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Dream House Calculator

Dream House Calculator. Helping people find the house they need, love and can afford. UROPs: Ana Chen, Mary Hong Advisors: Dan Ariely, Marko Popovic. MIT Media Lab Center for Future Banking. Thought you “needed” a house with 6 bedrooms, 3 guest rooms and a huge living room.

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Dream House Calculator

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  1. Dream House Calculator Helping people find the house they need, love and can afford UROPs: Ana Chen, Mary Hong Advisors: Dan Ariely, Marko Popovic MIT Media Lab Center for Future Banking

  2. Thought you “needed” a house with 6 bedrooms, 3 guest rooms and a huge living room …then discovered you really didn’t? Bought a cozy cottage that seemed perfect at the time …only to get married a few years later. Have you ever… With elderly in-laws moving in and children on the way, suddenly the “perfect” home seemed way too small

  3. At Thanksgiving dinner, your obnoxious cousin constantly brags about his new 3-story colonial in the suburbs with French doors and that amazing spiral staircase Next time, you find yourself sinking money into a house even bigger and fancier than his, but completely unaffordable …before you know it, you are mortgaged for all your worth

  4. Defining the Problem

  5. Current Resources (1) Real Estate Search Tools: • “Checklist questionnaire” - criteria by physical attributes • “Filter” approach • Examples: Coldwell Banker, Prudential, Zillow (2) Mortgage Calculators: • Calculate maximum mortgage buyer can pay Problem:Doesn’t help user decide what is necessary – or not “Filter” too general or too absolute Problem:Doesn’t calculate what buyers shouldborrow

  6. Result Many people don’t: • Plan adequately for the future • Make a distinction between what they need and what they want • Consider how circumstances change over the time span that they plan to live in the house

  7. Mortgage Crisis • In 2007, delinquency and foreclosure rate for all mortgages was 7.3% • 5.7% of home equity lines of credit were delinquent or in default at the same time

  8. Take-away • Buying a house is one of the biggest financial decisions in a person’s life • It is a complex, highly personalized process, in which it is easy to make mistakes When people make the wrong choices, it causes problems for them and the bank

  9. Solution: a new kind of Real Estate and Mortgage Application

  10. Strategy Guide -lifestyle -wants/needs -dreams -future -priorities Quantitative -statistics -algorithms -hedonic pricing model (economics) -searching & sorting

  11. Concept: process in 8 parts

  12. Backyard Study Good school district No lead paint Bar Patio Foyer Studio Garage Tool shed 1 Hopes, dreams and the future Golf Garden 2 3 kids Dining room Entertain guests Hiking Comfort Husband Dog Priorities Eat out Modern Lots of light Work (artisan) 3

  13. … 2 car garage … … Hopes, dreams and the future 2 car garage Pool … Many windows Single level Good school district Finished basement Eat-in kitchen 4 Financial Boundaries Shed

  14. Round peg, square hole problem… Financial constraints Hopes, dreams, future

  15. Solutions Hopes, dreams, future Financial constraints • Trade-offs: - Deform circle • Cut the circle Hopes, dreams, future Hopes, dreams, future Financial constraints Financial constraints Financialconstraints Hopes, dreams, future • Change size of square* * Greater financial risk

  16. Comparison • New metrics for comparing houses Hopes, dreams, future Hopes, dreams, future Hopes, dreams, future Financial constraints Financial constraints Financial constraints A B C House X is 80% like A at 110% of projected price House Y is 60% like A at 80% of projected price

  17. Demo • Interview Design Screen Shots • Prioritization • Financial interview • Attributes Association • Trade-offs • Library / “Basket” • Search Results

  18. Prioritization Continue

  19. Association

  20. Trade-offs

  21. Fill Your Basket Library House 1 June_30_08 Urban Cape Dream home 1 My House Kelly’s House Small yard house House 2 Basket Urban Cape My House Kelly’s House Small yard house House 2 Add Delete Continue

  22. Search Results

  23. Interview I (Lifestyle) Prioritization Interview II (Finances) Associations Trade-offs Basket (metric) Sorted Results Recap: Information Flow Statistics, Hedonic pricing model

  24. Recap: What’s New • Guides buyer through the process of finding the “right” house –realistically and financially, in a way that is logical, but natural • Considers buyer’s present situation and future plans • Helps buyer compare houses that may be very different – in features and price • Allows buyer to accurately evaluate trade-offs between what he wants and how much he’s willing to pay • Makes sure buyer doesn’t spend more than he can afford

  25. Hoped for Results More happy and financially stable buyers Decreased risk for mortgage provider Overall healthier real estate and mortgage system

  26. Completed Work • Running Interview user interface • Suggested attributes for various lifestyles • Design of rest of application

  27. FutureChallenges • Statistical analysis to build realistic hedonic model of projected prices • Working prototype for Boston area listings => eventually expand to entire US • Cognitive system that “learns” from user responses to give improved attribute suggestions • Redesign questions and relevant attributes based on user feedback

  28. For Bank of America Differentiate from other mortgage businesses Not just a customer-conscious financial product, but comprehensive and useful tool Perfect part of the suite of other financial and life planning tools in development at BoA, CFB Reinforce message as a bank that helps plan your life and your future -- worthy of lifetime of trust

  29. Thank yous Dan Ariely Marko Popovic Kwan-Hong Lee Dawei Shen Shrini Deb Roy Aithne Fellow UROPs: Ryan Stephen, Oscar, Leslie (“UROP”) Irum, Andrew

  30. Questions?

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