Editor’s Note: The following is the cover story in the December issue of RISMedia’s Real Estate magazine.
It’s no secret: The value of the real estate agent is under attack. With a slew of disruptors determined to diminish their role in the real estate transaction, it’s become incumbent upon agents to bolster their value proposition to the consumer with more service, more guidance, more information…whatever it takes to stand apart and make themselves an indispensable advisor in an increasingly competitive and crowded market.
That’s where data comes in. But while consumers seem to have access to all the real estate data they could possibly want these days, there are vast discrepancies in the quality of that data. Every real estate agent out there probably has at least one tale to tell of how an inaccurate home valuation bungled a deal. And that’s exactly what makes HouseCanary a game-changer.
Not only has the San Francisco-based firm redefined the practice of home valuation in terms of accuracy—with a median error of 2.5 percent and declining every month as the company’s algorithms process more data—it is helping real estate professionals set themselves apart with the burgeoning power of predictive analytics, elevating them from average real estate agent to invaluable financial advisor. By leveraging 40 years of U.S. home sales and a billion transactions to predict the direction of virtually every metro, zip code and block in the United States, HouseCanary can provide agents with branded, property-specific reports that depict how their client’s home value has increased, where the value of the home is headed, and which improvements will have the biggest impact on that value. Now, instead of the typical listing presentation, agents can explain—in precise detail—the “why” behind a home’s current and future value.
Co-founded by CEO Jeremy Sicklick and Chief of Research Chris Stroud in 2014 to help investors and lenders make better real estate decisions, HouseCanary created one of the most accurate forecasting models in the industry, then packaged it into easy-to-use software solutions for appraisers, brokers, investors and lenders, including Wall Street investors like Blackstone and the nation’s top three mortgage lenders; $64 million in venture capital funding from the likes of Eric Schmidt, chairman of Google parent Alphabet, former Commerce Secretary Penny Pritzker, and top venture capital firms helped solidify HouseCanary’s status as the real deal.
In 2016, HouseCanary made that same data available to real estate professionals—now, that same information lenders had been using to decide whether or not to extend a loan, could also be accessed by a real estate agent working on the front lines with the consumer. Imagine being able to sit down with clients and walk them through the exact financials of why they should make a particular offer—an offer based on real data and real numbers. Interactions like this cast the real estate agent in a whole new light.
“Innovative lenders and savvy loan originators are leveraging HouseCanary’s data to give their clients confidence in the home purchase decision they’re about to make,” says Joe Dahleen, executive vice president and chief strategy officer at MortgageHippo. “A homebuyer can feel confident with boosting their offer by $20,000 to win seller acceptance because HouseCanary’s accurate data helps them make an educated and informed real estate decision. The company’s in-depth understanding of the current market and three-year future value forecast help today’s buyers win.”
Forward-thinking real estate professionals understand the potential. Quality data based on HouseCanary’s predictive analytics can vault their positioning in the marketplace. “We have a distinct competitive advantage if we are armed with more accurate data and more detailed content,” says Todd Hetherington, CEO of NM Management and CENTURY 21 New Millennium, serving Maryland, Virginia, and the Washington, D.C., area. “HouseCanary can help provide this advantage through its ability to refine and analyze literally thousands of different variables and algorithms—that’s incredibly powerful.”
That’s why many brokers and agents have already gotten on board. “We started working with HouseCanary after meeting with them at the REALTORS® Conference and Legislative Meetings in Washington, D.C., last May,” says Scott MacDonald, president of RE/MAX Gateway in Northern Virginia. “We made the decision because we embrace the idea of predictive analytics and how it relates to the buying and selling of real estate.”
What really sets HouseCanary apart in the world of big data is its unprecedented approach to accuracy. HouseCanary’s platform leverages machine learning models that draw upon the most robust real estate database, and correlates those with mortgage markets, jobs, population shifts and an amazing array of local, block-level data to be able to predict the direction of every metro, zip code and block in the United States, analyzed and visualized in real-time for better, faster decision-making.
