While NAR fights legal challenges to procompetitive, proconsumer local broker marketplaces, you can educate your community.

In the litigation landscape that the National Association of REALTORS® is facing today, much of what NAR is fighting is misinformation, mischaracterization and lack of understanding or education. There are class-action attorneys and other challengers who have a blatant disregard or lack of appreciation for the value REALTORS® bring consumers and how local MLS broker marketplaces serve the best interests of American home buyers and sellers.

Litigation is a long, complex process that will not be resolved for years, and NAR takes each case and legal development seriously. NAR leadership is taking proactive measures to ensure consumers continue to benefit from the access and opportunities they have today and that real estate professionals continue to be equipped and positioned to serve the best interests of those consumers. On the front, NAR has legal teams actively engaged to defend pro-consumer and pro-competitive practices in local broker marketplaces.

We want you to understand major developments, what we’re doing to address them and how you can help.

Several Cases Remain Unresolved

Let’s start with the Department of Justice.

In a clear victory for NAR in January, a district court ruled that the DOJ must adhere to its previous agreement with NAR to more explicitly state the spirit and intent of NAR’s Code of Ethics and MLS guidelines in certain key areas. In fact, NAR has already adopted clarifications to its guidance for local MLS broker marketplaces to strengthen transparency for consumers.

Though the DOJ recently appealed the decision, NAR remains confident that it will ultimately prevail, saying the association has upheld its end of the agreement and simply expects the DOJ to do the same.

Next, let’s discuss seller class-action lawsuits.

Four years ago, class-action attorneys brought lawsuits against NAR and four corporate defendants in Missouri and Illinois, alleging home sellers have been damaged because their listing broker compensates the buyer’s representative. The lawsuits also suggest that real estate professionals are being paid too much as a result.

While the Illinois case is in earlier stages, the Missouri case is set to go to trial this fall. NAR’s attorneys will make it imminently clear that the association has the law and facts on its side.

Lastly, let’s look at challenges to the Clear Cooperation Policy.

Two lawsuits stem from private listing networks wanting REALTORS® to bypass local broker marketplaces and market properties to consumers only within these private networks. The plaintiffs’ original complaints were dismissed; a federal judge agreed with NAR that the Clear Cooperation Policy provides consumers with “access to more information regarding market conditions, enabling them to make better informed choices about the bundle of real estate brokerage services that will best serve their needs.” 

However, due to appeals, the cases are still ongoing. Regardless, NAR is prepared to present its position at trial, if needed, and prove that the rule promotes competition and ensures transparent, equitable access to real estate listings for the benefit of consumers.

Help NAR Educate the Public

NAR continues to anticipate and prepare for these various legal milestones via ongoing positive, proactive storytelling moments in the media and other places to spread the word about the pro-consumer and pro-competitive nature of local broker marketplaces and REALTORS®’ reputation as trusted, valued experts. NAR also continues to equip state and local associations with toolkits and other content to help them motivate members and educate consumers.

This is where you come in: NAR needs your help to educate consumers about how local MLS broker marketplaces work and promote equity, transparency and market-driven pricing options for consumers as well as the incredible value you provide. That’s why NAR has developed the website competition.realtor. This site is a place to send people who have questions, and it’s a resource for you to pull things you need to be ambassadors with clients and others in your community. The site hosts fact sheets, FAQs, articles, infographics and other information you can use that:

• Illustrate how REALTORS® are consumer champions.
• Describe how local MLS broker marketplaces create highly competitive markets that promote equity, greater access, more choices and greater pricing options when it comes to real estate services.
• Provide soundbite updates on NAR policy changes and legal matters.

In addition, NAR has created a simple consumer website at realestatecommissionfacts.com(link is external) to aid consumers’ understanding of broker services and how real estate professionals are compensated.

At the end of the day, we all know that REALTORS® are consumers’ advocates. We all know that REALTORS® lead as entrepreneurs, small business owners, experts and philanthropists to protect consumers, build generational wealth and contribute to local and national economies. And we also know local MLS broker marketplaces create the largest, most efficient and convenient markets that ensure equity, transparency and market-driven pricing for home buyers and sellers.​​​​​

It is imperative that right now, REALTORS® do all they can to communicate that reality every day in all the conversations they have and channels at their disposal. While NAR’s legal team is helping the association win in a court of law, the association asks members to play their part to help win in the court of public opinion.

