HouseCanary CEO and Co-Founder, Jeremy Sicklick presented to Mortgage Lending and Appraisal leaders in Ft. Lauderdale on January 28th, 2015. The discussion, titled "Big Data Revolution: Increasing Transparency to Risk and Valuation", explains how big data insights will revolutionize the appraisal and lending industry.

1. Big Data Revolution
Creating Transparency to Risk and Valuation
January 28, 2015
Copyright
©
2015
by
Canary
Analy5cs,
Inc.
All
rights
reserved.

2. 1
Introductions
Jeremy Sicklick
Co-Founder & CEO
Chris Stroud
Co-Founder & Chief of Research
Partner & Managing Director, The Boston
Consulting Group
• Led Real Estate – advised top builders,
developers & PE investors
• Prior - Arthur Andersen - CPA
Education
• MBA, The Wharton School, University of
Pennsylvania
• BS, University of Southern California –
Summa Cum Laude
PhD Candidate, Applied Statistics,
University of Texas at San Antonio
• Dissertation Topic – Dynamic Models of
Financial Risk
• Other Research Interests – Bayesian
Hidden Markov Models, Bayesian Decision
Theory, Dynamic Time Series
Education
• MA & BA, Economics, UC Santa Barbara

3. 2
We build products that combine
proprietary data and predictive analytics
to help people make better real estate decisions.
2
2

4. HouseCanary Overview
3
The most objective, consistent, and
efficient way to appraise homes
The most advanced tool for
real estate professionals
NATIONAL HOME
CONSTRUCTION
DATABASE
Powered by
The data source for valuing and
appraising new construction
Launching
Q4 2015
Patent pending

5. Big Data Is Growing Exponentially
4
Where We Are GoingWhere We Have Been
“If you recorded all human
communication from the dawn
of time to 2003, it takes up
about five billion gigabytes
(5,000 petabytes) of storage
space. Now we’re creating that
much data every 7 hours”
Every 7 hours
Source: IDC
6.12 10.87 21.61 40.03
2014 2016 2018 2020
7x…every hour
Data in millions of petabytes
‘Big Data’ will revolutionize real estate like it has other industries

6. 5
Local and Macro
Fundamentals
Housing Data
Capital &
Credit Markets
Local Market
&
Consumer Data
Household-Level
Appraiser Data
120M parcel level details geo-
coded
Property details and valuation
• 900+ MLS
• 3,000+ County Assessors
Land supply available
Permits
Flood
Real Estate Is Big Data
Local jobs /
employment
Construction jobs
Consumer flows in-
out areas
Consumer equity
vs. debt
Affordability
components
Household net worth
Debt to income
Local economy
(GMP)
Recession
probability forecasts
Inflation measures
Schools
Crime
Housing Makeup
Livability / amenities
Career & Income
Commute times
Migration patterns
Potential demand
Family makeup
Education level
Rent vs owner
Comparable choices
Value adjustments
Key value drivers
C & Q ratings
Mortgage volume & mix
Mortgage health & delinquency
Homebuilder capital growth
Residential & Mortgage REIT indices
Construction materials futures
Mortgage yields & spreads
Mortgage Debt, ARM, RMBS growth
20,000 home price indices
Sales volume
New starts
Foreclosures
Months supply
Market clusters
Market risk scores
Single vs. multi-family mix
Rent versus own economics

7. 6
Huge volumes of data
may be compelling at first glance,
but without an interpretive
structure they are meaningless.

8. Great Applications of Big Data are Simple & Powerful
7
Millions of Data Points
+
Predictive Analytics
+
Industry Expertise
+
Simple User Interfaces
Transformed Government Intelligence
Common Elements
Understand Weather Data & Forecasts
Transformed Global Search

9. Big Data Can Augment Human Intellect, Not Replace It
8
Computers Are Less Equipped to
Understand Subjective Things
Computers Can Run Large
Quantities of Known Calculations
Google Image recognition
output as of 11/2014
Stress simulation,
3D CAD model

10. 9
Go to PollEverywhere.com/HCCRN
How well do current data and tools
empower you to make better decisions,
consistently as an appraiser?
o Extremely well
o Ok, but opportunities to improve
o Far below expectations
1

11. 10
1
Source: CRN conference attendee survey, 1/28/2015; N=50
How well do current data and tools empower you to make better
decisions, consistently as an appraiser?
Percent of respondents
Answer: Majority See Opportunity to Improve
18
64
18
-
10
20
30
40
50
60
70
Extremely well Ok, but opportunities to
improve
Poorly

12. Problem: Issues Appraisers Face Today
11
Inefficient Takes 6 hours on average to appraise a property
• Data is fragmented
• Re-keying necessary
• Lack of tools to help with analytics of valuation and risk
Costs $1,000+ through lifecycle of loan
• To review inputs
• To review calculations, approaches and adjustments
• To defend repurchase demands
Focus on re-describing property as opposed to valuing it
• Inefficient use of professional talent
• Not focused on measuring and communicating risk
• Not leveraging data and valuation techniques possible
Inconsistent
Not focused
on value & risk

