Big data, your home and your mortgage
Big data and real estate are coming together with electronic speed. The house you buy, your mortgage financing, and the broker with whom you buy or sell are increasingly tied together with artificial intelligence (AI), a new technology which is changing the real estate marketplace.Verify your new rate (Feb 19th, 2019)
What is “big data?”
Marketing professionals today have an incredible amount of information — about you — at their disposal. In addition to offline things like your home address, memberships, affiliations, and phone number, they can pull a treasure trove of online data.
Every website you visit and every ad you click is recorded somewhere and can be purchased from someone. This vast compilation of information is known generally as big data.
By itself, big data is doesn’t mean much. The trick is to sort through the information to come up with usable information, trends and leads. How do you do that? With artificial intelligence, software and systems that quickly analyze big data.
Mortgages and big data
Among the leading users of big data are mortgage companies. You may not hear the term “big data” at your lender’s, but it’s likely working in the background. For example, when you reach a mortgage company and a pleasant voice answers, it may not be a loan officer. It might be a chatbot, software which gets more human-like every day.
When you apply for a mortgage, lenders traditionally ask for such things as tax returns and bank statements. That’s increasingly old hat. Now – with your permission – the information goes directly from the source to the lender. This happens just about instantly. There are no worries about lost papers or changed documents. It’s AI at work.
Brokers often ply their trade in “farms,” groups of similar houses in a neighborhood. Several hundred homes might be tracked by a broker. Those homes are likely targets for newsletters and postcards.
With big data, the idea is the same, but the process is larger and quicker. An AI company might review several thousand homes for the broker and identify the few dozen most likely to list. The savings in broker time and postage are huge.
Buyers and sellers
When homes are listed, brokers hit the big data pile looking for the individuals most likely to buy. That’s why you may get a postcard, flyer or email. If you go to an online site looking for properties, it will increasingly recognize your interests as you search around. This can be helpful to you as well as real estate brokers.
Every morning, you can get an email detailing new and current listings. You can check maps for available properties and recent sales. Perhaps most importantly, you can compare properties by any number of factors. You can look at square footage, price per square foot, lot sizes, etc.
Before the Internet and big data, such information was largely in the hands of brokers. Now it’s available everywhere, 24 hours a day. And it’s free.
Sellers and brokers can take advantage of the system by peppering descriptions with certain keywords. Do you have a pool or an in-ground pool? How do your photos show? Such things are important because visitors might only look at your electronic listing for a few seconds if you get it wrong.
A key use of AI for both buyers and sellers is in the valuation process. Lenders are increasingly turning away from appraisals when they can substitute electronic valuations.
Freddie Mac says “we are using big data and advanced analytics to offer our innovative, award-winning automated collateral evaluation (ACE) through Loan Product Advisor, providing the option to underwrite a loan without a traditional appraisal.” This new system, says the company, can speed up the process and reduce borrower costs.
Fannie Mae has a similar system. “Does every loan delivered to Fannie Mae require an appraisal?” asks the company. The answer is no, it says, in part because it has appraisal reports from 29 million properties on file.
Should consumers save the cost of an appraisal and instead rely on a big data valuation system instead? The answer is not clear, because one has to look at the type of property involved, as well as such factors as its uniqueness, condition and immediate market demand.
If you skip the appraisal, you can save $500 or so in many markets. That’s a lot of money. On the other hand, if you overpay for the property, that can be a lot more money. A more likely scenario (lenders tend to be conservative and risk-averse) is that the appraisal will come in low — a problem if you’re refinancing or buying.
So consider your options carefully.Verify your new rate (Feb 19th, 2019)