National Association of REALTORS®
Reprinted with permission

Your expertise and experience make all the difference.

A home sale is rarely as smooth as the open road. More often it’s a rocky, winding journey that requires detours, pit stops, and flexibility. Your expertise and experience make all the difference. Through this year’s Riding with the Brand tour, we’ve met thousands of you, our industry’s finest professionals who are committed to putting clients first. Yet, even as we celebrate our REALTOR® brand, we are in a legal battle against detractors who either don’t understand or don’t appreciate the value of REALTORS® and local broker marketplaces. The facts are on our side. We will prevail. But we need all hands on deck. At competition.realtor, you’ll find resources that spell out what we do, the economics of a home purchase, and the value of local broker marketplaces. Share these resources to give the public a true understanding of how REALTORS® pave the way. Thank you for all that you do! Thank you for Riding with the Brand.

National Association of REALTORS®
Reprinted with permission

Federal Housing Commissioner Julia Gordon discusses policy changes and initiatives to expand access to financing for underserved home buyers at a time of low affordability.

For many first-time and low- and moderate-income home buyers, a loan insured by the Federal Housing Administration is the best product to finance a home purchase. The 3.5% down payment requirement makes FHA-insured loans an important financial tool, particularly at a time of low home affordability, helping more buyers achieve home ownership. Yet many sellers and their agents may decide not to accept offers from FHA buyers based on pervasive myths about such financing, and that can have the effect of creating another barrier to home ownership for underserved consumers.

Federal Housing Commissioner Julia Gordon is on a campaign to dispel misperceptions about FHA loans, such as the belief that they have unreasonable property condition requirements. At the REALTORS® Legislative Meetings in May, Gordon implored real estate professionals to get educated on FHA financing so they can accurately explain their benefits to clients.

Gordon recently sat down with REALTOR® Magazine to discuss how FHA is broadening access to home ownership, not only through its traditional loan products but also by enhancing its property rehab programs and expanding housing counseling resources.

Q: High home prices and mortgage rates, as well as low housing inventory, are sidelining many buyers. What steps is FHA taking to expand mortgage access and make its loans more competitive with conventional financing?

A: The FHA’s role is to serve borrowers who are not served by the conventional market. Home ownership is very expensive right now. So, we’re looking at what areas we can lean into that offer promise for lower-income families. One of the most exciting policy changes at FHA is being able to factor in positive rental payment history in the underwriting and eligibility process. We serve a lot of people who don’t come with a robust credit history. Looking at rental history can help get more households into home ownership.

We’re also concerned about inventory on both the home ownership and rental side. While exclusionary zoning is one of the most important issues we’re facing in this industry, it currently appears more possible to rezone for accessory dwelling units than larger multifamily buildings. People who have a home that has an ADU can build wealth by renting it out, and ADUs also have the benefit of creating more affordable units. That’s especially important in places where teachers or first responders otherwise can’t afford to live. We hope soon to release a policy that enables existing or potential income from an ADU to count toward income requirements for underwriting purposes.

We’re taking a similar look at manufactured homes and factory-built homes. The cost of production is lower for these homes, and they tend to be more affordable. Modern technology also is enabling them to be almost indistinguishable from site-built homes. We want to make sure we have financing products available to support them.

Earlier this year, the FHA reduced its mortgage insurance premiums, which is estimated to help borrowers save $800 annually. It was a move that NAR strongly supported. Could there be any future reductions?

When I came into this position in May 2022, it was quite clear that the FHA had a significant financial cushion. We didn’t have to keep stacking up funds for a rainy day. By reducing the pricing to better match our risk, we could reduce costs and make it easier for people to qualify for a loan or pay monthly bills.

Now that we’ve made that change, we plan to wait and see how we’re doing. Volumes are lower right now, and that could persist for some time. Also, we’re seeing the lowest inventory levels ever in our time. So, let’s see how this reduction plays out. Let’s see how borrowers perform. Let’s see what happens with rates. But one thing we’ve done is create a template for how we look at our premium levels and whether they need to be adjusted in the future.

