I just finished a typical appraisal in Portland, Oregon that, on the surface, should have been an easy assignment. However, it turned out to be difficult because after data verification of six comparable sales selected, four turned out to have major errors in the multiple listing service (MLS) data as they relate to living space. Three of the comparables had to be rejected and replaced with stronger comparable sales data. Here are the four comparables and the major living space errors that I found.
Example Comparable Sale 1 was listed in the RMLS as having an above grade living area of 1,536 sf. The agent indicated that the source was the tax record. When I checked the tax record, the main floor is 836 sf and the finished attic is 300 sf. This comparable sale was quite comparable to the subject property at 1,536 sf but at 1,136 sf it was not very comparable and had to be replaced with another property.
Example Comparable Sale 2 was listed in the RMLS as having 1,627 sf of above grade living area with no upper level. The agent indicated the source was the tax record. Clearly, the photos show an upper area and the tax records show 1,218 sf of finished attic in addition to the 1,627 sf main area. This sale was reasonably comparable to the subject at 1,627 sf, but at 2,845 sf it is not very comparable. Consequently, it had to be replaced with another more comparable sale.
Example Comparable Sale 3 was listed in the RMLS as having 2,100 sf of above grade living area. The agent indicated the source was the tax record. I checked the tax record and found the main was recorded as 1,200 sf and the finished attic as 696 sf. This property actually became more comparable at 1,896 sf and thus remained in the appraisal.
Example Active Listing 1 was listed in the RMLS as having an above grade living area of 1,436 sf. The agent indicated the source of information was the “trio,” which is essentially tax records. When I checked the tax record, the main is shown as 836 sf and the finished attic is 300 sf, or just 1,136 sf of above grade living area. It appears that the agent had looked at the tax record and took the total as the main area and then added in the attic to result in the 1,436 sf. This listing was quite comparable at 1,436 sf to the subject, but at 1,136 sf, the property was not very comparable and had to be replaced.
At the data verification step of the appraisal process, the appraisal should be almost complete, and now due to errors in a fundamentally important set of data points, the appraiser is forced to go back to an earlier step of finding and photographing new comparable sales. This process of sifting and verifying inaccurate data is something that appraisers and real estate professionals everywhere have to deal with, not just appraisers in Portland, Oregon.
Data errors are also common throughout Portland real estate listing data. It would be helpful to the health of the real estate industry if there were a process for verifying MLS data prior to (or soon after) a real estate agent posts the listing. Just imagine if you were the buyer of the Example Comparable Sale 1 and you thought that you contracted to purchase a 1,536 sf home but the appraiser found it was only 1,136 sf. This could result in a low opinion of value and a renegotiation of the sales price. If the contract price is still supported by the comparable sales data, the buyers might never find out that the home they purchased is actually much smaller than they thought (since the appraiser is typically hired by the lender for sales transactions and buyers usually do not read the appraisal report).
Each listing of Portland’s RMLS (Regional Multiple Listing Service) has a “Report Issue” button for subscribers to report data errors. However, given the number of errors or misleading information that our appraisers find regularly in MLS data, I believe this process is deficient. Additionally, an MLS employee remotely editing listing information does not provide a complete picture to real estate professionals who need reliable data. If a house was inaccurately marketed as 1,536 sf to unsuspecting buyers, that could be important information for the appraiser to understand later when making comparisons.
A better solution would be a private forum at the bottom of every listing for RMLS subscribers as shown above. Instead of every appraiser, agent, or other real estate professional calling or emailing the agents and asking questions, there could just be a chat window similar to comments on Facebook. Each appraiser could ask questions about the transaction or the data and receive answers from the agents involved. If one appraiser already asked a question about a data discrepancy or if there is something that the agent cannot disclose, the next appraiser could simply read the previous comments and would not need to ask that question again. This simple change to the RMLS would reduce many failed sales, reduce time spent by agents responding to questions, reduce time spent by appraisers asking questions, reduce agent liability, strengthen the ability for real estate professions to value real estate, and improve the confidence of all market participants thru transparency.
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Thanks for reading,