House Hunters

When the housing market started to unravel, RealtyTrac was in the right place at the right time. In 2005 the firm began issuing press releases on foreclosure trends to get media attention. It succeeded, and soon people were calling. Among them: New York banking superintendent Richard Neiman, who chairs the state's foreclosure-prevention task force. "If you're going to motivate legislators to change laws and apportion money, you've got to convince them there's a problem," he says. "You've got to start with the data." Collecting and analyzing data from the state's 62 counties would have been costly, so the task force went to RealtyTrac. New York was hardly alone. "RealtyTrac does the shoe leather," says Israel Klein, deputy staff director for Congress's Joint Economic Committee, which shepherded July's federal housing legislation. "When we want to try to get a picture of what communities are hit hardest, their data is very helpful."

But as more people started using RealtyTrac data to understand the downturn, a backlash took hold, largely because of the company's method of counting the three steps of foreclosure separately; the numbers, critics said, were wildly inflated. One of the protests came from Kathi Williams, director of the Colorado Division of Housing, who in 2007 publicly called RealtyTrac's numbers--which put Colorado near the top of the list of states with foreclosure problems--"ridiculous and irresponsible." "It was devastating Colorado in terms of consumer confidence and mortgage lending into the state," she says. The Mortgage Bankers Association, which releases well-watched loan-default data of its own, came out swinging as well, with the trade group's chief economist complaining that the firm was "damaging the industry."

Eventually, RealtyTrac changed its methodology in favor of counting unique houses--Williams says the new numbers are within 5% of those the state collects internally--but in the long term, the dustup did little to reduce the use of the company's data.

Part of that is due to RealtyTrac's deliberate strategy of giving away information to any government entity that wants it. Those sorts of relationships build credibility, and besides, RealtyTrac's business model isn't selling data; it's selling addresses of foreclosures to real estate agents, investors and home buyers. When J.D. Bondurant, a research analyst at the Virginia Housing Development Authority, was given the job of understanding which parts of the state were being hit hardest by foreclosure, he called First American CoreLogic, a highly regarded data aggregator that covers 3,000 counties in-depth and counts lenders, investors and ratings agencies among its clients. But with databases costing thousands, even tens of thousands of dollars, Bondurant had to go elsewhere. So he turned to RealtyTrac and with its foreclosure data created density maps that determined where the state should hold foreclosure-prevention workshops--down to the neighborhood.