The FHA’s 203(k) program enables buyers and homeowners to add renovation costs to their mortgages. Can you explain how this loan program helps revitalize existing housing stock?

The average age of our housing stock is reaching 50 years old. If we’re not replacing the boiler, the HVAC system and fixing the roof routinely, that house is going to go offline. We really need to be focusing on the aging of homes much more than we are. We are working with the National Association of REALTORS® to try to distribute more information about the 203(k) program. At the same time, we’re looking to see how we can improve that product. For all of FHA’s products, it’s important to realize that both the loan limits and product features can get out of date, and they need to be revisited regularly if they are not indexed in some way.

The FHA also recently increased its price threshold for large multifamily loans, which could foster greater development and ease the inventory shortage. Can you talk about the significance of this change?

Increasing the threshold enables us to improve efficiency and reduce costs for multifamily sector at a time when we need more affordable rental homes. We know that a lot of luxury rental homes have been built. But in affordable housing, we continue to face a shortage. For the lowest-income households, the shortage is dire. We need to continue to push on the supply in the affordable multifamily space, where so much of our FHA business is. This change seemed like a great way to make sure we were keeping pace with the economic environment.

More supply, ultimately, is good for everybody. But we also need to build it in a way that the economics work out and to preserve affordability for existing buildings. So, we need to repair, maintain and update buildings to make them more energy-efficient and climate resilient.

You said at the REALTORS® Legislative Meetings that real estate professionals and the FHA need each other. Can you expand on that?

We want to make sure that practitioners understand FHA mortgages are good loans. The fallout rate is no different than that of a conventional mortgage. FHA borrowers are well-qualified borrowers who perform well over time. And we hope you will join us in dispelling some myths that have arisen about FHA mortgages. There’s a lot of outdated information, like what the minimum property requirements are. It’s really important to be current on what is actually required because it may not be as big of a deal as you think.

Real estate professionals are on the front lines. When people start thinking about buying a home for the first time, they’re depending on their agent as a gatekeeper. So, it’s important that we work together and that we continue to push out information that’s easy to understand. Through our Office of Housing Counseling(link is external), we’ve rolled out a new public campaign called “Let’s Make Home the Goal(link is external)” to raise awareness about the value of housing counseling. It’s aimed at reaching underserved home-ready individuals and families. We’re focused on delivering culturally and linguistically appropriate information for communities that often have been left out of home ownership. We believe that both pre-purchase and post-purchase housing counseling is a critical tool, especially for first-time buyers. It’s an opportunity for home buyers to learn about the process from a disinterested party and make sure they’re getting into the right loan at the right place.

With a fragile economy—high inflation, uncertainty in the banking sector and an uptick in foreclosures—some people fear a major slowdown in the housing market. How are you preparing for any potential disruption?

We’re here to fill a particular gap in the market, regardless of what the total volume picture looks like. Yes, the slowdown is already here. FHA is experiencing the same volume decreases that the rest of the market is experiencing. But we’re continuing to serve the type of borrowers that we want to be serving. And we stand ready to act as a counter cyclical force, as we have time and again, when economic conditions threatened to constrain liquidity in the mortgage market.

When you run into any kind of economic headwinds, you also want to make sure the people who already have a house can keep that house. Our rate of serious delinquency continues to remain somewhat elevated from pre-pandemic levels. But we have done an enormous amount of work to create better home retention options, like a monthly payment reduction, for servicers to offer borrowers when they are delinquent or need help. There will be some people who will face a hardship that they can’t overcome. But those families should be able to be served through a short sale or a deed in lieu rather than going through foreclosure. Foreclosure is just a loss for everybody.

What are the FHA’s priorities over the next year?  

We are at that time in the trajectory of the Biden administration where we have very long to-do lists. We’re very focused on pushing many priorities forward over the next year, like the 203(k) and FHA Title I program revisions, continued expansion and modernization of manufactured housing, and enhancing our ability to provide home buyers with access to quality FHA-insured mortgages. We also will continue to focus on loss mitigation and home retention solutions so that buyers who use an FHA-insured mortgage are able to maintain home ownership over the long term.

