From the Head of the Central Arizona Association of Realtors®: Hot Take on AI in Real Estate

Writing to agents about the impact of AI, Dennis Riccio, president of the Central Arizona Association of REALTORS®, offered a helpful take on the use and future of the technology in various stages of our deed transactions.

Let’s look at the main points that came up involving the residential side of real estate.

The President Says…

Artificial intelligence (AI) tools are becoming part of daily real estate practice. Dennis Riccio notes forerunner tech, like price predictions and pop-up chats.

Now, AI is digesting massive data inputs to forecast market trends with detail and precision. Many brokerages are putting AI to use to produce optimal pricing suggestions for sellers. Close to three-fourths of real estate firms, Riccio notes, are currently at some stage of AI adoption. Some have AI voice assistants to field calls. And eight out of 10 individual agents use AI to help write listing descriptions, marketing materials, social media posts, and email blasts.

 Here are a few things Riccio wants these agents (and us) to know:

AI Is Winning Over the Appraisal Industry

Dennis Riccio notes that the president of the Arizona Association of Real Estate Appraisers is a fan of ChatGPT. Appraisers might use AI for entering data into appraisal forms, and to find errors or inconsistencies.

Appraisers, Riccio finds, are “becoming AI-augmented professionals.” The value in this is speedier reports and, optimally, more precise and thorough property evaluations.

Some automated valuation models, according to Riccio’s research, already offer pricing forecasts that regularly fall within 2 – 3% of the actual sale prices.

Further, AI can quickly observe patterns in market trends and show agents what locations, and even which homes, will likely appreciate most.

Next up, look for AI to include evaluations of climate risk, migration patterns, and more.  

Riccio believes AI will soon be able to write parts of the reports for appraisers. A licensed human, he says, will always finish the work, and hold final responsibility for determining valuations.

AI Can Catch or Rule Out Compliance Issues

AI can tell professionals when to take another look — or when they won’t have to. Riccio gives these examples:

• Real estate companies are deploying AI to flag things like incomplete names in contracts, or nonstandard terminology.

• Title companies are deploying AI to run speedy checks for liens or title defects.

• Lenders are using automated processing and may allow bypassing of a full appraisal when AI determines the risk is low. AI can check all details for a loan underwriter with precision, and unprecedented speed. It can also flag issues that call for an extra dose of diligence.

Brokerages can also use AI to avert accounting errors.

On the Other Hand, AI Can Enable Fraud

Riccio sees real estate scams and deed fraud taking an alarming turn, given the capabilities of machine learning. AI enables:

• Homeowner impersonation to transfer deeds.

• Deepfake video and voice cloning scams.

• Bogus email communications urging people to wire money to manipulators.

Riccio recommends that all agents urge their clients to visit their county recorders’ websites to sign up for free, automatic title alerts, where available. These systems tell deed holders whenever something is recorded against their titles, so they can move fast to minimize the damage done by con artists.

Riccio also notes that title companies may require AI-based fraud detection, both for in-person and remote online notarization platforms. These AI tools run tests to see, for example, if people in videos are really human.

Professional Ethics: Put to the Test

An agent’s competence now demands a basic understanding of tech tools on the part of any agent who uses them. Here’s what professionals need to know:

• AI can make mistakes. Check listing text carefully. Avoid false or misleading advertising.

• Using AI to write legal documents, change legal templates, or offer legal advice is unauthorized practice of law.

As for the agent’s duty of confidentiality, every professional needs to know if their AI platforms are storing the user’s input for machine learning. Only feed the system information “that you’d be comfortable being public,” warns Riccio. Pasting in a client’s inspection report or financial details to get a summary? Caution!

Riccio also spends some keystrokes on the right and wrong ways to use enhanced graphics. 

Virtual decluttering and staging is allowed. Adjusting pictures so that they misrepresent a home is not. Arranging the interior décor for illustrative purposes? OK. But the agent may not embellish the photos with landscaping backdrops, cover up defects, or otherwise add or delete significant features.

Helpfully, the industry has an approved watermark identifying virtual staging. The agent can also include the phrase “virtually staged” in the listing.

On Fair Housing: “This Is a Critical Ethical Area”

Riccio acknowledges that machine learning digests all kinds of inputs, including biased information, and replicates it. It may miss subtle linguistic cues the industry has ruled out because they may implicate bias: language apparently preferring families, for example.

And when filtering prospective clients, any kind of bias against particular social groups is unacceptable, says Riccio. So is any system that’s coded to steer some buyers out of certain markets. Any AI tools or their products have to be “vetted for compliance,” says Riccio.

The real estate expert is a fan of disclaimers telling clients the company or agent is using AI, and is committed to adhering to fair housing rules.

What’s Coming Next?

Watch for all kinds of possibilities. These examples appear in Riccio’s memo:

• An AI-based facilitator for all that happens with a settlement and escrow account. The processes include messaging parties, scheduling inspections, and so forth.

• Smart contracts that ensure compliance between parties, according to the terms of the documents they sign.  

• Multilingual support.

• AI systems carrying out home searches and offering narrated, augmented-reality tours.

• AI selecting which website guests are ready to buy, and which past clients could be most ready to move and receptive to the company’s marketing.

AI’s digital assistance, number-crunching, and analytics save time and costs. (Riccio points to Morgan Stanley researchers who forecast $34 billion worth of potential cost savings in real estate by 2030.)

Dennis Riccio’s Bottom Line on AI

We all know that an arm’s-length deed transaction is a paper chase. The process can be tamed by AI, and the transformation is already in progress. Riccio brings up an example of a major company (Colliers) attempting to work around an outage. An AI-based program equipped with optical character recognition went through a heap of papers nearly instantly. The human staff would have needed a week for the same result.

Riccio is “excited” about outcomes like that, and the “insights these tools bring.” At the same time, he adds that agents continue to have skills machines cannot replace.  

“My message to you is to embrace AI’s advantages, don’t be afraid of it, but also stay educated and cautious.”