Jeremy Sicklick founded Silicon Valley fintech company HouseCanary in 2013 to modernize the critical role of home appraisals in America’s $30.7 trillion housing market. In 2020, HouseCanary will go mainstream with it’s ComeHome product for consumers. Below Jeremy tells us about ComeHome, the future of home appraisals, instant homeownership, and whether a financial system backed by automated home valuations is safer.
[Editor’s Note: This installment of 5 Questions is from a depth interview with Jeremy Sicklick January 2020, edited for clarity.]
Q1: FUTURE OF HOME APPRAISALS IN FINANCIAL MARKETS
THE BASIS POINT: Who’s the customer and what’s the sales pitch for HouseCanary’s core home valuation business?
JEREMY: HouseCanary’s customers are U.S. banks and lenders making home loans to consumers, and major Wall Street institutions buying homes or loans.
To protect homeowners and the financial system—and to be competitive—these orgs use us for trusted, fast home valuations.
As for HouseCanary’s pitch, let’s start with the market:
– The U.S. housing market is worth $30.7 trillion (which is $11 trillion of loans on the homes plus $19.7 trillion on equity owned by homeowners).
– And there are about 6 million homes sold and $1.6+ trillion in mortgages made each year.
So the financial and housing system must have accurate valuations to manage risk and make buying and selling decisions.
HouseCanary lets market participants value over 100 million properties with a median error of 2.5% or less. This makes housing and financial markets more liquid and transparent just like stock and bond markets.
This is a story of machines starting to outperform humans on a majority of the U.S. housing market.
We’ve focused on automating up to 70% of home valuations to be more accurate and faster than human appraisals. There are limits to this, but we’ve found that modern machine learning gets to a more accurate valuation.
For about 30% of U.S. homes, humans are the superior approach where certain local market homes and neighborhoods require more on-the-ground analysis.
Reliably automating home valuations replaces a 2-3 week human appraisal process with instant, trusted valuation at a fraction of the price. Consumers getting home loans and institutions buying and lending on homes demand this.
Our mission is to keep the system safe while meeting these market demands.
Q2: FINANCIAL DASHBOARD FOR YOUR HOME
THE BASIS POINT: What is HouseCanary’s new consumer product ComeHome, and what does it do for homebuyers and owners?
JEREMY: ComeHome makes our HouseCanary platform—used by the largest Wall Street institutions to make home buying and lending decisions—available to consumers to manage their largest financial asset: their home.
In 2020, millions of consumers will manage their homeownership journey using ComeHome by HouseCanary in partnership with their existing lenders.
– Homebuyers can search, start pre-approvals, and transact on 100 million homes
– Homeowners can act on money-saving tips and plan renovations
– Home sellers can estimate potential sales price within 2.5% accuracy.
– And it’s all powered by HouseCanary’s granular home valuations, trusted by Wall Street and vetted with ratings agencies.
These features make ComeHome by HouseCanary the category-leading customer engagement platform for the housing industry.
ComeHome is free to consumers.
It’s offered through their banks and lenders. Or consumers can use the ComeHome site and apps themselves.
Banks and lenders providing ComeHome to customers can see how people are interacting with it. Then they can engage customers with the right advice at just the right times.
This creates a lifetime relationship not by pitching products, but by powering peoples’ homeownership lifecycles.
Q3: INSTANT HOMEBUYING & REMODELING
THE BASIS POINT: Can ComeHome help enable instant lending for homebuyers and owners?
JEREMY: In a word, Yes.
The market doesn’t need another site showing an interesting but not-actionable home valuation. ComeHome powered by HouseCanary creates a truly transactable value.
So you can identify homes of your dreams then buy one instantly when you’re ready, knowing the value is accurate and can be quickly verified by lenders.
And once you own the home, you’ll always have an app to understand and act on refi savings, remodel options, and sale scenarios.
Actionable valuation is ComeHome by HouseCanary’s special sauce. Every other real estate site’s home values are interesting but don’t help you buy a home or get a loan.
Q4: RISKS WITH HUMAN VS. ROBOT APPRAISALS
THE BASIS POINT: Do automated home valuations make the financial system safer or riskier?
JEREMY: Automated home valuations help make the financial system safer, more transparent, and more liquid.
Earlier I noted our focus on keeping the system safe while meeting market demand for speed. Automation isn’t just about speed. It’s to give everyone more information about more homes so they can buy/sell homes more easily—this transparency and liquidity lowers market risk.
I also noted earlier how humans are better for appraising about 30% of the market so we’ve focused on automating up to 70% of home valuations to be more accurate and faster than human appraisals.
Over time, we should automate highly repeatable processes for the majority of the market. For the tougher local markets, great appraisers will still be required.
Great appraisal pros will also increasingly be the brains helping to incrementally improve automation in housing.
With cars, it used to be everyone drove a stick shift. Then it was automatic. Then smart cruise control. Now some cars can drive you to work. Humans drove all this modernization.
Now it’s happening in housing, thanks to the whole appraisal and valuation community working together.
Here are four more key points on machine vs. human home valuations:
1. More Comparable Sales.
Machines can evaluate a home based on 500+ variables, down to view angles, privacy, elevation, lot slope, and busy vs. slow streets. Plus, in most U.S. markets, we can value a home using up to 500 comparable properties vs. a human who only uses 3-5 comps.
2. Machines Recognize Granite Countertops.
Historically you had to walk a home to determine things like privacy and lot usability. But now machines understand these nuances critical to values. Same with interiors. Image recognition on millions of homes trains machines on type, condition, and materials of each room.
3. Machines Can’t Smell, Yet.
Human appraisers can tell you if a home smells funny, and machines are getting there. Machines know if a neighborhood is downwind from a farm or other source of smell, but don’t know if a single home smells. Yet. We study why homes sell for abnormal prices, and note anomalies like smell into valuation from that point forward.
4. Controlling Bias.
Humans have bias. HouseCanary valuations have 2.2% median error, and 0% bias. Research from Fed and FHFA groups shows 95% of human appraisals are at or above a home’s sale contract price. Is this “anchoring bias” trying to value homes at the contract price? Or is it ok for an open market bidding process to set the price? And if so, why spend $500-$2500 and 2 weeks on a human appraisal to find out what the market already told you?
Q5: WALL STREET VS. WASHINGTON ON HOME VALUES & LENDING
THE BASIS POINT: How do Wall Street and Washington define the future of home valuations?
JEREMY: Wall Street players must remain competitive with differentiated insights amidst tight regulation. They’ve embraced our view of automated home valuations because it gives them far more data to make informed home buying and lending decisions.
Again, our view today is that we can automate up to 70% of home valuations to be more accurate and faster. Human appraisals are reliable for the rest. And Wall Street still uses humans to analyze and augment automated valuations.
The side of Wall Street that buys homes in bulk has seen the ability to make money faster, cheaper, safer so they support automated valuations.
The side of Wall Street that makes consumer home loans also supports it for 2 reasons. It gives them more data to manage risk, and it gives their consumers a better transactional and lifetime experience.
That’s what ComeHome is about.
As for housing and financial regulators in Washington, systemic safety comes first.
Market transparency lowers risk, and regulators are studying how automated home valuations can support transparency.
And the FDIC, OCC, and Fed recently said certain homes sales of $400,000 and below wouldn’t require a human appraisal. Previously the limit was $250,000.
HouseCanary believes incrementally improving automated home values will help create a safer housing and financial system.