It’s tempting in this position to not take any risks—to have this job and just keep things running smoothly and not address crises. But I think that’s why it’s so important that President Biden chose to put someone in this position who comes from a background of advocacy on behalf of consumers. I did not come here with the intention of surviving a few years and then leaving.

Is homeownership still a critical piece of the American Dream? Do you believe that it is achievable for most Americans?

Home ownership is still the asset class that most effectively helps families change their economic circumstances. It’s the only sophisticated financial product available to a lower-income family where they can use the power of leverage. A mortgage is an instrument that allows households to access an interest rate that is good relative to other financial products and where they can own an asset that serves as their home. It creates stability for families. Home ownership is also associated with other positive outcomes, whether it’s health, education or public safety. Even as we’re at a point now where I think home ownership is as expensive as it has ever been relative to incomes, the drive is still there. This is what people aspire to have.

National Association of REALTORS®
Reprinted with permission

We cannot not let this crisis go to waste.

Brokers and agents around the country felt the effects of an August cyberattack that took down 23 MLSs around the country. Two weeks after the attack, some markets are beginning to come back online, while others continue to experience severe loss of capabilities. Associations are manually recreating critical functions. MLSs are battling uphill to find new ways to update and advertise listings. 

After the National Association of REALTORS®’s Leadership Summit Aug. 13–15, I was talking with some MLS folks about how we were seeing MLSs using Google Sheets and associations using Excel to track membership and listing information: creative and practical. But we were dumbfounded that their systems had put them in this state.

This is a crisis the real estate industry must take to heart. Whether you’re a broker, agent or appraiser with a leadership role, an association executive or an MLS director, you have every right to be exasperated, and accountability will come in time. But the priority for now is action. 

First, we need to acknowledge the gravity of the situation. Some cities’ primary housing marketplaces ceased to operate for a time and continue to struggle on the fringes. Though the breakdown was technical in nature, this is a business-planning problem. Every leader in this industry has been delivered a mandate to immediately ask difficult existential questions about their organization’s functional defensibility.

Ask and Answer the Right Questions

As item number one, strategic planning must restart with this crisis. 

Identifying the key functions of an MLS or association, securing them, and ensuring alternative solutions are available will be critical for creating stable, functioning real estate marketplaces.

MLS services have taken a harder hit than association services, so MLSs are the primary focus here, but the core questions are the same for both.

Primary strategic planning questions:

• Which of our services are essential for the marketplace to function?
• What threats could stop the tools enabling those services from functioning?
• How are we mitigating those threats?
• What tools will we leverage to restart those services if our primary tools fail?

While they navigated this crisis, affected MLSs have focused on critical functions and their corresponding tools:

• Listing creation: forms systems (static and dynamic)
• Listing submission: add/edit listing modules
• Listing storage: back-end database management system
• Listing search and display: front-end user interface
• Listing publication: API service portal syndication, participant data feeds

MLSs provide much more, but these are table stakes. A plan going forward requires an analysis of what’s required to keep each of these services viable.

Assess Security, Plan for Disaster Recovery, Seek Technology Opportunities

Information security preparation is a critical first step. Hire an expert and do an audit. Don’t let perfect be the enemy of good. Your organization will always have vulnerabilities, and just fixing the ones that you can identify swiftly will take time. 

Another cyberattack like this will happen. Other MLSs have been hacked in the recent past, and you just haven’t heard about the attacks because the affected parties worked through the problems quietly. Reducing the frequency and severity is the goal. Even the FBI’s website goes down due to attacks at times. But the bureau is prepared for the situation and has plans for recovering from it. The acknowledgement that all risks cannot be avoided makes it easier to put together a reasonable plan.

An information security consultation can identify threats to your physical equipment and office policies and practices. It can also provide data-breach planning and third-party analysis of your vendors’ information security capabilities.

Having already found your critical services, what downstream services do they affect? Which reports, data shares, APIs, membership systems and statistics applications are fed by your internal data? By mapping out the connections between your information and your internal and external services, you’ll see the potential failure points between services. 

