As technology continues to take center stage in the 21st century, many businesses and industries are looking for ways to leverage Artificial Intelligence (AI) as part of their operations. Real estate is no exception – AI capabilities have facilitated a range of advancements for buyers and sellers, opening up countless opportunities that were unimaginable until recently.
What’s all the buzz about Artificial Intelligence?
Artificial Intelligence, or AI for short, has a longer history than you may realize. The term artificial intelligence was coined in 1956 by John McCarthy in reference to the creation of machines that could reason and think like humans. It has been around in some capacity since then, whether in sci-fi novels or as a buzzword thrown around Silicon Valley, as the next big revolution that was perpetually around the corner.
However, the time has now come when it’s set to disrupt the real estate market, and other markets, both in the USA and globally. Real estate investment has been a relatively cut-and-dry space with barely any change over the years so having a new technology that genuinely adds immediate value can create a lot of opportunity in the market.
From lenders trying to optimize their financing strategies, to brokers trying to enhance their listings, to landlords looking to make property maintenance easier – AI has something to offer almost every stakeholder in the market. While AI was a familiar world thrown around in the technology space, it was not common vocabulary for the masses. However, this all changed in 2022.
AI becomes a household word.
Last year, AI was catapulted into the global spotlight with the release of two new AI models, both developed by AI company OpenAI: ChatGPT and DALLE-2. DALLE-2 was software that could generate new artwork and images based on the entry of a text description, often rendered in impeccable detail. You could have a portrait of a woman done in the style of Leonardo Da Vinci generated in a few seconds, and it would take a lot of work to tell this art from his original depictions.
More impressively, however, was the deployment of ChatGPT, a tool created to answer any question conversationally. Simply ask it a question or tell it to generate some text on a particular idea, and it will instantly generate high-quality, accurate, and readable text. This could be a short 2-sentence reply to a lengthy 800+ word article on any subject. It’s a wild new world out there, thanks to AI, and new tools are being released every day (some built on the foundations of ChatGPT and DALLE-2) that are fundamentally changing how we work.
Opportunities for AI in Real Estate
There are multiple use cases for AI in the real estate industry that vary depending on the user and their background. We’ve covered some of the most obvious ones below to get you thinking.
- Writing Property Listings
Some investors and brokers consider the need for writing property descriptions for listing on publications or new sites a time-consuming chore, while others do not have the skill to do so. Well, that’s a thing of the past now. Using a tool such as ChatGPT, you can feed it keywords regarding your property, and it could generate a description for you.
- Lender risk and loan research
Lenders have historically had to do a lot of leg work to research the property as well as the investor when considering if it was prudent to offer them a loan. However, a lot of property data is public domain and can be used for analysis and predictive modeling at scale. Using AI, companies such as LoanSnap can sift through hundreds of thousands of records to help vet potential opportunities and the level of risk. In fact, they use AI to find the perfect loan option for an investor quickly and even use it to find the right borrower for a loan, including conducting background checks.
- Market research and forecasting
Popular real estate websites, such as Compass and Zillow, use AI to allow users to find better deals, better matching them with properties in line with their needs. They can also accurately calculate and predict pricing and fluctuations of the pricing of a property. Investors today have more access to information than ever before, and AI can filter and sort it to save time and effort while also potentially being more accurate with the analysis.
- Property Management
Smart home automation and predictive maintenance are examples of how AI can help property owners and tenants. Automation can be used remotely and automatically do specific tasks like switching off lights or HVAC units. Predictive maintenance can be used to predict what units or equipment might require attention before breakdown. These can save money and effort in the long run, especially for owners with multiple properties.
The above are just some of the most common ways that AI is disrupting the real estate industry, as it can apply to stakeholders across all aspects of the industry.
A word of caution
While the opportunities are broad, you should be aware of the current limitations of the growing technology. While it is growing and improving at an unprecedented rate, it still has limitations. For example, the text generated by ChatGPT generally cannot be simply copied and then used.
The user has to proofread it for accuracy and grammar issues, as it is common to find random mistakes in the output. This should be alleviated in the next release, but doubtless, it will take a few more iterations to get perfect. The same goes for research and prediction. While it can save time and effort by giving suggestions, always do background research on the recommendation you are considering to ensure its reasoning is sound.
Privacy concerns can crop up with smart home automation with more data being accessed by tech companies globally; there is a risk that should there be a breach in their security, your private data can easily be stolen. Additionally, owners who have access to the data of their renters from smart home devices could be another source of privacy concerns.
Real estate will be disrupted by AI
Just as with almost every industry, the introduction and growth of AI tools will only transform whole industries. Whether this disruption is largely favorable or negative (even OpenAI co-founder Elon Musk calls for regulation of AI, fearing it as a dangerous threat to humanity) is not very relevant, as it is inevitable.
The best thing you can do is to look at the numerous ways AI can help investors, lenders, and tenants and learn how it can make your life and work easier and more efficient. Just do so knowing that it’s not a perfect solution today and requires finessing and human intervention to get right perfectly, but it makes a great jumping-off point for a more productive, efficient industry.
