If ever there were a public relations success story, RealtyTrac is it.
The Irvine-based firm's monthly news releases, chock-full of state-by-state foreclosure counts, are devoured by a national media ravenous for data on what many consider a developing crisis.
Since RealtyTrac began putting out the news releases in 2005, the number of unique visitors to its Web site has tripled to 3 million a month, said Rick Sharga, RealtyTrac's vice president of marketing. That's hugely important for the company because selling foreclosure listings through its Web site is how RealtyTrac makes money.
But questions are being raised about whether the firm's oft-cited numbers overstate the real dimensions of the foreclosure problem. And that could create a problem for the company's credibility.
For example, last year, RealtyTrac's data showed Colorado had the nation's highest foreclosure rate. That didn't sit well with state officials, who decided to do their own count of foreclosures and came up with a figure much smaller than RealtyTrac's.
Then, in July, RealtyTrac reported 12,602 foreclosure actions in Georgia, giving the state the nation's second-highest foreclosure rate. When the Atlanta Journal-Constitution looked into the numbers, the newspaper found that RealtyTrac had counted more than 2,000 properties twice and sometimes more.
RealtyTrac acknowledges it isn't perfect but says its data offers comprehensiveness and context that other providers don't.
Why the discrepancies?
The main reason is that RealtyTrac counts every step in the foreclosure process. So if a home goes into default on its mortgage, is scheduled for auction and then repossessed by a bank, RealtyTrac counts that home three times.
RealtyTrac counted 54,747 "foreclosure actions" in Colorado last year.
That number wasn't useful because it didn't reflect how many homeowners were actually in danger of losing their homes, said Ryan McMaken, spokesman for the Colorado Division of Housing. "We couldn't really use those numbers for having serious discussions," he said.
So McMaken put an intern to work calling all of the state's 64 counties to get a count of how many homes entered the foreclosure process last year. The number he came up with: 28,435.
This summer, partly in response to criticism, RealtyTrac began sorting its numbers to compile a separate count of properties in foreclosure, in addition to total foreclosure actions. RealtyTrac's "unique property" count, published quarterly, found 19,411 properties in foreclosure in Colorado in the first half of this year. That's within a few dozen of the 19,460 counted by McMaken.
"I think they're getting a lot closer now," McMaken said, adding that "we might not have to collect our own numbers" anymore.
In the Georgia situation, RealtyTrac admitted it erred. It revised its July count for the state to 8,461 foreclosure actions, down from its initial count of 12,602.
"The reporting error resulted from a combination of overlapping data coverage in some areas of Georgia and an anomaly in the formatting of some of the foreclosure records in those overlapping areas," the company said.
RealtyTrac could probably mute much of the criticism of its data if it simply published its unique properties count every month in addition to its total filings count. That's something the company is considering doing next year, Sharga said.
But Sharga argues that there's value in looking at data on all the steps of the foreclosure process, too. For example, in California, less than 20 percent of homes that enter foreclosure go all the way through the process to be repossessed by a bank, while in the Detroit area, it's more like 30 percent or 40 percent, he said.
"If you know what you're looking for, there's very important contextual information if you look at the stages in filings," he said.
Does it matter how the data are counted?
Jack Kyser, chief economist with the Los Angeles County Economic Development Corp., argues that it does.
Figures that overstate problems in the housing market "become sort of a self-fulfilling prophecy in that people are afraid to go out and look for a home," Kyser said.
Moreover, inflated data on foreclosures could prompt politicians to push through ill-considered mortgage reforms.
"You do something that's good, but it's the law of unintended consequences," Kyser said.
Kyser said he's aware of the questions surrounding RealtyTrac's data and won't use it.
"If I want information I can rely on, I'll go to First American or DataQuick," he said.
First American and DataQuick are both respected providers of real estate information, but neither publicizes data on foreclosures with the monthly frequency and national scope of RealtyTrac's releases.
Randy Green, a former director of data acquisition at RealtyTrac who is now with competitor ForeclosureTrackers.com, said RealtyTrac doesn't have the same data-handling standards as First American or DataQuick, which have been in business longer. RealtyTrac was formed in 1996.
Other factors that could cause RealtyTrac's counts to be higher than others: The company doesn't filter out duplicate filings if two or more loans on the same property go into default, and its monthly reports are based on the date that foreclosure actions enter its database, rather than the recording dates, Sharga said.
"We're not perfect; we don't claim to be," Sharga said. "When we do find a mistake, we fix it … and try not to replicate that."
Having made its name partly through its news releases, RealtyTrac is well aware of the importance of being a credible data provider, Sharga said.
"We recognize there's a responsibility with this stuff," he said. "We do everything we can to treat it with integrity."