412 - Unveiling the Truth: The Controversial Role of Data Collectors in Real Estate

You're listening to Crazy Shit in Real Estate. You'll be amazed at all these wild but true situations that others have found themselves in. Because on this show, you'll hear uncensored, unbelievable stories from the world of real estate. I'm Leigh Thomas Brown. Let's dive right in. What are real estate property data collectors? Should you be one? Should you let one into your house? We're going to go over all of that. And friends, this one's a little bit complicated, so you might a pen and paper to write down some of the information, 'cause we're going to start with some acronyms, because I'm going to slide into acronyms, I won't be able to help myself. The first one you have to know is AMC, Appraisal Management Company. These appraisal management companies came into big space around 2009 when the Home Valuation Code of Conduct, also known as the HVCC, passed into law because of the giant mortgage and real estate meltdown in the Great Recession. The theory behind it was that a lot of the houses went into foreclosure and had issues because the appraisals were inflated. And so there was a push to manage the appraisers. And in managing the appraisers, the AMCs came into effect saying, "Oh, we're not going to play favorites. We'll just have a stable of people who can service different zip codes. Then we'll just call people based on the zip code, and we'll put the zip code out, and somebody can raise their hand and take it." So it sounded good on paper, but like most government programs that sound good on paper, the reality can be a lot different. Now, the third acronym I want you to know is AVM. That's an Automated Valuation Model, which is basically like going to a certain website on the internet where you can type in your address and it spits out a number for your house. That kind of rhymes with a estimate of your house. And so if you think about those numbers, if you're a real estate pro, you're pretty irritated by them because you don't like the inaccuracies. And if you're a consumer, you get very confused 'cause you don't know if it's real or not. And so that's when you should call your REALTOR® pro 'cause we can help you. But those are the acronyms at play right now 'cause here's what's happening. Fannie Mae, which is a government-sanctioned entity or a GSE, and Fannie Mae and Freddie Mac, by the way, backstop about 80% of the mortgages in the country. So they have a ton of impact. They also provide a lot of the guidance for our, licensed, certified appraisers who are humans. And in fact, we have about 88,000 certified appraisers in the country, many of which are REALTOR members, which means they are bound by the code of ethics and they are out there doing the best that they can to provide independent valuations to give the consumer some credibility and some belief in their largest financial instrument, AKA their real estate. Okay, so Fannie Mae and Freddie Mac are rolling out a new program looking for data collectors. If you're in real estate, you're getting these emails that say, "Hey, new career path in real estate. You can go be a data collector, and for the princely sum of $50, $60, $75, we'll pay you to walk into a house and check off some information for us. Hey, do an inspection without a license. Hey, check out the structural items without any guidance, and then give the information back to the bank." I want you to know this about these data collectors. The way they've set the program up, y'all, They don't have to be licensed, which means there's not a regulatory body that is going to be able to oversee them and look out for consumer protection. Now, y'all know I'm kind of a small government girl. Well, not kind of, I am a small government girl. I'm not a huge fan of heavy regulation, but regulation has its place. And when you look at professional services, professional services should have some regulatory oversight because we're going into somebody else's house, y'all. That is their sanctuary. That's where their babies lay their heads down on the pillow to go to sleep at night, and they eat supper, and they sit on the couch and relax and watch TV and eat popcorn and act like people do in commercials, where they should have some protection over who's coming in. So these data collectors that are being created aren't under a licensure regulatory body. So that's the first thing you have to know, which answers my third point that I started off with. As a consumer, do you want them in your house? I'm going to just tell you that they might all have great intentions, they might all be honorable people, but I'm a bit of a skeptic in the world. I don't want somebody who doesn't have to answer to somebody in my house. I just don't. I don't trust that they actually have a good reason to be there because I just don't know who they are and what their intelligence and knowledge level is. Now, the way that this is being set up, well, the lenders can do their training. Okay, great. I really don't want a big bank training somebody to go in my house, y'all, because that tells me they're working for somebody else's best interest. I want somebody in my house who's looking out for me. That's the whole reason the consumer calls me as a REALTOR®. They want somebody in there to help them get best information, pros and cons. And when I'm the REALTOR® and my buyer has an appraiser coming in to verify the value, I want that certified appraiser to be able to give my buyer some peace of mind because they can run the numbers on the property and figure out what the numbers look like. A data collector doesn't have that expertise, that training, that knowledge. And also Fannie Mae and Freddie Mac said, hey, they're going to have fair housing training provided by the lender. But again, no structure on this. We don't know what it's going to look like. The whole thing is really nebulous. And what we do in real estate is so big. I mean, we have to get back to an understanding of the sheer volume of this financial investment and what it means to people. This is, for most people, their financial stability. We have to look at this as a really serious topic. And this idea of a data collector going in just doesn't tell me that the GSEs think real estate is as serious an item as it is. Because an independent, unlicensed, unregulated, probably poorly trained data collector going into a house, how am I going to rebut that? Why are they doing this information? Where are they coming from? What's their preset bias? What are they going to come back with, with a number? Is it going to harm my buyer? Could it harm my seller? And as a realtor professional, you have to ask all these questions because this is a really big issue. If you are remotely awake, then you know that we are heading into some really tricky economic times.

