4 Ways Big Data is Changing Real Estate
As defined by SAS, big data is an expression describing the sizeable amount of structured and unstructured data inundating businesses on a daily basis. The importance doesn’t lie in the incredible amount of data, but instead, it is what organizations do with the data that matters. Big data can be analyzed for insights that lead to better decisions and strategic business moves. Traditionally, real estate is a business reliant upon personal networking, timing and detecting trends. Big data is shifting that way lenders, buyers in Sunnyvale, sellers in Atherton and real estate agents think about property transactions in Silicon Valley and beyond.
The term big data is relatively new but the process of gathering enormous amounts of information and statistics for (eventual) analysis has been around for quite some time. In the early 200’s, industry analyst, Doug Laney, defined the conventional definition of big data, breaking it into what is referred to as the 3 V’s:
Volume: Organizations collect data from a variety of sources, including business transactions, social media, and information from sensor or machine-to-machine data. In the past, storing this voluminous amount of information would’ve been problematic but new technologies have been developed to better manage this.
Velocity: Data pours in at an unprecedented rate and needs to be dealt with promptly. RFID tags, sensors and smart metering are all driving the need to deal with inundations of data in near-real time.
Variety: Data comes in all types of formats – from structured, numeric data in traditional databases to unstructured text documents, email, video, audio, stock ticker data and financial transactions.
Sources of big data include three key areas:
- Machine generated data such as smart thermostats, security cameras and RFID tags
- Human generated data including social media, email, photos and video
- Business generated data from corporations the likes of SAP and Teradata
The quantity of data being created and stored worldwide is mind boggling, and it just keeps amassing as new sources come ‘online’. The potential for business and industry to glean key insights from big data is huge yet only a small percentage of data is actually analyzed.
Big data is being used in all facets of business and commerce. Below are 4 key ways this information is being utilized in real estate.
1. Empowering Consumers With Information
Homebuyers and those looking to sell or invest have access to real estate information at their fingertips, thanks to companies like Zillow, Trulia and Refin. Theyuse big data to crunch information obtained through the census, consumer surveys, property listings and more. These websites provide a valuable starting point for a home search or to obtain high-level knowledge on potential value and trends within a specific postal code or community. Consumers should remember that property valuations given on Zillow, Trulia and other real estate sites are not always accurate. A licensed real estate professional will always be able to provide a more precise value of your home.
2. Bank Financing & Liability
Commercial banks use big data to help them mitigate risk. This allows lenders to offers the best interest rates to their clients. Banks and mortgage lenders also utilize data provided by insurance companies to safeguard their investments. While data alone can’t fully determine whether a specific property will be hit by some sort of catastrophe, it does provide statistics and indicators that serve as potential warnings.
3. Insurance
Every type of insurance coverage depends on information gathered from digital data sources. To offer more comprehensive policies for homeowners, insurance companies analyze data from large numbers of users. They study what types of insurance are necessary for particular geographic regions and types of dwellings, including offering earthquake, flood or hurricane insurance as a standard part of a homeowner policy based on the information provided by big data.
4. Real Estate Agent Roles
Big data tools offer real estate agents as well as their clients valuable information on basic housing trends but this massive number crunching cannot take the place of the personal attention and expertise a knowledgeable agent provides. No amount of big data replaces having a licensed agent as an advocate, negotiator and local expert to assist in traversing the road to buying, selling or investing. The Internet is a good source of rudimentary information, but working directly with an expert who has your best interest in mind and understands your unique requirements is the ‘shortcut to real estate success’.
With proper data evaluation tools, companies like Zillow and Trulia can offer insights for homebuyers and sellers while lenders and insurance brokers are better able to offer reliable predictions to mitigate risk and better assist their clientele.
Big data should be used as a tool while working closely with a knowledgeable agent, lender and financial advisor to assist in the sale or purchase of a residence, investment property or vacation home.
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