There has been significant hype since ChatGPT’s release by OpenAI. The interactive AI chat tool has captured the imagination of our society and culture, with adoption rates rivaling some of the most-used technology applications in history.
Microsoft’s $10 billion investment (see WSJ article Microsoft to Deepen OpenAI Partnership, Invest Billions in ChatGPT Creator) valuing OpenAI (the parent of ChatGPT, co-founded by Elon Musk) at $30 billion makes it one of the most valuable start-ups ever.
ChatGPT represents the incarnation of generative AI in a way that has touched our cultural consciousness and brought AI to life for all of us. The wake of its disruptive innovation will be long, and its impact will be felt across copious industries and enterprises.
What does ChatGPT have to do with luxury real estate?
But what do AI technologies like ChatGPT have to do with real estate, and in particular, what are the possibilities for the luxury real estate broker? In other words, if you are a real estate broker, you may ask, what’s in it for me?
Against that backdrop, one key area and low-hanging fruit to be revolutionized and ripe for disruption in the residential real estate industry will, I think, be around market and real estate reports. Today, real estate brokers either use existing templates or centralized marketing resources (this is just my opinion, based on experience with brands) from their brands to create their market reports.
But the reality is that they are sending the same exact report to every client. In some cases, there might be slight variations or changes, but in general, each client receives something that is not tailored for them.
Repositioning residential real estate on the balance sheet of a luxury consumer
I have often spoken at conferences and written about how the best way to engage the high-net-worth and ultra-high-net-worth luxury consumer is by creating a more portfolio-based strategic framework by positioning their residential real estate assets as part of their broader balance sheet.
This forces them to view their houses and homes through an investment lens. It further places the same assumptions they have when looking at their financial portfolio onto their residential assets. This process further transitions the broker’s position from purely transactional to being a true advisor around this specific part of the balance sheet.
Automating and scaling bespoke market reports by client and property
This is where applications like ChatGPT and generative AI will be extremely helpful in crafting bespoke market reports for each client customized around their property and portfolio in striking contrast to the existing habit of sending the same market reports to everyone in their CRM.
Today’s reports sent to their prospects and clients represent what I have called “hope marketing,” in which they hope they will get some response or engagement.
And while brokers could create a market report for each client that looks at each of their properties and does a quarterly market assessment of the property value in which they were involved from a transaction standpoint as well as the additional properties owned by their client, the reality is they don’t have the time or resources to do this, and it’s not scalable.
But with applications like ChatGPT/generative AI, imagine sending a report that includes the following and can be refreshed weekly and bespoke for each client around their portfolio of global properties:
- Property value changes, including showing how much the client’s investment has increased or decreased
- Market comps and transactions nearby
- Current and recent events within that geography
- Macro-political and economic trends that have implications (like interest rates)
- Events and other current situations specific to each property location
Every client would open their bespoke residential portfolio report as it was written specifically for them. This is a great example of how AI-driven applications will empower brokers to scale real value for their clients.
How brokers can resist being disintermediated by AI
But, you may also be asking, does this not also sow the seeds for disintermediating the broker? Those experts in AI tend to agree that AI/human formulas will be the ones that win the race versus pure AI. This means that AIs that learn from humans first will be the most successful ones.
Specifically, brokers’ local knowledge of which homes to include in a comp report is something an AI could never know from the beginning. But, if the brokers taught the AI which properties to include within a specific market for valuing a home, it could learn over time.
Here is a real example of me using this application to do what I have written about:
Here is what it wrote in 30 seconds:
Real Estate Report for 345 Madison Street, Sag Harbor, NY 11963
Introduction: This real estate report provides an overview of the property value changes, market comps and transactions, current and recent events, macro-political and economic trends, and events specific to 345 Madison Street, Sag Harbor, NY 11963.
Property Value Changes: The property value of 345 Madison Street, Sag Harbor, NY 11963, has increased over the past year. According to Zillow, the estimated property value as of February 2023 is $1,200,000, which is an increase of 7.6 percent from the previous year. This increase is above the average increase of 6.8% for properties in the Sag Harbor area. The property value is expected to continue to increase in the coming years due to the high demand for properties in this area.
Market Comps and Transactions: The average home value in Sag Harbor is currently around $1.4 million. Recent sales in the area have ranged from $800,000 to over $10 million, with an average of $2.2 million. Some notable transactions in the area include the sale of 31 Jermain Avenue for $10 million in December 2022 and the sale of 16 Hempstead Street for $2.2 million in January 2023.
Current and Recent Events: Sag Harbor has been experiencing a surge in popularity among homebuyers and vacationers in recent years, leading to increased property values. The town is known for its charming small-town atmosphere, historic architecture, and beautiful waterfront. In addition, Sag Harbor is home to various restaurants, shops, and cultural attractions, making it a desirable destination for both residents and visitors.
Macro-political and Economic Trends: The national and global economic and political landscape can impact the real estate market in Sag Harbor. One important trend to note is the rise in interest rates, which can impact the affordability of homes and decrease demand. However, Sag Harbor’s status as a desirable location (The AI writes this) may help mitigate rising interest rates’ effects.
Events and Other Current Situations Specific to the Property Location: 345 Madison Street is located in a desirable neighborhood in Sag Harbor, close to the waterfront and many of the town’s amenities. The property is also within walking distance of several parks and nature preserves, including Mashashimuet Park and Barcelona Neck Nature Preserve. The property’s location makes it highly desirable to buyers looking for a comfortable and convenient living environment.
Conclusion: In conclusion, the property value of 345 Madison Street, Sag Harbor, NY 11963, has increased over the past year and is expected to continue to rise due to high demand. Recent sales in the area have ranged from $800,000 to over $10 million, with an average of $2.2 million. Sag Harbor’s status as a desirable location may help mitigate rising interest rates’ effects. The property’s location in a desirable neighborhood close to many of the town’s amenities makes it highly desirable to buyers.
Not bad for 30 seconds of work, and since the AI learns from iterations, imagine what this report could look like after a quarter or year of teaching and more data.
Zillow vs. the brokerages
This article should hopefully be a clarion call to the executives of all the brokerages to start looking at integrating specific scenarios, use cases and applications for their agents. With their vast data infrastructures, enterprises like Zillow will be well-positioned to overlay these types of applications and offer them directly to the consumer, bypassing brokers and continuing to deepen their hold on the consumer.
Zillow and other data-rich platforms have the foundation in place to leapfrog the industry and lead with these offerings. However, the smart leaders in this field will focus on specific applications like the one in this article if they want to win against data Goliath platforms like Zillow.
As AI generative applications like ChatGPT become integrated with operations and systems across real estate firms, these tools will help scale bespoke services to clients and prospects in a way that will empower brokers to offer value in an ongoing way versus just helping in the transaction.
The brokers that will be successful in navigating the coming AI revolution will be the ones that learn what part of the value chain they can focus on and how to scale other offerings using these new technologies.
Finally, leadership at the top brokerage platforms will need to quickly pivot to charting specific applications in which they can carve out competitive advantages if they are going to match the vast data repositories of platforms like Zillow.