Periodic Reporting for period 2 - Geowox (A platform supercharging residential property valuations.)
Período documentado: 2021-04-01 hasta 2022-03-31
Residential real estate valuations are i) slow and ii) inaccurate. This is due to the fact that they are largely performed by manual processes, with a surveyor visiting the properties and entering many data points for the final report - a process that takes several hours. Naturally, human subjectivity comes into play. For several years, EU countries like the Netherlands and Sweden have worked with fully automated valuations (fully based on data interpretation, with no human intervention) for certain lower risk loan types such as low Loan To Value (LTV) refinancing. The European Banking Authority (EBA) has noticed the disconnect between countries that perform valuations fully manually, and countries that have fully automated solutions, and as of July 1st 2021 activated the ‘EBA Guidelines on loan origination and monitoring’, a piece of legislation accepted by near all EU countries, abolishing fully automated valuations but opening the door to a ‘hybrid’ format between a statistical base and a surveyor sign off. The legislation also states that in cases with strong data, there will be no need to visit the property.
There are two positive impacts on society:
i) Speed. Hybrid valuations have the potential to reduce average turnaround time from over 1 week to a few hours, producing a customer experience in line with customer expectations. Millions of customers have been moving towards end-to-end digital services in current account banking (N26, Monzo, Revolut) and increasingly demand sleek customer experiences also for financial services such as mortgages.
ii) Accuracy. Hybrid valuations will drive objectivity by supporting a solid statistical underpinning to the surveyor’s work. A 2019 research paper by the Dutch Central Bank showed that average overvaluation as performed by surveyors is 5.3%, due to: ‘Incentives in the system putting the surveyor’s independence under pressure. Buyer, seller, broker, advisor and lender have an interest in the transaction going ahead and the appraiser providing the necessary appraisal value’.
In effect, valuations are now guided by purchase price, an amount the surveyor is typically aware of at the moment of performing the valuation. Therefore, having an underlying statistical basis to each valuation will greatly increase the monitoring capacity of both the lender and the central bank to double check outliers, and put additional scrutiny on systematically under- or overvaluing surveyors. The overall project objective is an optimised version of the Geowox property valuation platform. It is on schedule to be ready for commercialisation in our first target market of Ireland in 2022 as planned.
There are two positive impacts on society:
i) Speed. Hybrid valuations have the potential to reduce average turnaround time from over 1 week to a few hours, producing a customer experience in line with customer expectations. Millions of customers have been moving towards end-to-end digital services in current account banking (N26, Monzo, Revolut) and increasingly demand sleek customer experiences also for financial services such as mortgages.
ii) Accuracy. Hybrid valuations will drive objectivity by supporting a solid statistical underpinning to the surveyor’s work. A 2019 research paper by the Dutch Central Bank showed that average overvaluation as performed by surveyors is 5.3%, due to: ‘Incentives in the system putting the surveyor’s independence under pressure. Buyer, seller, broker, advisor and lender have an interest in the transaction going ahead and the appraiser providing the necessary appraisal value’.
In effect, valuations are now guided by purchase price, an amount the surveyor is typically aware of at the moment of performing the valuation. Therefore, having an underlying statistical basis to each valuation will greatly increase the monitoring capacity of both the lender and the central bank to double check outliers, and put additional scrutiny on systematically under- or overvaluing surveyors. The overall project objective is an optimised version of the Geowox property valuation platform. It is on schedule to be ready for commercialisation in our first target market of Ireland in 2022 as planned.
The activities performed to meet the specific project objectives 1-9 are given below along with key results achieved to date.
Objective 1 - Mapped data.
● Developed “Geowox boundary detection monitor” and computer vision software able to read mapped lot sizes.
● Conducted tests inhouse and with datasets provided by private equity funds and banks.
Objective 2 - Image data.
● Development led by Chief Data Scientist GIS. Success at identifying property orientation, adjacency, extensions, and secondary buildings.
Objective 3 - Apps.
● Created the borrower facing web app platform valuemyhome.ai. It is launched as a standalone application at M13 and as a lender and channel partner integration by M24.
● Version 2 of the lender and surveyor web app platform built (platform.geowox.com). An online sign-off module and automated reports creation were developed.
● Data localisation commenced for IE, UK, NL.
Objective 4 - Back end.
● Automated address matching tool developed.
Objective 5. Onboard Surveyors.
● Removed the goal to work with ‘big 6’ surveyor firms.
● Decided to focus on internally hired surveyors for desktop valuations with support from lender panel (small firm) surveyors to increase geographical coverage for onsite visits.
Objective 6. Onboard Surveyors.
● Paid portfolio valuations on >5.000 properties completed with 3x private equity funds.
● Paid portfolio completed on >5.000 properties completed with 2x banks.
Objectives 7 - Compliance and IP.
● Confirmed regulatory compliance with EU central banks through the 2020-signed off EBA guidelines on mortgage origination & monitoring.
