Planwise’s Real Estate Reality Check: Keeping Homebuyers On Budget

Buying a house has huge financial consequences for a family, but the decision is often based on emotion rather than dollars and cents, says Vincent Turner, a veteran developer of online real estate tools for consumers.

As an Australian tech entrepreneur, Turner watched the U.S. financial system nearly buckle between 2007 and 2009, in part because so many Americans had taken out home loans they couldn’t repay.

Turner, who had developed an online mortgage application for Australian banks, saw an opportunity and moved to Silicon Valley. In 2011 he founded San Mateo, CA-based Planwise, a creator of Web tools to help consumers make better financial decisions—and maybe prevent another disastrous housing bust.

Existing technology was helping home buyers find the best mortgages and to qualify faster, Turner (pictured above) says. But it skipped over a more important question: Did the buyers know whether they’d be taking on debt to buy homes that were beyond their means?

“Consumers need to understand the difference between what a bank will lend and what they can afford,” Turner says.

Home buyers are getting more help on that score since the financial crisis from the Consumer Financial Protection Bureau, a new agency founded under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. Mortgage lenders will need to assess the likelihood that a loan applicant can afford the payments before approving the transaction. And new rules expected to take effect in October will require lenders to provide borrowers with plain English documents detailing the terms of their mortgages before signing. Lenders will also be obliged to help educate consumers by giving them copies of the consumer protection agency’s “Know Before You Owe” toolkit.

Turner is adding some personalized technology to the mix, to help consumers think about affordability before they ever sit down with a banker. The tool his startup recently rolled out, Planwise Connect, is a bit like having a virtual cousin with an accounting degree who rides along on your tour of homes for sale and reminds you your budget can’t support that handy extra bedroom or spiffed-up kitchen.

Planwise Connect is a browser extension that follows house-hunters as they visit property listing sites such as Zillow and Redfin. While the consumer pauses to drool over a particular home and its irresistible features, the Planwise tool is busy extracting data from the listing. It makes calculations about the financial impact of buying that home, such as the likely monthly mortgage payments, taxes, insurance costs, and homeowners’ association fees.

The tool can also report whether the home fits a family’s monthly operating budget, as long as the consumer has entered personal financial information such as household income, spending patterns, and existing debts. In addition, house hunters can use Planwise Connect’s communication tools to share information with their brokers, lenders, other advisors, and family members.

Planwise is currently focusing its efforts on the real estate application, though Turner says the company’s technology can support much more comprehensive guidance on personal finance decisions, including investing, travel planning, and choosing a college for the kids. The startup has raised about $1.5 million from U.S. and Australian angel investors, an Australian bank, and the venture arm of the National Association of Realtors. It faces some formidable competitors that are already aiming to become the go-to spot for a full range of financial advice. In San Francisco alone, personal finance sites Credit Karma raised $175 million recently, and NerdWallet raised $64 million.

While Planwise Connect is free to consumers, Turner says his company is starting to bring in money by licensing the tool to property listing sites that pay from $100 to $1,000 a month. Those clients are mostly small firms so far, but that doesn’t mean consumers can’t get financial calculations from the listings of larger companies, Turner says.

“Planwise plugs into the big sites whether they license us or not,” Turner says.

The startup is testing other possible sources of revenue. It supplies its online tool to real estate broker networks RE/MAX and Leading RE. Planwise might also earn fees from lenders by providing them leads to well-qualified borrowers who have used Planwise Connect, Turner says. The company is starting to market the browser extension to banks, which can license the technology and provide it as a resource to their clients, Turner says. That avenue is the most promising potential revenue source, he says.

Although some banks may not be eager to raise the question of home affordability with loan customers, “a select group of loan officers see a competitive advantage (in the Planwise tool),” Turner says. “Customers will ask the question anyway.”

One of Planwise’s next steps is to help consumers pre-qualify for loans, and to integrate trusted lenders into its site. Meanwhile, the company plans to build out the Planwise Connect features, and teach consumers to focus on factors they wouldn’t necessarily recognize as important.

For example, home buyers may concentrate on getting a mortgage with the lowest interest rate, Turner says. But a slight difference in interest rates has a lower financial impact than the difference between a 15-year and a 20-year mortgage. That also goes for the charges imposed by a homeowners‘ association, he says.

Consumers who are wary of sharing private financial details with Planwise can sign up with just an e-mail address and use the company’s calculating tool to get general insights, Turner says.

“You don’t have to put in financial data about yourself if you don’t want to,” Turner says.

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