13. 12
Go to PollEverywhere.com/HCCRN
What are the largest challenges facing the
appraisal industry today?
o Inefficient
o Inconsistent
o Not sufficiently focused on value & risk
o All of the above
2

14. 13
2
Source: CRN conference attendee survey, 1/28/2015; N=50
What are the largest challenge facing the appraisal
industry today?
Percent of respondents
32
26
16
4
22
0
5
10
15
20
25
30
35
Inconsistent Inefficient Insufficient focus
on risk
Insufficient focus
on future value
All of the above
Answer: Consistency, Efficiency are Largest Pain Points

15. Solution: Apply a Tested Formula
14
Millions of Data Points
+
Predictive Analytics
+
Industry Expertise
+
Simple User Interfaces
Common Elements

16. Case Examples
15
1 Understand the market and market risk
2 Understand property details and risk
3 Better value collateral and risk

17. Understand the market
and market risk
Case Study 1
16

18. A–F Submarket ClusteringGrading Submarkets
Case Study 1: Market Cluster and Inherent Risk
17
Areas of Focus
Across 20,000 zip codes we cluster markets
Several factors together used to cluster
• Home price
• Income & wealth
• School scores
• Crime level
• Owner / rental mix
• Commutability
“A’s” move earlier in the cycle with lower
overall volatility
How does this help me make better
appraisal decisions
Objectively measure risk / volatility of a market

19. Case Study 1: Buyer vs. Seller Market
18
Buyer’s – Seller’s Market Scores
Areas of Focus
Insights on market environment to support
value
• Seller’s market – higher probability to reconcile
at higher end of range
• Buyer’s market – higher probability to reconcile
at lower end of range
How does this help me make better
appraisal decisions
Combine factors to summarize market
environment
Long time-series of data (ie, decade+) to
understand where we are currently
Transparency to underlying drivers

20. Case Study 1: Market Risk & Affordability
19
Risk Score
Insight on market risk to support value
• Low market risk– reconcile at higher end of
range
• High market risk – reconcile at lower end of
range
How does this help me make better
appraisal decisions
Areas of Focus
Quantified risk score – probability of future
downturn (eg, FICO score for real estate)
• Leverage HC predictive analytics for
20,000+ zip codes
Drivers of risk – price, affordability, velocity

21. Case Study 1: Potential Consumer Demand vs Supply
20
Will become critical at a local level
• As affluent baby boomers downsize
• Interest rates rise
• Ensure sufficient depth of demand to support
value at price level by local area
How does this help me make better
appraisal decisions
Areas of Focus
Potential demand vs supply
Understand depth of potential buyers who can
make down payment & DTI in market versus
supply at that price point
Potential Demand by Price / Age

22. Case Study 1: Understand the Market with Aerial Imagery
21
Market insights to support value
• Nearby beneficial / adverse affects to value
• Holistic view of area at time of appraisal
How does this help me make better
appraisal decisions
Areas of Focus
Current imagery (less than 1 month old)
View to new public works, new supply
Nearby drivers of value – positive and negative
Up-to-Date Satellite Imagery
Beta

23. 22
Go to PollEverywhere.com/HCCRN
What is most critical to you to better
understand the market and market risk?
o Market Risk Clusters & Inherent Local Risk
o Buyer vs. Seller Market summary
o Future Market Risk Score
o Potential Consumer Demand v. Supply
o Up-to-Date Aerial Imagery
o All of the Above are Equally Critical
3

24. 23
3
Source: CRN conference attendee survey, 1/28/2015; N=44
What is most critical to you to better understand the market and
market risk?
Percent of respondents
Answer: Broad Interest in Tools to Understand Market Risk
32
20 20
14
0
14
-
5
10
15
20
25
30
35
Potential
consumer
demand vs.
supply
Market
clusters with
similar risk
Market risk
score
Buyer vs.
Seller's
market
rating
Up-to-date
aerial
imagery
All of the
above

25. Understand property
details and risk
Case Study 2
24

26. Case Study 2: Organize & Normalize Property Details
25
Auto-populated & normalized Property Details
Minimal rekeying…. mis-keying issues
Focus appraisers’ attention on completing
accurately
How does this help me make better
appraisal decisions
Areas of Focus
Fully integrate MLS & Assessor data for
completeness
Highlight differences between MLS & Assessor
Integrate all other data sources into one user
experience – flood, parcel, g-map, permit, etc.