“It’s true that data permeates every part of the real estate industry to help agents and brokers support their clients—but not all real estate databases are created equal,” explains Sicklick. “Most agents are familiar with the pitfalls of the housing data available on major real estate portals and would prefer that their clients use home-search options that contain accurate, up-to-date data. HouseCanary has built the most robust—and most accurate—home database in the industry, so agents and brokers can feel confident that the valuation or appraisal generated by our products is pinpoint-accurate.”
“In order to move beyond the pre-canned automated valuation models (AVMs), or even baseline reporting on a home’s past value adjusted for current sales, we need bigger data sets and stronger algorithms to project future value with a high degree of accuracy,” says Dave Garland, a partner with Second Century Ventures and the director of Strategic Investments for the National Association of REALTORS®. “HouseCanary aims to not only capture and curate those data sets, but also works with real estate practitioners to better predict what will happen home by home, block by block, for virtually every home in America.”
A member of the National Association of REALTORS®’ s 2017 REach® technology accelerator program, HouseCanary is representative of the evolution of how residential real estate is appraised, valued, purchased and sold. Using its software solutions, agents can quickly pull up complete and accurate home valuations and analytics and price per square foot for all nearby comparables, as well as three-year price growth for all homes near the listed property. Going well beyond the standard CMA, HouseCanary’s Value Report puts powerful information into agents’ hands, allowing them to truly differentiate themselves from the competition and validate their value to consumers.
HouseCanary has also begun to integrate with leading CRMs, with more to be rolled out shortly, enabling agents to put data to work as an ongoing engagement tool.
“HouseCanary has the ability to analyze properties down the block, which helps with the accuracy of their information,” says MacDonald. “Our agents can see who is opening the Value Reports and can, in turn, reach out to their clients to start a conversation.”
Using predictive analytics, HouseCanary upended the real estate valuation process, benefiting everyone involved in the transaction process. “The real estate process is slow and cumbersome, and that’s even truer for the mortgage loan process,” explains Stroud. “One of the major reasons for delays is collateral valuation or appraisals, which can take as long as six to eight weeks in some high-demand areas, and can cost upwards of $500. By embracing predictive analytics, HouseCanary is addressing the most critical hurdles of collateral valuation and significantly shortening the amount of time it takes to get an accurate appraisal from weeks to days—or even the same day, in some cases—and providing those appraisals for a reduced cost to the consumer. Through predictive analytics, real estate agents and brokers can help their clients reach the closing table faster and keep more money to use toward the home purchase. There’s also a significant benefit to consumers when agents and brokers are familiar with predictive analytics: They can help individual homebuyers understand the risk and reward of their new investment, leading to increased confidence and trust from real estate clients.”
And for real estate consumers, the value of their investment is the most essential piece of information in the decision-making process.
“We as REALTORS® and brokers don’t determine which data is of value—the consumer/client determines which data is of value,” explains Hetherington. “From a seller’s standpoint, they’re only concerned with the market value of their home, days on market and what will appeal to a buyer. From a buyer’s standpoint, they’re concerned more with a broad-based data knowledge for comparing different markets and neighborhoods.”
But the issue to-date has been inaccurate home valuations. HouseCanary is out to change the game in that regard.
“The problem with many AVMs is that they’re using poor-quality data to generate a valuation, which means the margin of error can often be pretty wide—leaving it up to real estate agents to explain to consumers why the AVM number isn’t realistic,” says Sicklick. “HouseCanary also gives real estate professionals—as well as lenders and appraisers—the ability to tweak existing property details and data to more accurately reflect the home as it stands, marrying technology with human understanding and intuition.”