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Now, let's talk about the bigger item at play here. Who is going to send the data collector out? Well, a bank will send a data collector out because they're looking to add some more information to the AVM, that automated valuation model. They plug the number into the computer, and the computer spit out a number, they send the data collector in to add some information to that, thereby supplanting the certified appraiser. This is crazy. Why in the world are our institutions trying to get rid of certified appraisers? Because we'll have to put our tinfoil hats on here for a second, y'all. Go ahead and go conspiracy with me for just a minute. Look back at the ownership of all this stuff. You have a data collector who's unlicensed and unregulated, so the only answer to the bank. The bank sent them out to supplement the AVM. The Automated Valuation Model is owned by the AMC. The AMC, the appraisal management company, is owned by the bank. If you go through and add up all of these dots, what's happening is there's too much power getting consolidated into the hands of big banks. And we in real estate have been fighting the big banks who have wanted to be in the realtor business for decades. And we fought them off because there has to be a separation there of you are the person loaning the money, but the realtor has a different obligation. We have a different fiduciary role. We represent the consumer who's borrowing the money. And I want banks to be wonderful partners with us. I want there to be a healthy, robust financial system that allows people to take out a mortgage on a property, but that shouldn't be the same person representing them getting into it, y'all. And when you think about the consolidation of the appraisal power, if it all rests with the banks, that means the numbers could be manipulated. And I know that numbers can be manipulated. I took statistics in college too. That I don't want the banks to be able to lever the values up and down in neighborhoods because that can cause instability in the financial markets and that causes instability in homes. And that could lead people to another financial crisis like we saw after the Great Recession. There are still tons of homeowners who got foreclosed on during that time who are trying to recover their assets now, and they're going to be working longer trying to get it fixed. It's not right. The system that we have is actually very smart, where I, as a realtor who has a buyer client, I take them into a property, I run a market analysis to see if the numbers do make sense. We write the offer, we get the agreement from the seller, and now we have a contract. My buyer gives that to the lender. The lender selects an appraiser. The appraiser then independently of any of us goes out and looks at the property to say, "Yes, this number makes sense," or, "No, this number doesn't make sense." And then we can all discuss amongst ourselves if there is a dispute to the valuation, if it looks correct. We all have roles to play here, and the independence of our roles is what protects the consumer public. And that's actually the job of a REALTOR® who's got a license from our state. My pocket card that I have from the North Carolina Real Estate Commission and the pocket card that I have from the South Carolina Real Estate Commission have granted me the public trust. I have an obligation to not take a shortcut of an unlicensed, unregulated data collector going into a house. I want my people that I represent to have the best possible outcome, which means an independent certified appraiser verifying their numbers. And y'all, even if my clients are paying cash, I generally recommend to them to get a certified appraiser to come in and estimate the value of the property so they have some comfort going into that property. This is my job as a fiduciary because I do serve in that agency capacity. When my clients sign that agency agreement and they say, "Yes, Leigh Thomas Brown, I want you to work for me," I'm going to go to work for them. And that means making sure that I'm advocating for them in every step along the way. If there is a different process where a computer is determining a value backed up by an unlicensed, unregulated rando who's out there making $50 looking at a house and making up their own opinions. I can't advocate against a computer, y'all. I can't advocate with somebody who's out there with no knowledge and no expertise and who's not bound by any code of ethics. This system is very messy, messy, messy right now. So here's my recommendation to you. If you stuck with me this long, that means you care about real estate. If you are a REALTOR®, do not do this data collector stuff. We are still waiting on guidance, but it looks like you could be possibly outside of your scope of expertise operating like this, and that is a violation of the code of ethics. So if you're going to operate, you've got to be super thoughtful and careful. My recommendation though is to do your REALTOR® job and let certified appraisers do certified appraiser jobs. If you are a member of the consumer public and you're buying a house, You have the right to tell your lender that you want a certified appraiser. Ask for one. These are highly trained, skilled individuals. In fact, they're very math nerdy people, and they are going to go out there and give evaluation. Now, they're not perfect. I'm not perfect. No profession is. But a certified appraiser is going to be bound by the guidelines of Fannie Mae and Freddie Mac. They're under the guidelines of the Appraisal Institute. And most importantly, if they're a REALTOR® appraiser, they're under the code of ethics and they're doing the best job that they can. Everything in the world doesn't have to be technology-driven, and everything in the world doesn't all need to be consolidated. There's a reason realtors are small businesses, appraisers are small businesses, and there is a reason that you as the consumer should be able to know enough to ask better questions. So if you have a data collection appointment, my recommendation is to talk to your realtor before you let them in. If you're a realtor, delete these emails. And make sure that you are speaking up about how valuable your appraiser partners are. And if you're an appraiser, you need to start fighting back too, because this does not make sense. Y'all, this is a complicated topic, but this is what REALTORS® have to do. You can't assume somebody else is going to fix it. You can't assume that somebody else is going to fix this. I beg and plead of you, read the emails when you get them, raise your hand, make some phone calls, and speak up. Because realtors matter. Realtor appraisers matter. The system that we have designed with lots of firewalls and protection for the consumer, it matters. And that means good legislation and good regulation matters as well. So it's important for us to speak up and not let government agencies just do as they will. As always, I'm so super thrilled that you joined in for more crazy shit. And if you're a realtor, investor, inspector, lender, or just a regular human being who happens to have an unbelievable story that you need you need to tell the world about, or frankly you just need to one-up the story you just heard, then make sure to DM me on Instagram @leithomasbrown or tweet me @leebrown or frankly any social network where you hang out.

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