The latest “competition” that may have REALTORS® concerned is artificial intelligence (AI).
Last week C.A.R.’s Center for California Real Estate convened a panel of real estate’s heavy hitters to explore how the real estate industry can adopt and embrace artificial intelligence. Moderated by C.A.R. CEO Joel Singer, the panelists discussed the challenges and opportunities that lie ahead with regard to AI.
But in a recent talk at Citrus Valley Association of REALTORS®, CRMLS CEO Art Carter said that agents have the advantage over all the technology vying for consumers’ attention if they offer one thing: Value.
“This is the biggest purchase people are ever going to make. As long as you bring value to the transaction, you’ll be part of the transaction,” Carter said.
Some consumers are testing the waters, even though studies have shown transactions without an agent bring lower prices on average. Ron and Marilyn Hougardy of Thousand Oaks essentially recruited a computer to sell their four-bedroom home last December.
The couple was motivated by the 2% commission they would pay the artificial intelligence-driven service run byREX Real EstateExchangeinstead of the typical 5- to 6% paid to a human broker who would find buyers for them.
“It was kind of swimming upstream to make this decision, but we decided let’s try it out,” Ron Hougardy, a project manager, said. The home was listed for $880,000 and sold for $890,500 in January.
The bidders for the Hougardys’ home weren’t found by an agent adding the home to a multiple listing service, which feeds that information to Zillow, Trulia and Realtor.com.
Instead, computers were crunching over a hundred thousand data points in order to identify thousands of likely buyers and target them with ads on websites and social media.
“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,” said Jack Ryan, co-founder and CEO of REX Real Estate Exchange, based in Woodland Hills.
User Buying Habits
His computers find potential home buyers based on who is clicking on REX ads, recent purchase decisions people have made and their history of home ownership.
The brokerage has raised $25.5 million in funding to date, from investors such asBest Buyfounder Dick Schulze, Sun Microsystems co-founder and former CEO Scott McNealy, formerMcDonaldsCEO Jack Greenberg and Crate and Barrel founder Gordon Segal, the company said.
To sell a home, REX computers disseminate an initial batch of ads based on a hypothesis about where and whom the likely buyers are.
Jack Ryan (photo Courtesy of REX)
Of the people who clicked on the ad, the computer “can figure out what those 500 people have in common,” Ryan said. “Let’s go find more people who look just like those 500 people who clicked on the ad.”
If someone clicks on an ad, the computer will tailor future ads for that individual based on what their behavior on the website demonstrated about their interests.
REX also identifies potential home buyers and sellers by gathering data from retailers and businesses that show changes in people’s purchasing behavior. It’s common practice for businesses to sell data about consumers’ purchases to third parties and advertisers, privacy experts say.
“The fact that you bought a hammer itself isn’t very informative to us,” Ryan said. “The changes in the rate at which you’re buying home supplies is very important to us.”
That’s coupled with data about the individual’s homeownership history–whether he or she actually owns a home and has positive equity in the home in order to make a down payment on a new one. Likewise, if someone just purchased a big screen TV, it’s likely they aren’t about to sell their home or move into a new one.
REX also tailors ads by determining which features about a home or its surrounding community can increase its probability of selling faster or at a higher price point, Ryan said.
Computers analyze data about comparable home sales in the area. Then REX data scientists input the facts about the home for sale and introduce new variables to determine how they affect the probability the home will sell for a certain price in a certain number of days.
“It says to us, hey don’t know why but apparently the probability of success goes up by 3- or 4% if it’s within 2 miles of a Starbucks or something,” Ryan said. “There are dozens of pieces of data, each of which changes the probability by 1- or 2%.”
Though most of the homes it sells are under $1 million, REX sold a mega-mansion in Malibu for $44 million in February 2015, Ryan said. It’s currently listing another one in Malibu for $57.5 million.
Best With Entry-Level Homes
“The AI is better at selling a $500,000 dollar home because there’s much more data,” Ryan said. “To do probability theory you need lots of data points to say with 85% certainty or 92% certainty this is a buyer for a home.”
To sell mega mansions, REX has to scour the globe for similarly priced homes. After all, only so many people can afford a home that expensive. “There’s only 2,000 people in the world with a net worth over a billion dollars,” Ryan said.
The company then drops ads on the likely owners of those homes, identified by the IP addresses that consistently show up at that address. Whenever that IP address shows up at a particular social media platform or website, it will be served those ads.
REX is one in a number of alternative tech-driven real estate brokerages that charges lower fees and diminishes the role of the real estate agent. That has put pressure on agent commissions across the industry.
However, the brokerage said it still employs a team of 22 agents across offices in New York, Austin, Denver and Southern California. Once a buyer or seller agrees to work with REX, a staff member meets with them and serves as guidance during the process, Ryan said.
A REX staffer will also show up at open houses, sometimes bringing along a robot. That robot is programmed to answer 75 different questions, many of which an agent may not know off the top of their head, such as: When was the pool last resurfaced or the roof last replaced? Exactly how long does it take to drive to school?
Agents guide buyers and sellers through the closing process, including evaluating offers or writing an offer, inspection, title insurance, and escrow.
Ultimately, Ryan agrees with Carter: “When you’re selling the most important asset of your life, you want to know there’s a person who cares about you in addition to the computer,” he said.