Online Real Estate Wars 

Star Wars, Avatar or Robin Hood?

Last year November, the Realtor® Property Resource (RPR) announcement by the National Association of Realtors® (NAR) shook the industry. NAR had just reached an agreement with Lender Processing Services (LPS) and announced their plans on launching the Realtor® Valuation Model (RVM) in hopes that it will become the "gold standard" used by financial in the majority of online valuations.

For a detailed account on Automatic Valuations Models (AVM) and the events that led up to the creation, the structuring, the benefits and the concerns of RPR read the latest edition of the Swanepoel TRENDS Report.

In the Report we also discussed some of the leading contenders; Zillow, Google and First American. Zillow is of course widely known for its popular "Zestimates" and has been using an online automated valuation services since going live in 2006.

It the lesser known of the bunch, Corelogic, that is now drawing attention.

Inside Story

First American is in the process of splitting its Information Solutions Group (CoreLogic) and Financial Services Group into two separate, publicly traded companies. The separation is targeted to close next week on June 1, 2010 and CoreLogic is set to trade under the symbol CLGX.

Just as Corelogic is being spun off from First American Corporation (NYSE:FAF) so LPS was spun off last November from Fidelity National Financial (NYSE: FNF).

So what does that all mean?

Well, last week CoreLogic filed a lawsuit against eight companies, including Zillow and LPS claiming the companies' automated valuation models infringe on their 1994 patent. CoreLogic is seeking an injunction against these companies to prohibit them from using or selling those types of services, both that they claim any products that according to CoreLogic fall within the scope of their patent. Other companies also named in the lawsuit include: Fiserv Inc., Intellireal LLC, Interthinx Inc., Precision Appraisal Services Inc., Real Data Inc. and RealEC Technologies Inc.

FYI, it appears that the first patent for an "automated real estate appraisal system" was granted on Nov. 1, 1994 (U.S. Patent 5,361,201) and was issued to the inventors Allen Jost, Jennifer Nelson, Krishna Gopinathan and Craig Smith. Subsequently those rights were assigned to Transamerica Intellitech Inc., then First American Residential Services and now reside with CoreLogic.

The patent application describes the algorithms and dozens of variables that could be used to generate valuations, and how predictive models could generate estimated property values based on individual property characteristics and neighborhood or area characteristics. Through a trial and error process the model "learns" and thereby improving the results.

So What's Next?

Patent lawsuits are traditionally very difficult to prove and can take many years to resolve. Parties have to demonstrate that a patent is or isn't unique, already in use, overly broad or vague. In this case I am sure there will be a huge debate.

As this whole debate develops, don't think Zillow will stop offering zestimates or that NAR will back off RPR and their dream of creating the "gold standard." No, for now it's business as normal. First a lot of water has to flow under the bridge before either side will anyone will know whether this lawsuit will have a chance of succeeding or not. If it turns out that First American will prevail, a licensing agreement or changes to existing AVM models will most likely occur very quickly.

This recent legal action between major corporations is however worth noting because it underscores the growing online turf war surrounding real estate data. Remember in the most recent edition of the Swanepoel TRENDS Report real estate data was listed as the #1 trend for broker, agents and professionals to watch closely.

Whether it's AVM's, the MLS, IDX, RETS standards, RPR or any one of the many other technology initiatives or acronyms, it's very clear that the battle lines have been drawn.

Why the fuss? Well the winner(s) will most likely dominate the very attractive and lucrative real estate data market for the next few decades.