● Conducted multiple consultations with our IPR consultant (Basck) and investigated an IP strategy aligning with our commercialisation plan.
Objective 8- Scale teams.
● Team scaled from 5 to 12 FTE. This includes technical, valuation, marketing and sales support roles.
Objective 9 - Communication.
● Trade fairs and events disrupted due to lockdowns and travel bans caused by the Covid-19 pandemic.
● Set up a media strategy including always-on online communication and quarterly ‘housing market’ reports in regional and national newspapers.
Objective 1 - Mapped data.
● Developed “Geowox boundary detection monitor” and computer vision software able to read mapped lot sizes.
● Conducted tests inhouse and with datasets provided by private equity funds and banks.
Objective 2 - Image data.
● Development led by Chief Data Scientist GIS. Success at identifying property orientation, adjacency, extensions, and secondary buildings.
Objective 3 - Apps.
● Created the borrower facing web app platform valuemyhome.ai. It is launched as a standalone application at M13 and as a lender and channel partner integration by M24.
● Version 2 of the lender and surveyor web app platform built (platform.geowox.com). An online sign-off module and automated reports creation were developed.
● Data localisation commenced for IE, UK, NL.
Objective 4 - Back end.
● Automated address matching tool developed.
Objective 5. Onboard Surveyors.
● Removed the goal to work with ‘big 6’ surveyor firms.
● Decided to focus on internally hired surveyors for desktop valuations with support from lender panel (small firm) surveyors to increase geographical coverage for onsite visits.
Objective 6. Onboard Surveyors.
● Paid portfolio valuations on >5.000 properties completed with 3x private equity funds.
● Paid portfolio completed on >5.000 properties completed with 2x banks.
Objectives 7 - Compliance and IP.
● Confirmed regulatory compliance with EU central banks through the 2020-signed off EBA guidelines on mortgage origination & monitoring.
● Conducted multiple consultations with our IPR consultant (Basck) and investigated an IP strategy aligning with our commercialisation plan.
Objective 8- Scale teams.
● Team scaled from 5 to 12 FTE. This includes technical, valuation, marketing and sales support roles.
Objective 9 - Communication.
● Trade fairs and events disrupted due to lockdowns and travel bans caused by the Covid-19 pandemic.
● Set up a media strategy including always-on online communication and quarterly ‘housing market’ reports in regional and national newspapers.
During the project, the valuation sector made progressive steps. Notably, in 2020 the EBA guidelines on loan origination and monitoring were approved, and came into effect July 2021. These guidelines specifically forbid fully automated valuations at time of origination, and warrant the use of surveyors and statistical data support, in line with our product development. On a business level, lenders are placing more emphasis on shortening mortgage origination cycles, which warrants faster valuation solutions, with higher accuracy to diminish error making early in the process. We see the private market moving to provide such solutions in EU markets and beyond. By combining the power of our data and workflow tools, we have a strong competitive advantage which goes beyond the state of the art; in particular, in our target market of Ireland where ‘manual real estate advisors’ control 100% of the market. This has been proven by i) winning portfolio valuations they would normally perform, and ii) switching mortgage lenders from manual panels to our serviced software. In the UK, we will have some competition with in-house built software; however, these platforms lack the statistical capacity and turnaround time of our platform. While in the Netherlands, there exist some automated valuation and statistical analysis tools, which have strong statistical capacity and good turnaround time (<8 hours); but are limited on the percentage of houses they can value (due to no hybrid support). Our solution can value 100% of the housing stock. Feedback from lenders is positive in all 3 markets, we are therefore confident in our competitive position internationally.
The Geowox tool will support financial institutions in meeting EBA guidelines by providing quick and accurate hybrid valuations with strong statistical basis. Implemented across Europe, this will reduce the current disconnect between countries. Accurate valuation methods are the backbone for the determination of collateral value of financial institutions, will create more accurate bank balance sheets, and improve sustainable lending practices.
By M24, we have signed multi-year contracts with 2, and secured pilots with another 2 mortgage lenders. We have an additional advanced pipeline of at least 5 mortgage lenders. It is our goal to become the leading statistical software-backed valuation provider in our first 3 markets, and gradually expand market coverage from there.
B2B website: www.geowox.com
B2C website: www.valuemyhome.ai
The Geowox tool will support financial institutions in meeting EBA guidelines by providing quick and accurate hybrid valuations with strong statistical basis. Implemented across Europe, this will reduce the current disconnect between countries. Accurate valuation methods are the backbone for the determination of collateral value of financial institutions, will create more accurate bank balance sheets, and improve sustainable lending practices.
By M24, we have signed multi-year contracts with 2, and secured pilots with another 2 mortgage lenders. We have an additional advanced pipeline of at least 5 mortgage lenders. It is our goal to become the leading statistical software-backed valuation provider in our first 3 markets, and gradually expand market coverage from there.
B2B website: www.geowox.com
B2C website: www.valuemyhome.ai