Corporate real estate (CRE) appraisals are fraught with peril — not to mention subjectivity. The average gap between a standard estimate and the actual sale price is 5 percent to 6 percent in the U.S. and U.K., with a median error of as much as 15 percent. And the process drags on, with the average asset valuation taking roughly a month and often costing a tidy sum — usually between $4,000 and $6,000.
The ridiculous status quo motivated former architects Teun van den Dries and Sander Mulders to found Geophy, a real estate appraisal platform that taps artificial intelligence to suss out properties’ true market value. The Delft, Netherlands-based startup today revealed that it has raised $33 million in a Series B financing round led by London and San Francisco venture capital firm Index Ventures, with participation from existing investors Inkef Capital and Hearst Ventures.
Geophy will use the fresh capital to expand its presence in the U.S. and Europe, said van den Dries, who serves as CEO, ahead of a move into the Asia-Pacific region in the next year.
“Real estate is foundational to all areas of economic activity — to everyday life, in fact — but much of it is based on inaccurate or biased data. Furthermore, there’s an information asymmetry that distorts the market and leads to volatility,” he said. “By providing a quicker, more reliable and intelligent service, Geophy helps its customers make better decisions and promotes a better-functioning market.”
Unlike human commercial appraisers, who rely on a combination of intuition and limited information to arrive at valuations, Geophy’s platform taps a veritable fire hose of public and private data sources, such as satellite images, sales data, transport links, green spaces, density, crime rates, and a database of 150 million property records. Its machine learning algorithms can determine the often complex relationships among those features, as well as between location characteristics and demographics and macroeconomic data, like interest rates and stock indices.
It’s a valuable service, considering real estate is now the world’s largest asset class, with global investment eclipsing an estimated $730 billion in 2018. That’s doubtless why Geophy has attracted interest from major rating agencies, banks, pension funds, investors, national regulators, and large government-backed enterprises. Its headlining client list includes U.S. mortgage provider Fannie Mae, British stock market data service provider FTSE Russell, and finance and lending group Walker and Dunlop.
“Geophy is bringing much-needed innovation to the antiquated property sector. Much of the world’s wealth is in real estate, yet we understand very little about how to accurately value it, or about the forces that have an impact on it,” said Index Ventures partner Jan Hammer, who joined Geophy’s board as part of the Series B. “This is a critical issue for everyone from portfolio managers to central bankers, and we believe GeoPhy’s technology has the potential to improve how the market operates.”
Geophy, which was founded in 2014 and employs about 100 people, is headquartered in Delft and has offices in New York; London; and Kaunas, Lithuania.
Geophy might be one of the first to take a crack at commercial property appraisal with AI, but it’s not the only one applying machine learning to the real estate market. Israel-based Skyline AI, which announced an $18 million funding round in July 2018, uses a proprietary dataset to make predictions about property values. Jointer.io, which emerged from stealth early last year, taps AI and blockchain technology to power its primary securities market for commercial properties. And New York-based Cherre leverages artificial intelligence to resolve property data from thousands of public, private, and internal sources in real time.