AI – Artificial Intelligence – has emerged as the buzzword of the moment. Advocates say it will enable users to access more information with greater speed than ever before, an advance with radical implications.
AI, says Bill Gates, “will change the way people work, learn, travel, get health care, and communicate with each other. Entire industries will reorient around it.”
And one of those industries, to be sure, will be the real estate industry.
AI and The New Voice of Computing
We have long thought of computing in terms of ones, zeros, and complex coding, but AI takes a different approach. Consider Long & Foster. The huge real estate brokerage introduced Holmes in 2021, a real estate bot powered by Roof AI.
“The virtual bot,” said the company, “will provide a conversational experience to personalize every customer interaction, providing immediate and responsive service with real-time, self-serve support.”
The critical word here is conversational. With AI, computer interactions will increasingly resemble familiar systems like Siri (Apple) and Alexa (Amazon). You talk, it responds, the byproduct of several evolving technologies, including:
NATURAL LANGUAGE PROCESSING (NLP) helps an AI system accept and respond in plain language. Users who have tried such public-facing AI systems as ChatGPT or Bard enter simple, plain language, prompts. These are typed or spoken inquiries rather than complex coding. Users get replies in equally simple, plain language. In effect, we’re on a path that will ultimately lead to something similar to the interactive computers shown on Star Trek and other futuristic shows.
ARTIFICIAL INTELLIGENCE itself is not easy to explain. Three experts in the field – Noam Chomsky, Ian Roberts, and Jeffrey Watumull – said in a recent New York Times article that AI systems “take huge amounts of data, search for patterns in it and become increasingly proficient at generating statistically probable outputs – such as seemingly humanlike language and thought.”
“GENERATIVE ARTIFICIAL INTELLIGENCE OR GENERATIVE AI,” says Wikipedia “is a type of artificial intelligence
(AI) system capable of generating text, images, or other media in response to prompts. Generative AI models learn the patterns and structure of their input training data, and then generate new data that has similar characteristics.”
If you ask an AI system “Who was Andrew Carnegie?” it does not have a file somewhere with this information. Instead, it scours its database – which includes far more text than is found in the Library of Congress – and pulls relevant material together to build an essay-like response in seconds.
AI does this by creating content based on which words are most likely to come next in a response, information acquired by viewing huge volumes of data. In a sense, AI is somewhat like a long-married couple who complete each other’s sentences.
AI and Practical Real Estate Benefits
Technology – so far at least – has generally meant job changes coupled with greater productivity.
As former Treasury official Steven Rattner wrote recently in The New York Times, “Higher worker productivity translates into higher wages and cheaper goods, which become more purchasing power, which stimulates more consumption, which induces more production, which creates new jobs. That, essentially, is how growth has always happened.”
And some of that consumption, of course, will be in the form of more home sales, bigger leases, and new mortgages.
- Looking for an apartment?
Call a broker or go online, and an AI system might answer the phone, respond to all of your questions, and suggest nearby options in your price range. The responses will be so fast and relevant that the caller may think they are talking to a person. - Want more broker time and productivity?
Prospective homebuyers can go online to narrow down possible choices. One result is that computer-savvy real estate licensees have additional time to do more transactions. According to the National Association of Realtors, in 2022 buyers typically looked at five homes before buying. Of these five properties, four were viewed online. In comparison, in 2021 buyers were likely to check out eight properties and — going back further – in 1987 purchasers typically saw 12 homes. With less physical viewing brokers have more time to do additional transactions. - Manage 3,000 apartments?
An AI system might track required maintenance for each unit and provide a list of preventive tasks every morning – with budgets and vendor lists. And then call to discuss the day’s needs. - Offer appraisals?
Appraisers are increasingly challenged by AVMs – automated valuation models – and will be more challenged as AI enters the marketplace. AVMs are fast, save money, and are based on data from millions of valuations, but critics argue they’re not a replacement for human eyes (or human noses). - Wonder how much financing you can afford?
An AI system response might include a series of mortgage options, adjusted for credit and income, down payment assistance, opportunity zone locations, and specialized employment options for teachers, nurses, and first responders.
How Real Are AI Worries?
It might seem as though AI will change the world and that might be the case. However, some of that change – especially in the short run – could produce wide-ranging, negative effects.
“If generative AI delivers on its promised capabilities, the labor market could face significant disruption,” according to a research report from Goldman Sachs.
How significant? About 300 million jobs worldwide could be automated, according to the Goldman Sachs study. Jobs potentially on the line include 46% of all office workers, 32% of all management positions, and more than a third of all architecture and engineering jobs.
But realistically, AI will take years to fully impact the labor market plus it will produce new job and economic opportunities.
A June report from McKinsey & Company explained that “Generative AI’s impact on productivity could add trillions of dollars in value to the global economy. Our latest research estimates that generative AI could add the equivalent of $2.6 trillion to $4.4 trillion annually across the 63 use cases we analyzed – by comparison, the United Kingdom’s entire GDP in 2021 was $3.1 trillion.”
Labor and management are already debating what role AI should play – if any. In June, for example, the Directors Guild of America (DGA) and the film and TV industries agreed in a tentative contract that “AI is not a person, and that generative AI cannot replace the duties performed by members.”
Hallucinations
Given that AI is a remarkable technology, it has a flaw that’s hard to overlook: Its responses are sometimes wildly incoherent, misleading, and yet beautifully written and superficially credible – a dangerous combination.
The experience of several New York attorneys illustrates the problem.
They used AI-generated briefing material in a passenger lawsuit against a commercial airline. It looked great. The brief listed case after case to support passenger claims. Those cases, unknown to the attorneys, were entirely fictional, no more real than Sherlock Holmes, examples of so-called “hallucinations” that AI systems sometimes generate.
The immediate result was that the airline won the case while the passenger’s attorneys were criticized and fined by the judge. The bigger outcome is that no one wants to be the next person to use AI without confirming the information it provides.
So yes, AI is part of real estate’s future, but the revolution may not come as quickly as some might have hoped. There remain wrinkles and tangles to be worked out as well as regulations and standards to be written. Just ask a few New York lawyers.