How AI integrates into the real estate sector is still a question to be answered. Judging by the uptick in the proptech sector and API-based data solutions, AI seems to be the rocket fuel the real estate sector has been looking for. But there’s a catch.
AI-powered solutions are facilitating streamlined property searches. They offer neighborhood assessments replete with school and crime data and predict property market trends well into the future to the delight of real estate agents, brokers, investors, lenders, and insurers.
However, AI is also finding, creating, and spreading inaccurate data and fraud. Perhaps the AI-fueled proptech rocket should slow down before there is a fatal error.
Problem 1: AI’s Propensity to “Fake It”
As much as AI finds valuable data, it also is guilty of conjuring fantasy. An article in the esteemed journal “Nature” describes how AI was used to generate convincing yet fake data sets. In a study that compared two surgical procedures for an eye condition, researchers found that some of the data had been fabricated by AI.
AI systems can be used to generate fake data that directly contradicts reliable data, such as property data, neighborhood data, and climate data. But that’s not the only problem that AI could bring to the real estate sector. There are sophisticated frauds and scams to watch out for that use false documentation and even false identification.
What’s more, AI has been accused of bias. If the data contains biases, the model may produce biased predictions or recommendations. For example, if historical sales data contain biases against certain demographics or neighborhoods, that will affect real estate investment decisions.
Problem 2: Frauds and Scams
Phishing scams are nothing new, but AI is adding to their sophistication. Fraudsters are using AI-generated emails and messages to extract personal and financial information from unsuspecting agents and consumers.
According to Tom Cronkright, co-founder and executive chairman of CertifID and CEO of Sun Title, who was interviewed by Housingwire’s Editor in Chief Sarah Wheeler, fraudsters are using generative AI to copy somebody’s voice, write emails, and to make phone calls. These communications often request action such as the sending of downpayments and wires.
AI systems are used to create fake identities for real estate agents or clients to steal money or sensitive information. According to Cronkight, there are cases of seller impersonation fraud. Seller impersonation is when a fraudster impersonates a property owner. They create a fake ID and solicit a listing from a broker or agent. The process advances through closing at which time the fraudulent seller closes the deal remotely with an out-of-state notary and their fake ID. The real property owner only finds out about the fraud months or years later.
AI systems can be used to create fake property documents, such as deeds or titles, to try to transfer ownership of a property. Other times, they may use false information to obtain loans against a property they do not own. Deed forgery, title transfer scams, and fraudulent property documents are all aided by AI.
Problem 3: Cyber Attacks
Cybercriminals use AI to launch ransomware attacks on real estate companies, insurance companies, and mortgage lenders.
According to SecureWorld, on November 21, 2023, Fidelity National Financial (FNF), one of the largest title insurance providers in the United States, suffered a cyberattack. The breach affected title insurance, escrow, mortgage transactions, and technology to the extent that the company shut down its systems for days. The fallout was delays and cancellations of real estate closings resulting in financial losses for FNF and its customers.
With all the advantages that AI brings, there is increasing vulnerability in the real estate industry. Conducting real estate transactions requires managing the apex where data meets legal documentation. So, how can the risks of AI be mitigated so that there is no loss of trust between real estate agencies and their clients?
Let’s address each problem in turn and look at possible mitigation measures.
Solutions to Problem 1: Misinformation and Fake Data
The problem of fake data can be solved by ensuring the sources of that data are reliable. Real estate professionals and service providers can choose established companies, like ATTOM, as data and service providers.
Even then, human oversight is necessary to fact-check data and make sure documents and IDs are authentic during everyday business transactions. AI-ready property data may be a way for companies to leverage automation and save labor costs, but reputations and bottom line will be saved with best practices to mitigate the risks of misinformation.
A good strategy is to use a mix of human resources and data solutions to detect and report fake information. AI systems can detect and flag fake information; however, just like the role of AI is emerging, automated solutions to the problems of fakes are still nascent.
Solutions to Problem 2: Frauds and Scams
Human verification and AI-powered anti-phishing tools can team-up to detect and prevent malicious emails and documents. Security protocols can be established and regularly updated, and the identities of agents and clients can be verified using multi-factor authentication or other secure methods.
AI systems that detect fake property listings and other documents are based on patterns or inconsistencies in the data. Again, human oversight should include verifying the identity of sellers or buyers to ensure they are legitimate, and the property is currently listed. Google Maps can confirm the existence and location of properties. Because of the ability of AI to aid fraudsters, human intervention cannot be dispensed with entirely and is a vital component of risk mitigation.
Solutions to Problem 3: Cyber Attacks
Security protocols to prevent ransomware attacks, including data backup and recovery plans, network segmentation, and intrusion detection systems, are essential measures for any online systems that handle sensitive data. While security measures like encryption, access controls, and monitoring tools may not always prevent unauthorized access to sensitive data, they ensure a rapid return to operation. AI systems designed to prevent ransomware attacks and security procedures should be regularly reviewed and updated to stay ahead of emerging threats.
Your Reputation and AI
AI is transforming various industries, including real estate. It is facilitating transactions, analyzing data, predicting market trends, powering targeted searches, and strengthening portfolios. However, while AI brings many benefits, it also poses certain risks. Companies need to adopt new safety and verification measures to mitigate these risks.
Protect your clients and your reputation by only doing business with reputable, established solution providers like ATTOM for your real estate and property data needs.