With the dawning of the Information Age, real estate information — which used to be exclusive and propriety to the Realtors — has gone public, as massive amounts of data is being created and disseminated on the Internet to empower a knowledge-hungry global society.
As the number of online resources has grown, more and more real estate consumers are tapping the Internet for information before beginning the purchase or sale process as the world wide web has made access to such information ever faster.
Driving the Data Supply
For online data aggregators such as RealtyTrac, Homefacts and Auction.com — business is about creating and disseminating the data, making it as transparent as possible while maintaining accuracy and timeliness. All the while striving to grow their databases through either acquisition of — or contracting with — other sources of data.
Enlarging the database in turn increases the capability of the aggregators to combine and interpret the data in new ways — creating new metrics with which to measure and analyze the state of the market from the national level down to the local zip code level, further empowering their customers to make wiser real estate decisions.
For RealtyTrac the firm built it’s reputation as the nation’s leading source of foreclosure listing information through a team of independent aggregators working all over the country. Building on that foundation, the firm has continued to add data through agreements with other sources such as government entities and various multiple listing services (MLS).
Then, in April 2012 RealtyTrac acquired Homefacts, adding to its arsenal dozens of datasets focused on neighborhood and local factors such as local schools and crime rates and environmental data that can impact property values.
“We don’t believe there is ever such a thing as too much information,” said RealtyTrac vice president Daren Blomquist. “Consumers may only use 25 percent of the data we’re providing, but if it’s available and public, it should be made easily available to both consumers and institutions who are making decisions about real estate.”
But as Rick Sharga, executive vice president of Auction.com pointed out, it is not the amount of the data that makes the difference but how it is used and by whom is it interpreted.
“The good news is there are a lot of tools and data at people’s disposal,” said Sharga. “On the other hand a lot of data out there can get you in trouble if you don’t know what you’re looking at.”
Auction.com built its business model on residential and commercial real estate auction listings, providing relevant data to inform users before the auction.
“Real estate, which is something that affects everybody in the country, had the information hermetically sealed. What we’re dealing with now is a sort of generational backlash. They want it when they want it and they want it to be free,” he explained.
Sharga has no doubt that making the data available allows consumers to be much better informed when conducting their due diligence to explore and analyze property. However, with so much narrative data out there, and so much conflicting data in the marketplace, there is still a danger that potential buyers and sellers are going to get confused.
“There’s a lot of information out there, and what we’re seeing now is a movement by market participants to get more and more customized,” he said. “The user can decide what information they want to look at depending on the purchase they are considering.”
Despite this glut of information, the data itself can be bad in some cases. Then there is case where the data itself is credible, but misinterpreted, causing people to come to wrong conclusions, Sharga warned.
Expanding the Market for Data
The continued acquisition of data has allowed companies like RealtyTrac and Auction.com to delve into other distribution channels to provide both residential and commercial real estate data to customer’s starving for more numbers to crunch.
For Auction.com, Sharga said the firm is acquiring additional data to make up its own set of custom reports for users to better analyze properties and the market.
In RealtyTrac’s case the firm began offering custom reports years ago along with licensing its data in bulk — through what it calls its MEGA download — to users other than simply real estate professionals, investors and homebuyers shopping for good deals.
“In terms of the bulk data licensing, we are targeting businesses in real estate, financial and insurance industries along with government agencies and others who need comprehensive nationwide real estate data to help make profitable and prudent decisions,” said Brian Mushaney, executive vice president, data licensing at RealtyTrac.
With the recent addition of data acquired through an agreement with the U.S. Federal Trade Commission signed earlier this year, RealtyTrac has become one of only three companies in the country to fully license tax and deed data, Mushaney said.
Having this additional information has allowed the company to delve not only into residential real estate, but also venture into data on the commercial side of the business.
“On a wider scale our mission as a company is to make as much real estate data available to as many people as possible,” he said. “Bulk data licensing is a key part of that, but that mission also includes disseminating the data on our website to consumers and through our expanded MEGA download product, offering smaller businesses such as real estate investors, agents and attorneys online access to our nationwide real estate database to create targeted direct marketing lists.”
It’s the Quality, Not the Quantity That Matters
No matter what type of property that particular consumer is seeking, be it a retail consumer looking to purchase or sell a home, or an institution considering building a factory or opening a franchise in a new market, finding the right information is key to a successful real estate transaction.
For Christopher Thornberg, founding partner of Beacon Economics in Los Angeles, Calif., it is not the number of data providers he is concerned about, but the quality of the data being provided.
“I wouldn’t say there are too many sites. The fact that there’s more data out there is a good thing,” said Thornberg. “The interpretation of the data is always questionable. Despite all that wonderful data out there, why did we just go through the worst crash since the Great Depression? With all that data, we seemed to make the same mistakes worse than we ever made them before.”
There are two uses for data, Thornberg noted. One is to track trends, and the other is to consider market fundamentals. At the end of the day, the trends measured are only as good as the fundamentals they are based on.
“When there’s more options, people pick the ones they like and roll with it. We live in a world where expect people to take care of their own investments and retirement. It’s supposed to be a self-sufficient world,” Thornberg said. “You have to understand the nature of this data. You can do all the searching you want, but in the end it won’t help you buy or sell your house. You make the offer and if you get it…great. If you’re a seller and you price it and it doesn’t sell…you’d better lower the price.”
Boots on the Ground
The people with a front row seat in this discussion are the real estate professionals and investors pounding the street who see the use and abuse of real estate data on a daily basis.
Real estate agent Brandon Carey with Ascent Real Estate in San Diego, Calif., sees his job as educating his clients on the state of the marketplace — whether they are dealing with residential, commercial or investment property.
For Carey, the key issue is not so much the quantity of the information available out there in cyberspace as it is the quality of that information.
“A lot of buyers go online, but a lot of the data they’re finding is out of date or inaccurate. It’s great to have all that information, but sometimes it can be overload for someone in the market,” said Carey. “Sometimes people scare themselves from buying a home because of the information they read online. It’s a matter of how accurate and how pertinent to each buyer in terms of how much information do they really need.”
Scott Mednick, broker/owner of Marblehead Real Estate in San Clemente, Calif., said residential buyers are usually focused on the few important factors that are most important to them in making a decision to purchase a home. On the commercial side, at the end of the day it’s all about the numbers, particularly cap rates that make the difference in the decision making process.
“You have to listen to what is important to them,” Mednick said.