Predictive Analytics Powering Real Estate Agents
As all real estate professionals know, no matter how much data one has, no two homes are alike. An endless number of factors affect a home’s value, from high walkability to being on the right side of the highway to having a wooded backyard. Yet traditional valuation models fail to take these details into account. HouseCanary, however, takes valuation a huge step further by empowering agents with data on how a remodeling project will impact the value of a home. Will adding another bathroom increase my home’s value in two years? Is putting in a pool a bad idea? This is how HouseCanary is further maximizing the power of predictive analytics for real estate professionals.
“Whether the remodel involves adding square footage to the home in question through a new wing or addition, or something simpler like putting a deck on a home, HouseCanary’s predictive analytics can help consumers understand where their current home stands in terms of building size and lot size, and can parse the popularity of different home attributes within the neighborhood,” explains Sicklick. “Homeowners can use that information to make educated decisions about where to spend their upgrade money—and agents and brokers can help shed insight by explaining to sellers or potential move-up clients what they can do to capture top dollar for their homes.”
No matter how predictive analytics is put to use, it is clearly an imperative strategy for success going forward in the real estate business. “While predictive analytics has been around for a while in other industries, we are just starting to see its impact in residential real estate,” says Garland. “With faster processing, improved and expanded data sets, and the application of machine learning techniques, we are quickly moving from data-driven hindsight and insight to foresight. That is the promise of predictive analytics.”
“We look at where buyers come from; we look at their profiles and know where to target our marketing,” says MacDonald. “The more you can arm your agents with information about what happened in the past and what’s coming in the future, the better able they will be to serve their clients. HouseCanary’s predictive analytics allows the agent to stay relevant in their consumers’ eyes by providing them with valuable content.”
“At some point, if you aren’t using predictive tools to engage the customer upstream before they even realize they’re a customer, others will be, and they’re going to be working with the customer before you,” said Key Realty Broker/Owner John Murray during RISMedia’s recent Power Broker Forum at the REALTORS® Conference & Expo in Chicago.
“Used effectively, predictive analytics can be used as a fantastic ice breaker, attention-grabber, and call to action,” agrees Hetherington. “If we have the data and our competition doesn’t, it would be an incredible recruiting and retention tool.”
What’s Next for Big Data
As technology and data continue to develop at an exponential pace, HouseCanary’s trajectory stands to rise quickly—as do the benefits for real estate professionals and the consumers they serve.
“We are very confident that within the next five years, artificial intelligence (AI) and ‘big data’ will enable incredibly accurate automated valuations, leading to at least partial unbundling of the appraisal process,” says Stroud. “This will boost appraisers’ productivity, allowing them to appraise more homes in less time and streamlining the purchase process for consumers.”
For real estate professionals, it’s important to continue to look toward partners who can show them how to work with advancements in data and predictive analytics instead of trying to fight against the tides of change.
“With growing volumes and types of data, the greater the capability to produce valuable insights,” says Garland.” Organizations that capture and maintain these accurate data sets will be in control of a powerful crystal ball.”
Since hitting the market in 2014, HouseCanary has achieved several key milestones during its meteoric rise:
- Named one of the most innovative companies by HousingWire’s Tech 100 for the last two years
- Selected as real estate partner for Google Cloud
- Financed by Hillspire (Alphabet Executive Chairman Eric Schmidt’s family office), PSP Growth/PSP Capital (firm founded by entrepreneur and former Commerce Secretary Penny Pritzker), Alpha Edison, ECA Ventures, Raven Ventures and other top Silicon Valley investors
- RE/MAX Strategic Alliance Partner
- Launched Agile AppraisalTM network of certified, on-demand appraisers using HouseCanary’s nationwide analytics to appraise in as few as five days
- Homes valued: 100 million
- Markets covered by Home Price Indices: 381 metros, nearly 20,000 zip codes, 4 million blocks
For more information, please visit www.housecanary.com.
Maria Patterson is RISMedia’s executive editor. Email her your real estate news ideas at email@example.com.
For the latest real estate news and trends, bookmark RISMedia.com.