You don’t need a consultant in place to start working. The search can start while initiating internal work. Document your answers to the previous questions. Draw your services map on a whiteboard. Take relevant tips from security toolkits, checklists and webinars. Once you’ve engaged experts, they can help with disaster-recovery plans while offering a clear picture of data inputs, management and outputs.

Many of the most difficult changes will not be technical. They will be policies, behaviors, contracts, licenses, and the inertia of a fast-moving 24/7 industry. For example, most MLSs don’t have their business rules for inputting listings documented. They may not have their local field mappings to RESO standards documented internally. Take advantage of this moment in time to start implementing changes to your organization’s daily practices that might be uncomfortable but are necessary.

While you’re pursuing an audit to identify security vulnerabilities, be sure to also assess weaknesses in your technology capabilities. This crisis made it clear how past technology choices allowed some MLSs to quickly pivot to new tools faster than others.

Some staff and board members may be uncomfortable with technology-systems topics, but everyone in leadership has a responsibility to be able to address them. The Real Estate Standards Organization’s RED-B course(link is external) is one way to start getting staff and leadership on the same knowledge plane.

Analyzing Opportunities Through Positive Developments

There are some shining examples of preparation, creativity and tenacity coming out of this crisis. As the face of organized real estate, MLS and association staff have difficult jobs. This crisis made some of them the direct focus of customers’ frustrations. And we’ve seen so many perform marvelously under this pressure–kudos to them.

MLSs not themselves affected by the attack have stepped up to help. CRMLS, OneKey MLS and Realcomp are just some of the organizations that offered access to their systems for brokers and agents shut out of their local services. Realtors Property Resource®, which has data partnerships with 97% of MLSs nationwide, stepped up as an alternate source for brokers and agents to access listing data and business tools. The organizational workarounds and recovery efforts will be a case study for the industry when this current crisis ends.

Analyzing Opportunities by Looking Back

One way to think about the timeless business weakness exposed by the crisis is to step back in time. 

Consider an MLS from 40 years ago that runs on paper. 

The paper MLS takes in listings. It stores listings. It distributes listings for consumption by brokers, agents, consumers, and printed media partners.

The MLS has an inbox where brokers submit new listings. It requires listing submission on its own unique input form. The listings manager processes the listing, makes two copies, punches three holes in one for the active office binder and files the other in the basement cabinet. The details of the listing are transcribed on different forms for newspaper open house submissions and for the listing catalog to be printed.

Then the Golden Bus Scenario happens (the listing manager is picked up by it or run over by it). No one else has been trained to do the job, and the job search will take untold days. Listings don’t get filed. Open houses don’t get published. Agents don’t get their listing books. 

We would never allow this singular failure point to exist in our staff. But we do with our technology choices.

Now zoom out to a situation with multiple MLSs: The first one could hire another listing manager, but say the other MLS has a different listing input form with different field names for the same things. The intake process is different. The recording process is different. The point people are different. These differences require custom training and backup staffing, while the differentiation isn’t producing added value. 

If every paper MLS used the same standard forms for inputs and outputs, there would be listing managers available at a moment’s notice. But we become mired in differences because local customers know the forms and current staff know the process. So, the business inefficiencies and weak points in the system can continue.

It’s the same situation MLS leaders face today. It’s clear that they need backup technology systems that are trained to operate in their unique environment and ready at a moment’s notice if current systems fail. But at what cost in dollars or disruption? The answer we’ve seen this month is that systems compliant with a standard are already mostly trained and greatly minimize the disruption.

Analyzing Opportunities in Crisis Transitions

Timing is everything: During a crisis, making changes to business practices is no longer an unwanted disruption, but a pain killer for the suffering our customers are experiencing.

When this current situation arose, there were technology vendors immediately ready to pick up standardized data and deliver it to the apps and websites that agents and brokers needed. And it was the standardization itself that was the difference in speed of recovery.

