Meeting with a client recently, he implied that my career would soon be over. When questioned, he replied, “You guys are all going to be replaced with AI.” He continued, emphatically, “In fact, it’s already happening!”
Fortunately, like so many other things over the years that have threatened to do away with real estate agents, we are in no danger. We do, however, need to be able to explain to our clients how artificial intelligence is transforming real estate — the good, the bad and the ugly.
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There is no question that AI is touching every aspect of our lives, and real estate is no exception. One significant use for AI is in the gathering and compilation of data and so, with this in mind, I thought, “Why not use AI to come up with a list of pros and cons for how AI is impacting the real estate industry?”
I queried ChatGPT, which stated:
“AI is rapidly reshaping the real estate experience for consumers — both buyers and sellers — by automating tasks, improving personalization and increasing transparency.”
It then provided the following outline, which I’ve edited, adding my own commentary:
1. Smarter home search
- AI-driven portals use algorithms to learn user preferences — price range, style, commute, lifestyle needs — and tailor listing recommendations. This can not only significantly reduce the number of listing alerts a buyer might receive, it can also shortlist properties, reducing the time required to find the perfect home. It can also show listings outside the normal area which might fit the buyer’s criteria, such as “upscale kitchen,” “water views” and the like.
- Buyers can upload photos of homes they like and let AI find comparable listings.
2. Automated valuations
- AI-powered AVMs (eg. Zestimate) analyze vast datasets to estimate home values in real time and are becoming significantly more accurate as AI technology develops.
- AI can be used to forecast optimal list prices based on comparable sales, seasonality and demand.
- Buyers can cross-check multiple AI valuations to gauge whether a property is priced competitively or not (Zillow, Homes.com, Realtor.com, most broker websites).
3. Enhanced decision support
- AI can help buyers make informed decisions about potential purchases by predicting neighborhood trends, potential price appreciation, and even the likelihood of multiple offers.
- AI can flag flood or other natural hazard risks, construction defects or proposed changes in zoning. As an example, a couple purchased a lot in Cape Cod and set about building their dream home. According to Realtor.com, “just a month after moving in, that dream unraveled. A letter was hand-delivered from the state, informing them their brand-new home would be seized by eminent domain to clear space for a new bridge.” An AI search for zoning changes might have prevented this.
4. Streamlined communication and assistance
- Some brokerages use AI to instantly answer buyer and seller queries, schedule tours and qualify leads, enabling 24/7 service.
- This allows consumers to get answers at any hour, improving convenience.
- AI translation tools can also break language barriers and facilitate conversations even though the agent does not speak the client’s language.
5. Transaction automation
- AI tools can read and verify contracts, disclosures and inspection reports for errors or missing information.
- It can ensure legal forms are complete and compliant before submission.
- AI can proactively predict potential bottlenecks in any given escrow and smooth the overall process.
6. Fraud detection and data security
- With wiring fraud a topic of significant concern, AI can help title companies detect forged signatures or fake identities.
- It can flag suspicious payment activity, protecting buyers and sellers from wire fraud.
7. Immersive experiences
- AI-powered staging and renovation previews allow buyers to visualize renovations or furniture placement before they place an offer on a home.
- AI can create lifelike walkthroughs that help remote buyers make confident decisions. Coupled with 3D, this can create an immersive experience.
Potential downsides of AI for consumers
Without question, there is a dark side to AI, and you also need to be able to explain this to your clients — many of whom may be using AI without knowing they are doing so.
For those who are actively using sites like ChatGPT to either leverage their sale or purchase, it is important that they understand where problems may arise. Potential problems fall into two categories:
Those unaware AI is being used:
- AI search can inadvertently favor certain neighborhoods or demographics, prompting fair housing violations (steering). This is one of the concerns flowing from Zillow’s recent linkage with ChatGPT.
- AVMs can be inaccurate in volatile or unique markets, leading to unrealistic seller expectations or misinformed buyers. This can, in turn, lead to lost opportunities or even failed transactions.
- AI-generated photos or videos can misrepresent a property.
- Automated systems reduce the human touch and can lead to reduced trust in the process.
- Data mined from consumers’ online activities can be used for targeted marketing, and improper handling of data can lead to fraud and scams.
Those purposefully using AI:
- When someone states, “I know what I like,” they are in effect stating, “I like what I know.” If AI is shortlisting homes based on a buyer’s preferences, they might not see homes that fall outside their stated criteria that, in fact, might be a better choice for them or have features they had not previously considered.
- AI cannot replace an agent’s local market knowledge, so those depending on AI for neighborhood information may come up short.
- Those using AI to locate “the best agent in the area” could potentially end up with an incomplete list based on the wording and criteria used. The criteria AI uses on the backside may not correspond with your personal metrics, resulting in a mismatch.
- One of our clients recently used AI to produce a market pricing strategy, which they in turn presented to us to suggest we had underpriced the property. Unfortunately, the data used in the analysis did not correlate with the property, its condition, location and amenities. In reality, the home had been on the market for months, and the price range suggested by AI was substantially over the price at which the home had failed to sell. In this case, AI was outsmarted by buyers, who were voting with their feet.
- AI lacks the human ability to negotiate effectively.
Potential downsides of AI for agents
- As mundane tasks are automated, the human touch is lost. This has the potential of devaluing the agent role, increasing competition and reducing prospective agent compensation.
- Overreliance on automation can erode agent capabilities, especially with newer agents, reducing the client experience.
ChatGPT’s summary said:
“AI is making real estate faster, more data-driven and more personalized, but it’s also introducing new risks around bias, transparency and data ethics.”
It clarified:
“The best outcomes occur when AI tools are used alongside experienced agents who can interpret data and advocate for clients’ best interests.”
I could not agree more.
Carl Medford is the CEO of The Medford Team.
