When Krishna Malyala and his wife relocated to New Jersey, they faced the lifestyle choice that confronts many city dwellers.
The Malyalas had to decide whether to buy an urban townhouse that was centrally located but expensive or one in the suburbs that was less convenient but affordable. Calculating their mortgage payment was easy, but deciding which location was best for them was more challenging.
"I needed an apples-to-apples comparison," said Malyala, a former vice president of technology for Citigroup in New York.
Malyala created a spreadsheet that helped him weigh all the variables, including commuting costs and property taxes. He found that, contrary to common assumptions, the most affordable houses weren't always the ones with the longest commute.
Malyala, now with Keller Williams in New Jersey, did the same analysis for friends who were moving. Along the way, he kept adding variables and soon had a software tool he dubbed "TLCengine" and his own company to market it.
TLC, which stands for "true lifestyle cost," has the potential to become one of the most innovative new home shopping tools in years, according to John Mosey, president and CEO of St. Paul-based NorthstarMLS, which will become the first MLS in the country to implement the new technology.
"This could transform the buying experience," he said. "I think this could be something of a game changer here."
Northstar and other MLS's across the country manage thousands of real estate listings and data for Realtors and their brokers.
Mosey, like other MLS executives, is constantly on the hunt for new tools and products to help make agents more useful to their clients. Mosey first learned about Malyala's system in 2013 at a technology conference, and thought there was enough potential to show it to the Northstar board, which is comprised mostly of brokers and agents.
"They were intrigued," Mosey said. "And I thought it was fantastic info that could enhance the image and value of the Realtor in a transaction by helping the potential buyer have a better understanding of what they could afford."
Malyala worked with the board and a group of agents to refine the system before recently launching a beta test. "What it was then doesn't bear much resemblance to the way it is now," Mosey said.
TLC can now factor in 31 variables, including commuting, parking, gas, car insurance and child-care costs. The service is free and can be applied to any listing in the system. For buyers, it's a first step before the real shopping begins. With an agent to assist, buyers enter their income, expenses and other variables that can affect affordability, then TLC determines how much you can spend. Then, it's time to shop for houses that fit within those parameters.
The system will constantly be updated and expanded. One of the latest changes, for example, considers whether a buyer will qualify for a mortgage under today's newer, tougher "QM" (qualified mortgage) underwriting rules.
"We want to bring deeper information and transparency to the home-buying process to empower consumers to make more informed purchasing decisions," Malyala said. "Consumers can make smarter home-buying decisions because they'll know the costs to own and, more importantly, whether they really can afford it."
The rollout has just begun, and the MLS is in the process of educating members.
Paul Sigurdson, managing partner and broker with Counselor Realty, was on the board when TLC was first presented. The association is bombarded with all kinds of proposals for new tools to help agents, he said, but few make it past the conceptual stage. They have to be free, easy to use and have a meaningful impact on the buying/selling experience.
"I think this is going to be an opportunity for the Realtor who wants to be more engaged in the process," he said. "It's going to create a better experience."
Though the NorthstarMLS now has a small ownership stake in Malyala's company, TLC won't be proprietary to just buyers in the Twin Cities. Malyala plans to extend use of TLC to other MLS's across the country, and has several groups that are close to signing up.
While Malyala has been working on TLC for several years, it's an innovation that he says will only get better with time as more data becomes available, and as users input their own information.
"The TLCengine gets smarter when local agents add the actual expenses provided by the seller for each home they list," he said. "Big data becomes smart data when you have real information being added to our system."