Big data is just now being used in the world of real estate. Put to good use, however, using machine learning to crunch numbers and observe data, such as how homes are selling in an area, can greatly affect the buying and selling process. From setting prices to marketing, and even determining if you will be able to get a good mortgage, big data can streamline major parts of the selling process.
Setting a Price
Whether you are working with a real estate agent or simply selling your home yourself, one of the first big decisions to make is at what price to list your home. This can draw people to your house or drive them away. What if, instead of guessing or relying on a comparative market analysis (CMA) from your agent, you used big data? This would essentially take a CMA and scale it up.
Plug in prices from neighborhoods that are similar to yours. Use real-time and historical data rather than just current prices. A machine can constantly pull data, rather than relying on a human to do it periodically. This will provide a holistic view of not just current competition, but what prices were recently. Is there is a downward trend, and should you perhaps hold off on selling if possible? Could there be an upward trend, and could you set the price slightly higher in the hopes of taking part in a rising market?
The next factor is marketing. Obviously, you want to target the right audience. Is your home meant for someone fresh out of college, looking for a starter home? A family that might be looking to expand? The key is targeting these demographics. Utilizing big data and AI analysis, you can increase the relevance of recommendations to potential buyers. There’s little point in trying to market your house to the wrong group; it’ll just be passed over.
Using social media, real estate agents can see ages, behaviors, and milestones of potential sellers, targeting highly specific demographics based on the data collected from profiles and posts. Once the demographic has been identified, they can be served with personalized marketing for the home being sold.
Chatbots can also take the place of a real estate agent, reaching out to potential buyers or simply fielding questions. Because they are machines and don’t have to sleep, it takes some of the weight off of the real estate agent’s shoulders. If there are questions the AI can’t answer, it can then connect the prospective buyer with the agent.
Getting a New Mortgage
This is one area where AI has been already put to good use. Getting a pre-approval on a new mortgage is fairly easy. Your current income, debt-to-income ratio, the price you are selling your current home for — all this and more is taken into account. Arguably the largest part of the equation is having good credit score. Basically, you are asking a computer whether you are a good candidate for a large loan and whether you have the means and reliability to pay it back, which is what a credit score represents.
While it may seem somewhat impersonal, the computer is looking at the hard facts of your financial life. This is what matters to the banks, so that’s what matters to the AI.
REX Real Estate Exchange
Here’s a real-world example of a real estate agency already heavily using AI to help buyers and sellers. REX Real Estate Exchange, based in Woodland Hills, CA, is an AI-driven service that only takes 2 percent commission for selling a house instead of the normal 5 or 6 percent.
We can tell everybody who lives within five miles of your house who has the basic means and motivation to want to buy your home,” CEO and co-founder Jack Ryan told CNBC.
Their machine learning starts with sending out an initial batch of ads. In real time, it looks at what all the people who click on the ad have in common, and then tailors ads for that person based on their interests and behavior on the website. This is helpful for future sellers if the person is not interested in that specific home.
The computer will also factor in homeownership history, including whether their current home has positive equity, which can factor into the price range of homes presented. If they have recently made a large purchase, the AI will not show ads, as the person is not likely to make another big purchase soon.
While most of the heavy lifting is done by a machine, there are still agents that will appear for showings and open houses. Even then, though, they bring a robot that will answer the top 75 questions about the house that the agent might not know. The agents, however, still draw up the contracts, evaluate or write offers, navigate the closing process, handle title insurance, and manage the inspection and escrow. It will be up to agencies to fill in the tech skills gap as more real estate agents use machine learning. They need to know how to utilize it properly, or they could be doing a disservice to their clients.
Does letting an AI take the reigns of handling major parts of selling a home work? The results are pretty self-explanatory: REX sold 231 homes between 2016, when the AI was implemented, and March 2018.
About the Author
Avery Phillips is a freelance human based out of the beautiful Treasure Valley. She loves all things in nature, especially humans. Leave a comment down below or tweet her @a_taylorian with any questions or comments.
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