27. Case Study 2: ‘Smart’ Property Details
26
Highlight changes from prior appraisal
Gauge how others measure C & Q to create a
consistent view on a subjective measures
How does this help me make better
appraisal decisions
Areas of Focus
Transparency to C & Q ratings across time for
noted property
Crowd-sourced understanding of (similar)
property’s C & Q rating
Natural language processing to identify and
manage data points about subject and comps
Suggested Condition/Quality Ratings

28. Case Study 2: New Insights on the Property
27
Sales History & Permit Data
Integrated insights on property to support
value
Understand consistency of property to area
overall
How does this help me
make better appraisal decisions
Areas of Focus
Full sales history
Full integration of permits
Plat map of full lot details
Consistency of property to local market

29. 28
Go to PollEverywhere.com/HCCRN
What is most critical to you to better understand
property details?
o Normalized Property Details that Auto-populate
o “Smart” Details such as C & Q Ratings
o New Insights on Property such as Permits
o All of the Above are Equally Critical
4

30. 29
4
Source: CRN conference attendee survey, 1/28/2015; N=40
• What is most critical to you to better understand property details?
Percent of respondents
Answer: Interest in Tools to Improve Property Details
25
13
8
55
-
10
20
30
40
50
60
Normalized
property details
that auto-populate
New insights on
property such as
permits
"Smart" details
such as C & Q
ratings
All of the above

31. Better value collateral
and risk
Case Study 3
30

32. Case Study 3: Objective Comparability Score
31
Comp Similarity Scores
Objectively derived comparable sales
Brings sales price to current, critical in fast
changing markets
How does this help me
make better appraisal decisions
Areas of Focus
Objectively derived multi-variate similarity score
Leverage NLP, location data to identify additional
characteristics eg, granite, view, remodeled, etc.
Sales price recalculated to current value using
20,000 proprietary zip code price indices

33. Case Study 3: Objective Value Adjustments
32
Comp Adjustments
Statistically significant as opposed to “based on
experience” approach
How does this help me
make better appraisal decisions
Areas of Focus
Statistically derived adjustments based on local
data
Supported and defensible using analytics & data
Continuously improves through crowd-sourced
feedback loops

34. Case Study 3: Key Value Drivers
33
Value Drivers
Clearly communicate key drivers of value for
property and surrounding properties
Identify impact of key drivers to value
How does this help me
make better appraisal decisions
Areas of Focus
Identifies key drivers of value
Hierarchy of value drivers
Quantification of value drivers through
feedback loops

35. Case Study 3: Big Data Value Reconciliation
34
Value Reconciliation
Supports appraiser with holistic view
• Valuation
• Risk
How does this help me
make better appraisal decisions
Areas of Focus
Define value range from 100+ comparable
properties as opposed to 3
Identify market risk and reconciliation range

36. 35
Go to PollEverywhere.com/HCCRN
What is most critical to you to improve
property valuation?
o Objective Comparability Score
o Objective Value Adjustments
o Key Value Driver Identification
o Big Data Value Reconciliation
o All of the Above are Equally Critical
5

37. 36
5
Source: CRN conference attendee survey, 1/28/2015; N=35
What is most critical to you to improve property valuation?
Percent of respondents
Answer: Interest in Several Tools to Help with Valuation
23
20
11
0
46
-
5
10
15
20
25
30
35
40
45
50
Objective value
adjustments
Key value driver
identification
Regression-based
value
reconciliation
Objective
similarity score
All of the above

38. The Power of Big Data Are In the Feedback Loops
37
Integrated NHCD Tool Better
Appraisal
Data &
Analytics
Better
Valuation &
Risk
Accurate &
Informative
Appraisals
Industry
Credibility
• Consumers
• Lenders
• Investors
Better
Appraisals

39. 38
Our team is hard at work
building products for you.

40. 39
More objective
• Objectively values property, from which Appraiser can deviate
• Comps rated by Similarity Score to help appraiser choose objectively
• Market Risk Score highlights the factors affecting risk of downturn
More consistent
• Automatic data import eliminates input errors
• Transparency into valuation/adjustment approach across appraisers
• Reduces need for costly manual review process post-appraisal
More efficient
• 2x+ faster than best legacy methods
• Focuses appraisers’ time on valuation vs. keying data
• Can use iOS app to start and finish on-site or work across app and
desktop to start on-site and finish in the office
Patent pending
The most objective, consistent, and
efficient way to appraise homes

41. • Objective - More confidence in your
valuations. Emulate Collateral Underwriter
to mitigate repurchase risk
• Consistent – Consistent data and
approaches to measure risk and support a
better final valuation every time
• Efficient - More efficient so you can earn
more while working less
• Manage Risk - Better manage lending
risk by understanding market risk and
expected home price trends
• Better Support - Reduce repurchase
expense by having more defensible
appraisals supported by better data
• Reduce Cost – Reduce costs by using
fewer appraisal review staff
Using Big Data to Appraise Creates a Win, Win, Win
40
For Appraisers For Lenders

42. Jeremy Sicklick
Co-Founder & CEO
HouseCanary, Inc.
300 Brannan St. #501
San Francisco, CA 94107
office: +1-866-729-7770
mobile: +1-213-422-2577
email: jeremy@housecanary.com
The Time Is Right For a New Way to Appraise
We Want to Hear Your Comments, Feedback, etc.
Slide Deck With Responses Posted to housecanary.com/news
41