The Promise of AI in Real Estate: What’s the Verdict?
Artificial intelligence (AI) as an idea is over 50 years old, but it’s only been in the last five years or so that AI has dominated the business world. Business communication, that is. Just as it’s hard to overstate the potential of AI to create large-scale change, it’s nearly impossible to overstate how much talk about AI in the news and in the marketing slicks created by news agencies public relations is hyperbolic and often disconnected from realities on the ground.
What about AI in real estate? In recent years, many companies have claimed to have used AI to “disrupt” space; I myself am affiliated with more than one of these companies. So what is, indeed, the verdict: Reality or rhetoric?
I’ll use my auteur perch to play both judge and jury here, but, spoiler alert, the jury is hopelessly hanging on. As a judge, I will say that so far we have seen a lot more rhetoric than reality.
In fairness to the AI community, let’s state at the outset the areas where AI has provided fundamental assistance:
- Automated Valuation Models (AVM) and Valuations In General
- Computer vision (CV)
- Process-oriented incremental upgrades
When it comes to AVMs and assessments in general, the ability to contextually analyze hundreds of millions of data points and associate them with particular groups of variables is fairly new and has certainly come about through advances in technology. ‘IA. Appraisals are at the heart of real estate because so much stems from the simple question, “What is this house worth?” While AVMs and the entire valuation industry were hurt by the rhetoric emanating from Zillow as they crumbled and burned with Zillow offerings, it was the unfortunate byproduct of poor business decision and as such cast unfair doubt on the AI.
Computer vision allows us to enter the previously closed portal: the interior of the house. With the proliferation of devices and the fantastic upgrades in the power of edge computing and “cutting edge AI”, genuine ratings and condition-adjusted service offerings can be seen as legit for the first time. .
Finally, the AI made it possible to ensure elements of the transactional process — in an incremental and “one-time-solution” manner.
Yet the promise of AI remains in the realm of “potential”. For the most part, real estate is a human-driven ecosystem that is always prone to error. Buyers and sellers do not meet in an open market characterized by complete transparency and immediacy. Cumbersome processes and vested interests continue to play an outsized role in residential real estate.
And with all the hubbub around “democratization” – a sine qua non in the history of AI – home ownership has become an impossible dream for about a third of Americans over the past five years. On these accounts, the AI failed to live up to the hype.
We all need to do more tire kicks. We need to understand the exact offerings and their precise business value before we rejoice in the advent of AI. The cycle of hyperbole must end and we must demand that those who say they are “game changers” actually make a difference. So far, some have, but most have not.
As such, for now, the game remains largely the same.
In other recent proptech news, April PropTech retrospective highlighted ESG initiatives and evaluation reform in the industry. Own also raised a $5.75 funding round for its property tax services.