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Xceligent Files Antitrust Suit Against Costar, Alleges Years Of Anticompetitive Behavior

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PL1957

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I haven't searched in a while but I don't think I've ever seen a positive comment here about CoStar... I hope there is. In the 1980s I subscribed to their Los Angeles, San Diego and Riverside county "comps" service, which we received by mail and then sorted into binders - not all appraisal firms had these, and even though I was just breaking into commercial at the time I suddenly made several new appraiser-friends who began showing up at my office for the data they weren't paying for themselves. They made the rounds to data-beg and from what I saw never really gained much traction with the banks because they simply couldn't get market data consistently. There were also groups of appraisers that shared subscriptions, each making copies of their comp-set and passing them around to one another. Before CoStar we couldn't make much money in CRE appraisal without full time staff to obtain, verify and format comp sheets, and THEN maintain the binders. By subscribing, I instantly became a legitimate commercial real estate appraiser because I had ALL the data available in my markets.

Since then I've spent hundreds (thousands?) of hours in courthouses all over the country - especially in the South - where CoStar didn't cover, going blind pawing through assessor's cards, and over microfische in a lot of musty libraries. That wasn't enough - I then had to verify the sales and add all the missing information to make it a "comp" while 3:1 would end up in the trash.

I'm paying about $1,000 a month now for the full CoStar subscription, and honestly believe that it's market value. My alternative would be to hire (or share) a researcher with all the necessary overhead including hiring, training, supervising and work-spacing, and then doing it all over again when they quit to become an appraiser or go to a new job.

I know CoStar has issues - much more consistent than most researchers I've worked with, but they aren't perfect. Their service is just providing a VERY good lead that always needs refinement, and they're also a great source of metadata for quick statistical research. A highly competent appraiser active here complains that they even salt their data with errors just so that they'll be able to build a case against people using their data who aren't paying for it. Well, adding one square foot to a lot size or misspelling a grantor's name isn't going to reduce the utility of their lead.

Remember, they just sell information. When a subscriber passes data sourced from CoStar along, even though they've improved it with direct verification, it costs them additional sales. Is that fair? When prices then increase to compensate, how is that fair to me, a loyal subscriber for many years?

So, here's the challenge - before complaining about CoStar imagine you'll staff several offices in major markets around the country, pay for pulling raw data from deeds, process the data through several levels of validation and verification, add information from several other sources, host and maintain the computer platform to distribute the data in a usable format, maintain jobs for a thousand people or so, PROTECT YOUR TURF from people who just don't get it and think that all this "public information" should be shared, and do this for 40 years so that you have a very deep understanding of just about every commercial real estate property in the most meaningful markets.

Personally, I'm thankful. I don't want to pay any more than I do, but I'm thankful...
 
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PL1957

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Certified General Appraiser
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Illinois
I agree with most of the above - CoStar is an invaluable tool for appraisers. I don't think it's possible to function professionally in the markets that I cover without it. That being said, their litigiousness toward any potential competitor (CompStak, Xceligent, etc.) and their abusive pricing practices leave a bad taste in my mouth. I subscribe to them (and have subscribed ever since they entered my markets) because I have to, not because I want to. I would love to see a legit competitor emerge. (As an aside, I feel the same way about ARGUS).

So, here's the challenge - before complaining about CoStar imagine you'll staff several offices in major markets around the country, pay for pulling raw data from deeds, process the data through several levels of validation and verification, add information from several other sources, host and maintain the computer platform to distribute the data in a usable format, maintain jobs for a thousand people or so, PROTECT YOUR TURF from people who just don't get it and think that all this "public information" should be shared, and do this for 40 years so that you have a very deep understanding of just about every commercial real estate property in the most meaningful markets.
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I had to laugh when I read this paragraph. This is from the Washington Post in 2012:

"A long-simmering feud between a global real estate services giant CBRE Group and District-based CoStar is beginning to boil over.