Modern MLSs might maintain their primary services as non-standard warehouses of proprietary data if they truly believe it’s a benefit to their marketplace and not just the status quo. But they’ll still need their secondary technology tools, and each one will need to translate their custom practices into the format the rest of the world needs. If that’s the choice they make, they need to start training those services for the translations now, not after an attack begins.

In the current crisis, technology vendors scrambled to provide lifeboats for MLSs in a way we haven’t seen before. And what we’re learning in real time will help guide your conversations with vendors in the future.

The San Francisco Association of REALTORS® and BAREIS MLSs were temporarily paralyzed by the attack. Staff worked quickly with their vendors to shift agents to Zenlist’s app for listing input. They created a new place for agents to add, edit and search listings, with a database translated to the RESO standard. 

They then focused on distribution to public sites. In just 24 hours, Zenlist’s RESO standard data feed went live in the Bridge API. Sites like Zillow, Redfin and realtor.com® could take the listings live immediately. This is because these consumer-facing companies are already prepared to ingest and display a standard RESO Data Dictionary–compliant feed, and that’s what Zenlist provided. Their technology systems inherently speak the same standard language.

For the Northwest Indiana REALTOR® Association, it was another agile technology vendor coming to the rescue. Without the ability to update listings in the main MLS system, they turned to MLS Grid, which manages outbound data feeds for brokers and their customers. In two days, MLS Grid built a simple listing editor that MLS staff could use to search and update listing prices, statuses and closing information for their brokers. 

Because MLS Grid manages both the nonstandard listing feed coming from the software platform used by the Northwest Indiana MLS and the RESO-translated feed that MLS Grid provides to downstream customers, the connections between all these systems could be maintained while the changes to the listings were being made through the intermediary.

It’s worth mentioning the big picture here. Virtually everyone downstream of the MLS wants these data feeds to be standards compliant. Brokers, website vendors, CMA apps—they can all speak RESO already. They can learn custom languages for each MLS if they need to, but it’s our choice as to whether we put them through that wringer.

Going back to the technology wins, we sometimes forget that appraisers are important customers of the MLS as well. RPR was immediately working to ensure this critical part of a sales transaction could continue to function. 

Seven MLSs are now using RPR accounts so appraisers can get critical listing information and complete appraisals for their clients. NAR’s strong ties in D.C. are leading the conversation with Fannie Mae and Freddie Mac to ensure appraisers nationwide can receive underwriting approval by using this data.

For brokers needing to get their listings on their own websites, NorthstarMLS took a unique approach, using software it had previously built in-house to power feeds to eXp Realty’s websites. This secondary service proved tremendously valuable.

Real Estate Webmasters, a vendor for Northstar and brokers, is also providing an MLS backup service to improve redundancy. And it’s not just another database in the cloud somewhere. It can provide listing add/edit and syndication/distribution functions like those described in the Zenlist scenario—which brings us to how we think about functions in the MLS.

Analyzing Opportunities for Function of Choice in MLSs

An MLS provides services. It hires a vendor to supply tools that support those services. Those tools offer functions to make the business work.

There will be plenty of reasonable calls for MLSs to have secondary database backups following this crisis. And they’ll be partially right. But even data backups can be hacked(link is external). The issue is bigger—MLSs need backups of functions, too.

A system that stores data is needed, as are MLS critical functions like add/edit, search, display and distribution. But does the MLS have backup tools identified and trained to replace the primary tools if they do not support any of these functions? That’s what MLSs needed during this crisis: tools that replace functionality like add/edit and API distribution of data feeds.

They don’t all have to come from the same vendor. But all these functions must work for the MLS to function. If one function fails, can each tool integrate with whatever backup tool is put in place?

Though the industry has long touted “Front End of Choice” as a goal, that focus has been on marginal improvement in user experience and ease of converting customers. Ensuring an MLS has “Function of Choice” in place, ready to restore the MLS’s core functions in an emergency, is a mandate of a higher priority.

Analyzing Opportunities From 30,000 Feet

Looking broadly at the MLS industry, we’re again reminded that MLSs don’t exist in isolation. 

