Can AI (Artificial Intelligence) and
Real Estate work together?
Let’s look back before we go forward.
On a summer day in 1968 I decided to ride into Boston from the ‘burbs with my uncle who worked in the downtown district. Going to “town” was not a big deal back then like it is today when you’re a 13 year old kid. I had taken the bus and subway to town at least 5 or 6 times by then, mostly to see the lowly Red Sox play an afternoon game. This day was a memorable day. I went to see one of the greatest movies ever made; Stanley Kubrick’s 2001 A Space Odyssey. For those who are not familiar it was a story of the exploration of space and the planet Saturn. This was my first introduction to AI in the form of Hal 9000 or Hal as the crew called this interactive machine. Hal had not only objective decision making but subjective decisions too as Hal was responsible for killing crew members over a disagreement in repair protocols of the EVA. Hal was evil AI. Still to this day I have memories of the circular vehicle traveling through space to the music of the Blue Danube playing through an incredible sound system (Dolby Sound didn’t come along until 1971 in another Kubrick movie, A Clockwork Orange).
Fast forward to 2016. What is AI today? AI is software that learns and adapts to the consumer’s behavior via live feedback. You may have heard of Watson, Hal’s big brother that IBM developed and beat the all time winner in Jeopardy. Watson and IBM are blazing trails never thought of in consumer habits, medical, education, science and entertainment just to name a few. Watson is on the forefront to how we will operate as humans in our daily life in the future, We will be putting down our smart phones as we know today and have a device as smart as Watson in the palm of our hands that will conduct all parts of your life including where you live, what type of home is best for you, what features and amenities you NEED in this home and so forth. We are in the grips of AI today. Have you ever used Trulia or Zillow? The Zestimates you have are based on AI and derived by algorithms of properties that have sold in your neighborhood. But, has Zillow or Trulia ever been in your home? Of course they have. If your home has been on MLS in the last 5 years or so they have. Did Zillow or Trulia know that you remodeled your home and added a pool in 2015? Maybe, if the public records in the municipality you live in share records easily which include a building permit recorded. But do these AI outlets know about the $2500.00 farm sink you added to the kitchen or the Italian marble floors installed in the living and dining rooms? How about the bamboo floors you added in the family room. The answer is NO unless you are or have been in MLS noting these upgrades.
AI in the real estate business has been a mixed bag. Here’s a real life example. In 2012 there were 6 foreclosure homes that had sold in your neighborhood. The former owners stripped the home of all appliances, the HVAC system, the cabinets, the water heater, garage opener and even the carpet. They were trashed. Did these homes negatively affect the value of your white picket fenced home with perfect everything? Of course. And now we see the flaws in AI related to real estate. Some homes were $30, $40 up to $100 thousand undervalued by this AI.
Today AI valuations are improving but they are completly accurate and if taken at face value it could cost you big time. Hence the need for human intelligence, your Realtor. Agents who are experienced can quickly discover the discrepancies between AI and an accurate value of your home putting in many cases thousands more in your pocket. Also, while someday the process may become accurately automated through AI it will never be a substitute for a potential buyer not wanting to tour the home they will spend their life in. This brings into play the security issue. The Gallup Poll knows that 3% of the population will be law breakers. Of that 3 % some will do really bad things and this is where the Realtor will always play an important roll in serving as the gate keeper of your home and thus adding a level of security most consumers may not be willing to part with in this AI world. Also, the buyers will still be skeptical about dealing directly with the seller and want an intermediary to negotiate on their behalf as a non-subjective, task oriented entity. AI will never take the emotion out of buying residential real estate that the consumer will reside in. NEVER!
AI will quickly become what the Android and Iphone became on June 29, 2007. The consumer will expect real estate agents to change and understand parts of the process will be automated and run algorithmically. Those real estate agents who will survive will have “upskilled” and focus on niche areas or be equipped to handle smart systems and fully understand that the continued practice cultivating a relationship with the consumer will be paramount for longevity.
Maybe we could get Watson to run for president and Hal as VP in this election cycle. Hal would say “it couldn’t hurt”.
If you have any questions or comments about AI and the real estate industry please respond, I love feedback (human intelligence).