Artificial intelligence the latest competition for real estate agents

Instead of hiring a real estate agent, Ron and Marilyn Hougardy essentially recruited a computer to sell their four-bedroom home in Thousand Oaks, California last December.

The couple is motivated by the 2% commission they will pay on an artificial intelligence-based service run by the REX Real Estate Exchange instead of the usual 5 to 6% paid to a broker who will find a buyer. for them.

Ron Hougardy, a project manager, said: “It took a lot of ups and downs to make this decision, but we decided to give it a try. The home was listed for $880,000 and sold for $890,500 in January, he said.

The auctioneers for the Hougardys home were not found by an agent who added the home to a multiple listing service that provided that information to Zillow, Trulia and Realtor.com.

Instead, computers are processing more than a hundred thousand data points to identify thousands of potential buyers and target them with ads on websites and social media.

“We can tell everyone who lives within 5 miles of your house,” said Jack Ryan, co-founder and CEO of REX Real Estate Exchange, based in Woodland Hills, California. that they have the basic means and motivation to want to buy your home.

He says his computer finds potential homebuyers based on people clicking on REX ads, as well as recent purchase decisions people have made along with home ownership history. their.

That resulted in 231 trades being closed since REX launched in 2016, according to the company. REX represents the seller as well as the buyer.

The brokerage has raised $25.5 million in funding to date, from investors such as Best Buy founder Dick Schulze, Sun Microsystems co-founder and former exec Scott McNealy, former McDonalds CEO Jack Greenberg and Crate and Barrel founder Gordon Segal, the company said.

To sell homes, the REX computer disseminated a series of initial advertisements based on assumptions about where and who the buyer was.

Of the people who clicked on the ad, “the computer in real time, like right now, can figure out what those 500 people have in common,” Ryan said. “Go find more people who look like 500 people who clicked on the ad.”

If someone clicks on an ad, the computer will tailor future ads to that individual based on what their behavior on the site indicates about their interests.

REX also identifies potential home buyers and sellers by collecting data from retailers and businesses that show changes in people’s buying behavior. Businesses often sell data about consumer purchases to third parties and advertisers, privacy experts say.

“Your buying a hammer doesn’t give us much information,” says Ryan. “Changes in how quickly you buy home appliances is very important to us.”

That’s coupled with data on the individual’s home ownership history – whether he or she actually owns a home and has positive equity in the home to pay for a new home. Likewise, if someone just bought a big-screen TV, they’re likely not going to sell their home or switch to a new one.

REX also tailors advertising by identifying what features of a home or its surrounding community might increase the probability of selling faster or at a higher price, Ryan said.

The computer analyzes data on comparable home sales in the area. The REX data scientists then input facts about homes for sale and introduce new variables to determine how they affect the probability that the home will sell for a given price. in certain days.

“It told us, don’t know why, but obviously the probability of success goes up to 3 or 4 percent if it’s within two miles of a Starbucks or something,” Ryan said. “There are dozens of pieces of data, each of which changes the probability by one or two percent.”

Although most of the homes the company sells are for less than $1 million, REX sold a large mansion in Malibu for $44 million in February 2015, Ryan said. It is currently listing another in Malibu for $57.5 million.

“AI is better at selling a $500,000 home because there is more data,” Ryan said. “To do probability theory, you need multiple data points to say with 85% or 92% certainty – this is a homebuyer.”

In order to sell huge mansions, REX has to scour the world for homes with similar prices. After all, only so many people can afford an expensive home. “There are only 2,000 people in the world with a net worth of over a billion dollars,” says Ryan.

The company then dropped ads about people who were likely owners of those homes – identified by the IP addresses that were always visible at that address. Whenever that IP address shows up on a particular website or social media platform, it gets served those ads.

REX is one of a number of alternative technology-based real estate brokerage firms that charge lower fees and reduce the role of a real estate agent. That has put downward pressure on agency commissions across the industry.

However, the brokerage said it still employs a team of 22 agents in offices in New York, Austin, Denver and Southern California. Once a buyer or seller agrees to work with REX, an employee will meet with them and guide them through the process, Ryan said.

A REX employee will also appear at the open houses, sometimes carrying robots. The robot is programmed to answer 75 different questions, many of which may not be clear to employees, such as: When was the pool last surfaced or the roof was last changed. ? 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.

“When you’re selling your life’s most important asset, you want to know that there’s someone who cares about you beyond your computer,” says Ryan.