A CBRE executive last month sent out a memo barring brokers from sharing individual transaction information with CoStar, depriving the data firm of a sizable amount of information about commercial real estate transactions.

CoStar founder and chief executive Andrew C. Florance returned fire, saying in an interview that the federal government should examine CBRE for anti-competitive business practices."

Andy Florance thinks brokers should willingly, and without compensation, share confidential transaction data with CoStar, so that CoStar could turn around and sell it back to them and their competitors. He doesn't hesitate to sue when "his" confidential data is shared.
 
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I won't quote the above response, it's understandable that appraisers who are caught in the middle, because Brokers are or would be the biggest abusers of sharing CoStar data without paying fair market value for it, don't appreciate being slaves to the subscription.

However, anyone including an appraiser group would be welcome to hire their own researchers to obtain raw deeds, run them through several validation and verification tests, publish, maintain, and try to sell the information in an environment where customers will illegally share it if they are not sued.

I can easily see CoStar's point that brokers benefit greatly from sharing information, especially when it is passed through an objective standardizing third party. There are costs to that.

It is much more difficult to defend anyone thinking that sharing information illegally, even when enhanced through their own verification process, is ethical and should be allowed. By illegally, I mean outside of CoStar's service agreement, which of course permits publication in appraisal reports and market analysis. Taking raw CoStar - sourced comps and doing some value-added enhancement and verification does not mean that one owns the original intellectual property, and this is the issue with CoStar's competitors - too many have relied on CoStar's sourced data.
 
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Joined
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Certified General Appraiser
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Florida
<SNIP> Andy Florance thinks brokers should willingly, and without compensation, share confidential transaction data with CoStar, so that CoStar could turn around and sell it back to them and their competitors. He doesn't hesitate to sue when "his" confidential data is shared.
The big difference between your observation and mine in this regard is that brokers are not required to share confidential information with CoStar, but if the brokerage signs an agreement not to redistribute CoStar data they are required not to do so. There's nothing objectionable with vendor having service agreements with their customers, but there is a big problem when a customer behaves unethically contrary to the agreement. I don't think CBRE would condone it either.

By the way, C&W did something much the same when I was moved to NY to build the appraisal platform. It happened - not coincidentally - when the contract was up for renewal. As I recall, we were devastated when we got word that we would probably not continue a relationship with CoStar - as appraisers we knew how much our offices relied on CoStar and we were in the middle of building an import from CoStar to our new comp database. We were having our own problems because we were technically asking permission to save THEIR sourced data in our database, which would violate the service agreement. It all worked out, but when the dust settled it was my opinion that all the shooting was more a negotiating tactic than anything else... just my opinion of course.
 

PL1957

Senior Member
Joined
Jul 19, 2004
Professional Status
Certified General Appraiser
State
Illinois
It is much more difficult to defend anyone thinking that sharing information illegally, even when enhanced through their own verification process, is ethical and should be allowed. By illegally, I mean outside of CoStar's service agreement, which of course permits publication in appraisal reports and market analysis. Taking raw CoStar - sourced comps and doing some value-added enhancement and verification does not mean that one owns the original intellectual property, and this is the issue with CoStar's competitors - too many have relied on CoStar's sourced data.
Have you read CoStar's terms of service recently? It makes the most abusive AMC seem like the appraiser's best friend. IIRC, I think they have the right to access all of your files and databases to make sure you're not in violation of their agreement. There's no need for them to be the Darth Vader of the real estate industry, but that's the path they chose.
 

Terrel L. Shields

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May 2, 2002
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Arkansas
I don't think it's possible to function professionally in the markets that I cover without it. That being said, their litigiousness toward any potential competitor (CompStak, Xceligent, etc.) and their abusive pricing practices leave a bad taste in my mouth.
Outside of very large, specialized properties, it is not economic, and local brokers are more candid with me than any info they provide to costar. I let the big boys do big projects, I will stick to mom & pop ops.
 
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