforms already utilizing and profiting from the information that has been provided for free.

While Realtors® may have been paid for their listing by their client, they have not been provided a percentage of any search site’s profits, which is the primary argument Murdoch makes to Facebook.

Murdoch proposes a fee structure to remedy this issue, much in the same way cable is structured, whereby publishers would be compensated for their contributions, but it isn’t clear how this would work long-term, although it is food for thought about who really owns data.

According to Murdoch, “The time has come to consider a different route. If Facebook [or any other media giant] wants to recognize ‘trusted’ publishers, then it should pay those publishers a carriage fee similar to the model adopted by cable companies. The publishers are obviously enhancing the value and integrity of Facebook through their news and content but are not being adequately rewarded for those services. Carriage payments would have a minor impact on Facebook’s profits but a major impact on the prospects for publishers and journalists.”

In other words, real estate search sites should be paying broker for using the data they provide, instead of charging for extra bells and whistles in the name of marketing. Even if the real estate search site is one of Murdoch’s own…

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Real Estate Big Data

Housing optimism cools – what will it take to heat back up?

(REAL ESTATE NEWS) Despite economic gains and a hot housing market, optimism is cooling. Why is this happening and what’s the cure?



fair home prices existing home sales housing

Housing is a complex creature – the market can be on fire, but optimism can wane nonetheless. The National Association of Realtors (NAR) is reporting that despite solid job creation, the strength of the economy, and increased economic growth, many households are less keen on believing now is a good time for buying or selling, and are overall less confident about the economy.

This comes as a result of the fourth quarter HOME (Housing Opportunities and Market Experience) survey, which samples US households by a random digit-dial and was conducted by TehcnoMetrica Market Intelligence that gathered 2,705 households. The HOME survey collects data on a monthly basis and is focused on identifying real estate trends.

Despite an improving economy, more hiring, and low mortgage rates, optimism in home sales was not as expected, according to Lawrence Yun, Chief Economist for the NAR.

In general, most prospective home buyers had to deal with a lack of inventory – less construction, fewer sellers, and a lack of affordability.

Reduced economic confidence in the face of the economy’s improvements persisted, with more households feeling less secure about their financial situation, and less people believing the economy is improving. Simply put – they aren’t feeling it.

Renters are less engaged to buy, as demonstrated by a two percent decrease in renters believing now is a good time to go get that home.

Overall – the people most excited to purchase homes are current homeowners, households with income above $100,000, and those living in the Midwest and South. If you live in the West, it is likely that you believe yourself to be in a good market for selling a home.

Overall, people more firmly believe it is a good time to sell their home over last year, which can spell some good news for potential buyers in 2018, as more people may be comfortable putting their homes on the market.

The key is that housing supply must increase. New builds and more sellers placing homes on the market will improve confidence about the housing supply and can work in tandem with a better job market and improved economy to make households feel more optimistic about their #future.

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