Consumers didn’t care that an MLS’s software system was down. They cared that listings and open houses weren’t showing on national websites and apps. The fact that the most basic information about real estate listings disappeared for a while from major markets is a reminder that fragmentation is still a serious weakness for the MLS industry. When a bank’s ATMs go down, we don’t sit around waiting for the bank’s ATM vendor to fix it. We go to another bank’s ATM.

That the industry can’t agree to have every MLS publish a short, standard set of fields for every listing to a ubiquitous, simple system replicated across the world—guaranteeing every professional and consumer access to mission-critical information about housing—is another reminder that insularity keeps these valuable institutions from delivering their full value.

Every listing. Every MLS. 20 fields. Independently updated. Universally available. Simple and defensible. Accessible by every consumer technology tool.

This brings us back to where we started: the idea of a defensible light MLS network. It looks like a Google Sheet. For the MLS industry, it means securing an alternative solution for its most basic and necessary functions. The MLS is so much more than listing data, of course. But this shared resource would be a lifeline to those in distress and a resilient central nervous system for an industry that would benefit from showing its collective value by leveraging it for the good of consumers. 

There’s work to be done. Start locally, but always keep in mind the global nature of the consumer of real estate services and information. Seize this opportunity.

National Association of REALTORS®
Reprinted with permission

We have a lot of work ahead of us. And we are up for that challenge. Because That’s Who We R.

Stepping into my role as president of the National Association of REALTORS® early was unexpected; I’ve done so with the understanding that we have work to do to make NAR a welcoming experience for members and staff. It’s a time of transformation and possibility. At our Leadership Summit this year, I shared a book that inspires me as a broker-owner and leader. Extreme Ownership, by two retired U.S. Navy SEAL officers, applies lessons of SEAL team training to business. Of utmost importance is that the leader must own the outcome. I stand ready to do just that. Clarity of purpose is also essential. Our association’s purpose—to empower you in your work—is the touchstone for all of our activities, from advocacy in Washington to initiatives that help you bring positive change to your community. One such initiative, the Good Neighbor Awards, is now in its 24th year. The honorees devote extraordinary time and talent to help and “ignite” others. They practice extreme ownership, and they’re great examples to follow.

We have a lot of work ahead of us. And we are up for that challenge. Because That’s Who We R.

National Association of REALTORS®
Reprinted with permission

Work has been underway on multiple fronts to quash bias in the appraisal process. If you see an issue, you can speak up, too.

Lee Davenport became a real estate professional in 2008. Since then, she says, not a year has gone by when racial bias in an appraisal wasn’t suspected by one of her clients or one of the agents she coaches.

Multiple news stories have examined potential bias in appraisals, reporting cases in which Black homeowners’ valuation came in low, only to increase in a second appraisal after all personally identifiable photos and cultural items were removed.

In September 2021, a Freddie Mac report found that appraisal values are more likely to fall below the contracted sales price in Black and Latino neighborhoods than in predominantly White areas. An evaluation of 12 million appraisals found that 12.5% of properties in Black census tracts and 15.4% in predominantly Latino areas received appraisal values lower than the contract price, compared to 7.4% for those in White neighborhoods.

Then, in December 2021, the Federal Housing Finance Agency released a report(link is external), after examining millions of agency property valuations, that found thousands of potential bias cases related to neighborhood descriptions written by appraisers. The report cited examples where appraisers referenced the neighborhood’s racial makeup or the percentage of the local population who were immigrants. In February 2022, Congresswoman Maxine Waters (D-Calif.), chair of the House Financial Services Committee, sent a letter to the Department of Housing and Urban Development, the Appraisal Subcommittee, the Appraisal Foundation(link is external), and the Appraisal Institute calling for an investigation. Meanwhile, HUD Secretary Marcia Fudge chairs the Interagency Task Force on Property Appraisal and Valuation Equity (PAVE), created in June 2021 to address discrimination in the appraisal and homebuying process.

Industry Response

The Appraisal Foundation, which sets congressionally authorized standards and qualifications for real estate appraisers, has included a segment on fair housing laws and bias in its required seven-hour continuing education USPAP course. And the Appraisal Institute recently added a five-hour seminar focused on addressing unconscious bias, updated its code of ethics, and created a practice guide affirming that appraisers should ignore ethnographic and other personal characteristic in property appraisals.

