Broker AVMs? (Pt. 4): NAR’s proposed policy

This is part four in a series that I’ve now concluded will have five parts on the question of whether and how brokers participating in MLS may use listing data of other brokers to power AVMs sold into the real estate vertical. See Part 1 for an intro and Part 2 for advice that NAR gave MLSs in 2013. I examined a letter from The Realty Alliance (TRA) on this subject in Part 3. This post discusses the three broad questions I think NAR needs to answer, describes the current proposal for NAR’s policy committee, and examines whether that proposal answers my three questions. I conclude that it does not.

Decisions, decisions

The NAR multiple listing policy committee has three important and distinct decisions to make at its May meetings in D.C. on the broker AVM issue:

1. Are AVMs indistinguishable for policy purposes from BPOs and CMAs? In TRA’s view, the answer is ‘yes’, and that appears to be the view previously expressed by NAR policy staffers. Both TRA and NAR staffers appear to think that this is a foregone conclusion, but I noted some hedging on that from NAR last fall, and it’s plainly a fact that the ML policy committee has never given an answer to this question. If the answer to this question is ‘yes,’ then no listing broker permission need be obtained for a particpiant to use MLS data of all brokers in an AVM application (subject to NAR’s other policies of general application). In other words, there really cannot be a listing broker opt-out under this view. The committee would also need to address question 2. If the answer to this question 1 is ‘no,’ then NAR needs to decide whether AVMs get different treatment under its policies or if they are simply not permitted.
2. Are MLSs required to provide a broad data feed (equivalent in scope to a VOW data feed, though it would not be for VOW purposes) to support any application in which a participating broker plans to use the MLS data, provided that application is permissible under the NAR rules? In TRA’s view, the answer is ‘yes,’ and that appears to be consistent with the view tentatively expressed by NAR policy staffers last year. The ML policy committee has never before required MLSs to provide data feeds to brokers for any permissible purpose under the rules, with the express exceptions of IDX and VOWs. Before setting this precedent, the committee may wish to consider if there are other permissible applications of listing data for which participants might demand data feeds. If the answer to this question is ‘yes,’ the committee would also need to address question 3.
3. What limitations and costs may MLSs place on such data feeds? For example, under the IDX policy, such a download can be ‘persistent’ or ‘transient.’ Under the VOW policy, a persistent download must be available, but the MLS may charge more for it. A transient feed would probably not permit the building of the type of statistical or machine learning models that most AVMs rely on. What are the MLS’s options for this third type of listing feed? What about policies? TRA made much of the fact that its proposed use is analogous to VOWs. How much of the VOW policy can MLSs impose on participants’ use here? What if MLS chooses to impose a VOW requirement on this application and the participant refuses? Can MLSs impose requirements on participants that do NOT appear in the VOW policies? If so, under what circumstances, and to what ends? Can MLSs impose a license agreement on these uses, just as they can with the IDX and VOW policies?

I can imagine a few different ways that these questions might be answered. Here, though, is the proposal that has been teed up for the policy committee, at least as of today.

Policy proposal sent to committee members

The committee agenda and materials for members of NAR’s Multiple Listing Issues and Policies Committee for next week’s meetings in D.C. provide a recommendation from the committee’s “MLS Technology and Emerging Issues Advisory Board,” which met in March to discuss this issue. The recommendation is to amend NAR’s Statement of ML Policy 7.79, regarding “Reproduction of MLS Information.” The proposed amendment makes several changes, but the ‘payload’ is in this paragraph, which I’ve reproduced showing underlines where insertions would be made and strikethrough where deletions would occur:

None of the foregoing [which relates to limitations on brokers reproducing MLS data] shall be construed to prevent any individual legitimately in possession of current listing information, sold information, comparables, or statistical information from utilizing such information to support an estimate of value valuations on a particular property properties for a particular clients. Any MLS content in data feeds available to participants for real estate brokerage purposes must also be available to participants for valuation purposes, including automated valuations. MLSs must either permit use of existing data feeds, or create a separate data feed, to satisfy this requirement. MLSs may require participants who will use such data feeds to pay the reasonably estimated costs incurred by the MLS in adding or enhancing its downloading capacity for this purpose. However, only such iInformation that an association or association- owned multiple listing service has deemed to be nonconfidential and necessary to support the estimate of value may not be reproduced and attached to the report used as supporting documentation. Any other use of such information is unauthorized and prohibited by these rules and regulations.

