Dream House CalculatorHelping people find the house
they need, love and can afford
MIT Media LabCenter for Future
Banking
UROPs: Ana Chen, Mary HongAdvisors: Dan Ariely, Marko Popovic
Have you ever…
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.
With elderly in-laws moving in and children on the way, suddenly the “perfect” home seemed way too small
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
Defining the Problem
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 should borrow
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
Result
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
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
Solution:
a new kind of Real Estate and Mortgage Application
Strategy
Concept: process in 8 parts
3 kids
Modern
Garden
Eat out
Dog
Entertain guests
Golf
HikingHusband
Work (artisan)
Comfort
Lots of light
Priorities
Backyard
Study
Good school district
No lead paint
Dining roomBar
Patio
Studio
Tool shedGarage
Foyer
Financial Boundaries
2 car garage
2 car garage
Pool
Many windows
Good school district
Finished basement
Shed
Eat-in kitchen
Single level
………
…
Round peg, square hole problem…
Financial constraints
Hopes, dreams, future
Trade-offs:
- Deform circle
- Cut the circle
Solutions
* Greater financial risk
Change size of square*
Financial constraints
Hopes,
dreams,
future
Financial constraints
Financial constraints
Financial constraints
Hopes,
dreams,
future
Hopes,
dreams,
future
Hopes,
dreams,
future
Comparison
New metrics for comparing houses
A B C
Financial constraints
Hopes,
dreams,
future
Financial constraints
Hopes,
dreams,
future
Hopes,
dreams,
future
Financial constraints
House X is 80% like A at 110% of projected price
House Y is 60% like A at 80% of projected price
Demo
Design Screen Shots Prioritization Financial interview Attributes
Association Trade-offs Library / “Basket” Search Results
Interview
Prioritization
Continue
Association
Trade-offs
BasketUrban CapeMy HouseKelly’s HouseSmall yard houseHouse 2
Add
Delete
LibraryHouse 1June_30_08Urban CapeDream home 1My HouseKelly’s HouseSmall yard houseHouse 2
Fill Your Basket
Continue
Search Results
Recap: Information Flow
Statistics,
Hedonic pricing model
• 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
Recap: What’s New
Hoped for Results
More happy and financially stable buyers Decreased risk for mortgage provider Overall healthier real estate and mortgage
system
Completed Work
- Running Interview user interface- Suggested attributes for various
lifestyles- Design of rest of application
Future Challenges 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
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
Thank yous
Dan Ariely
Marko Popovic
Kwan-Hong Lee
Dawei Shen
Shrini
Deb Roy
Aithne
Fellow UROPs:
Ryan Stephen, Oscar, Leslie (“UROP”) Irum, Andrew
Questions?