“We’re trying to create a more equitable housing environment in the country … and ensure unconscious bias doesn’t play a role in appraisals,” says Jody Bishop, 2022 president of the Appraisal Institute and senior managing partner of Valbridge Property Advisors in Mount Pleasant, S.C.

One way to combat bias is to foster diversity in the industry, says Corey Hammonds, founder and CEO of The Hammonds Group in Nashville, Tenn. In 2016, Hammonds became the youngest African American certified general appraiser in the state of Tennessee.

“It’s an unintended lack of access. Many don’t know what appraisals are and what they do,” says Hammonds. “The qualifications to become an appraiser are very expensive. And people tend to deal with who they know, and if you’re not well connected, it’s a hard industry to tap into.”

There are 78,000 appraisers in the U.S., of whom 85% identify as White and 77% as male, according to The Appraisal Institute. The institute is partnering with Fannie Mae, Freddie Mac, and the National Urban League (link is external)in an appraiser diversity initiative, reaching out to more diverse candidates and educating them about the appraisal profession.

The National Association of REALTORS® has its own diversity, equity, and inclusion initiative, including a mentoring program known as NAR Spire. NAR also worked with the Biden administration on the PAVE Action Plan, released in March, which provides 21 recommendations for both improving government oversight of the appraisal industry and working with federal agencies and stakeholders to educate consumers on how to recognize and report potential instances of appraisal bias. The action plan also suggests developing procedures to ensure automated valuation models do not incorporate bias in their estimations of value.

… appraisal values are more likely to fall below the contracted sales price in Black and Latino neighborhoods than in predominantly White areas.

—Freddie Mac report, 2021

What Salespeople Can Do

Real estate professionals can play a major role in combating racial bias by identifying red flags and taking recourse on behalf of their clients. Hammonds says agents should equip their buyers and sellers with knowledge about the appraisal process. Often, marginalized borrowers, including those in the Black, Hispanic, and Indigenous communities, have not had models of homeownership. “They might not know they can dispute an appraisal or steps they can take to request a second one,” says Tai Christensen, diversity, equity & inclusion officer at CBC Mortgage Agency, an FHA specialist whose mission is to help erase the racial disparity in real estate.“We lean into homeownership education, and our prospective buyers are taught about appraisals and appraisal bias and what that means.”

Davenport suggests asking lenders about their policies for handling racial bias in appraisals.

In another proactive move, agents can present comparable sales and facts about the house, including a list of recent updates and repairs. “I accept any information that a homeowner or agent gives me. It’s helpful,” Bishop says. “If an appraiser rejects it, that would be a red flag to me.”

If you still believe an appraiser has reached a conclusion that’s inaccurate or biased, the Appraisal Institute’s site outlines steps for reconsideration of value. Beyond that, agents who suspect bias can work with their client to file a report with their state housing authorities or a federal agency like HUD, says LendingTree Senior Economic Analyst Jacob Channel. “The Federal Trade Commission(link is external) provides a good resource for how to spot mortgage discrimination and what those impacted by it can do in response,” he adds.

“I believe overwhelmingly there are more people today committed to listening, learning, and changing,” Bishop says.

National Association of REALTORS®
Reprinted with permission

We do not take challenges lightly—but we cannot let them deter us from our commitment as REALTORS® to work in the best interests of our clients.

The past two years have been filled with uncertainty, from declining home sales and shifting commercial real estate demand to often unpredictable external social, economic, environmental and geopolitical issues. Our association has also faced culture- and litigation-related challenges, as well as unexpected change at the highest levels of our leadership. We do not take any of these challenges lightly—but we cannot let them deter us from our commitment as REALTORS® to work in the best interests of our clients. As real estate professionals, we help our clients navigate the ever-changing real estate landscape during what, for many, is the most significant transaction of their lives. Beyond serving clients, we use our knowledge, problem-solving skills and care to help address critical areas of need in our communities. That’s what the mission of NAR is all about. When we empower our members in the preservation, protection and transfer of real property, we bring positive change for our industry and beyond.

National Association of REALTORS®
Reprinted with permission