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The real estate industry is no stranger to testing new technology and strategies to make life easier for investors and practitioners alike. The use of artificial intelligence (or “AI”) technology is no different in this regard. Advancements in artificial technology have been well-documented over the past few months and many real estate agents have been praising AI’s ability to make their jobs easier and more efficient. Specifically, Open AI’s “ChatGPT” chatbot has been the primary platform used. The early reporting leaves little doubt that products such as ChatGPT can be effective tools to analyze and practice real estate.

Since its launch in November 2022, ChatGPT has been lauded as the next sensation in AI products. Before explaining what ChatGPT does, it’s helpful to briefly explain what artificial intelligence is. Essentially, AI, as we understand it today, is a machine’s ability to perform tasks that are typically performed by the human brain (hence the term “machine learning”). Rather than simulating all aspects of human intelligence like robots in movies (see “Terminator” for the scary version, see “Star Wars” for the happy version), machine learning refers to software algorithms that are able to learn, becoming more effective at carrying out specific tasks as they are exposed to more information. Society is no stranger to machine learning, as it powers a large number of tools used in our everyday lives such as Google searches, Amazon shopping, Netflix viewing or Uber riding. The latest breed of AI applications, in theory, offers society the chance to use it for just about any task we can think of.

ChatGPT is a conversational interface created by the AI research and deployment company, OpenAI. Chat-GPT uses OpenAI’s GPT-3 natural language processing architecture to filter through internet data and sources to reference as its knowledge base. Users can ask ChatGPT a question or instruct it to perform a certain task, such as language translation, summarization, text completion, mathematical analysis, question-answering and human dictation.

Real estate agents and other real estate professionals have discovered the utility of ChatGPT and have utilized its features in their businesses on a daily basis. These agents contend that ChatGPT has improved their efficiency by reducing the amount of time spent with written work and property-based calculations. Real estate agents have used ChatGPT to look up the permitted uses for certain land and zones, and to calculate mortgage payments or the return on an investment for their clients (which typically involve the use of formulas and mortgage calculators, an often time-consuming process). One agent touting ChatGPT’s utility recently noted: “I can be in a car with a client when they ask me what their mortgage payments might be. I can ask ChatGPT what a mortgage payment would be on a $14 million purchase at a 7.2% interest rate amortized over 25 years with two origination points at closing, and in two seconds, it gives me that information. It also explains how it got the answer. It’s amazing.”

Despite the excitement behind the ChatGPT’s utility for real estate professionals, there are a few issues and limitations. As such, it doesn’t appear that ChatGPT will replace real estate agents, attorneys and advisors anytime soon. ChatGPT and other AI platforms should be viewed as tools rather than a catch-all solution to replace one’s own critical thinking and analysis. One real estate executive explained: “ChatGPT may help save brokers time when writing listings or responses, but automating all client responses may not be the best tactic because generating leads and closing transactions typically requires a personalized approach.” ChatGPT, at least for now, cannot replace personal connections, a critical part of the real estate industry. It’s also important to note that ChatGPT cannot do it all. For example, ChatGPT was asked the following question and after a few seconds, sent back the following answer:

Q: What is the fair market value of [X Property, New York, NY]?

A: As an AI language model, I don't have access to up-to-date real estate market data, and even if I did, it would not be ethical or legal for me to provide a specific valuation for a property. The fair market value of a property is determined by various factors, such as location, condition, size, age, and local market conditions. A professional real estate appraiser or a licensed real estate agent would be better equipped to provide a reliable estimate of the fair market value of a specific property based on their knowledge of the local real estate market and a thorough analysis of the property's characteristics.

Any real estate professional using ChatGPT should be wary of its limitations and cross-check the information received from it. This will avoid sending clients into the mine-field of errors and misinformation that could arise when relying solely on AI platforms for information. Either way, it looks like the use of ChatGPT and other AI platforms in the real estate industry is inevitable. Despite the enthusiasm, real estate practitioners should treat these products simply as tools and not as a replacement for actual human intelligence to protect both their business and the business of their clients.

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By: Michael A. Mulia