How does this change answer the questions I set out above? We’ll see in the next section.

How the proposal measures up

The proposed policy does not fully answer any of my questions, which is a pity, though the answer to question 2 is generally satisfying. It does not expressly equate AVMs with CMAs/BPOs for policy purposes (something the committee has never been asked to rule on, and which I discussed at length in the first, second, and third posts in this series). It does not say whether MLS must provide data to participants for any purpose permitted under the rules, though it does answer the question at least with regard to valuation activities. And it fails to address MLS concerns about how to manage these data feeds.

First, the proposed policy change and the summary of issues accompanying it still seem to take it for granted that AVMs are the same type of valuations as CMAs/BPOs, at least for policy purposes, even though The Realty Alliance has acknowledged the differences. I maintain that this important issue should be discussed in its own right. Listing brokers have never been asked, in general, how comfortable they are with their listing data being used in valuations (like AVMs) where no professional judgment is involved; they are, of course, well-accustomed to valuations (like CMAs/BPOs and appraisals) where professional judgment is involved. Should these be the same for policy purposes? The NAR staff and The Realty Alliance assume so. There still has been no public discussion of this; maybe it’s unimportant to brokers–I don’t know.

Second, NAR does a good job here by limiting the scope of this change to “valuation purposes.” In other words, it does not open the door for participants in MLS to demand to be able to use data feeds for anything they like, just because they can make a colorable claim that it is permitted under NAR policy. This at least helps to prevent some possible unintended or unexpected consequences of the change. However, I’ve already mentioned a concern about whether appraisers (who are ‘participants’ in many MLSs) would be entitled to build AVMs using data on this policy; I think the position of supporters of this change is that REALTOR® appraisers who are MLS participants would be entitled to do so. There still has been no public discussion of what this might mean; maybe it’s unimportant to other participants–I don’t know.

Most unfortunately, however, the proposed change leaves most of question 3 unanswered. It expressly says “MLSs may require participants who will use such data feeds to pay the reasonably estimated costs incurred by the MLS in adding or enhancing its downloading capacity for this purpose.” But this does not account for enforcement costs. MLSs that want to ensure the data feeds provided under this policy are being used in a way consistent with MLS rules will need to expend resources to do so; can they charge the brokers receiving the feed for those resource costs? Can the data feed be transient? We don’t know, but I would presume not, as I mentioned above, because that would make AVMs difficult to use. Can MLS exclude photographic image files from a persistent download? Some MLSs are considering this as part of their copyright protection strategy–making photo image file requests for IDX, VOW, and syndication all go through MLS’s photo servers. What about a license agreement? Can MLS impose a license agreement of the kind it is allowed to impose under the VOW and IDX policies? Does the silence of this policy on that question, taken together with the express grant of the right to have such agreements in the VOW and IDX policies, mean that MLSs cannot impose license agreements? What about other policies? How much of the VOW policy can MLSs impose on participants’ use here? Can MLSs impose requirements on brokers that do NOT appear in the VOW policies? If so, under what circumstances, and to what ends?

Concluding thoughts

Over the years, our law firm has benefitted from NAR’s hectic/chaotic policy-making. MLSs call us to help them navigate the resulting environment, and we get paid for that. But I’d much prefer a policy that’s easy for MLSs to adhere to and implement. The proposed modification falls short on a number of grounds. In my next post, the last of this series, I’ll suggest some alternatives.

What do you think? (BTW: I welcome the private communications I’ve had with some of you about this issue. But if you have the courage to post in the comments, that would be even better!)

-Brian

P.S. See previous posts in this series for disclosures and disclaimers….