The process of buying homes in the U.S. is undergoing significant transformation.

New regulations regarding how real estate agents are compensated are causing a shift among housing experts and in the tech industry. Potential homebuyers, already facing steep prices and closing expenses, are now left to consider the costs of hiring an agent.

A commission of 2-3% on the average home price of $416,700 could exceed $10,000. As consumers increasingly use technology for everything from filing taxes to booking tickets, many entrepreneurs see this as a chance to eliminate the middleman, though some consumer advocates warn that this might be premature.

Emerging AI Technologies in Real Estate

Flyhomes, a real estate tech company based in Seattle, has launched what it calls “the world’s first AI-powered home search” since June.

“Our design mimics a conversation with a local real estate agent, offering answers to perhaps 80% of inquiries instead of everything,” explained Adam Hopson, the chief strategy officer of Flyhomes.

According to Hopson, the tool provides immediate access to information that traditionally requires a human agent’s research, such as details about permits and proximity to power lines, thanks to extensive data integration.

AI is also accessible during high traffic times for potential buyers, like late nights or weekends, when human agents may be unavailable. Raffi Isanians, co-founder and CEO of Modern Realty, branding itself as an “AI Realtor for Home Buyers,” asserts that the search phase is just one part of the home buying journey. Buyers primarily seek assistance with pricing and negotiation, which Modern has tailored its approach around.

“By automating other tasks, we enable our agents to excel specifically in negotiations and pricing. While typical agents handle a handful of transactions per year, our agents complete multiple transactions daily,” Isanians stated.

Austin-based company Eden operates similarly, allowing buyers to use only the services they need, bringing costs down. Experienced agents prepare buyers’ offers at no charge, with charges applying only for negotiation and closing support.

With a forward-thinking outlook, co-founder Luke Mizell expressed belief that “within five years, all functions of a buyer’s agent will leverage AI.” He emphasized the untapped potential of AI in real estate. “Soon, tools like Siri will integrate with systems like ChatGPT, making consumers comfortable relying on AI for every aspect of buying a home. In five years, AI will manage inquiries, draft offers, negotiate, and even schedule maintenance for home appliances, all without charge.”

AI — The Future or Just an Expansion?

The future may hold many changes, but for now, many advanced tools still depend on human input for certain parts of the buying process, noted Brooke Anderson-Tompkins, founder and CEO of bridgeAIvisory, a consultancy specializing in AI.

Having transitioned from a lengthy career in mortgage lending to focusing on AI strategies, Tompkins acknowledges the potential impact of artificial intelligence across industries. However, she emphasizes that current developments reflect “augmented intelligence,” where humans and machines collaborate in processes. This is a positive approach, she believes.

In such a critical transaction, where human expertise is paramount, Tompkins highlights that the true benefits an agent offers may only become evident when complications arise. “When issues pop up, you will need the insight and connections of a knowledgeable agent,” she elaborated during an interview.

For those wanting to sidestep agent fees, consulting a certified housing counselor or attending a beginner homebuyer seminar could be valuable alternatives, suggested Sharon Cornelissen, director of housing at the Consumer Federation of America.

However, Cornelissen urges vigilance regarding the risk of receiving “hallucinations” from AI or augmented intelligence tools. This term refers to the phenomenon where AI systems yield incorrect or misleading responses to inquiries.

“Acquiring a home is typically the largest financial decision for most individuals,” Cornelissen stressed. “It’s crucial to steer clear of erroneous information while making such a substantial investment.”

It’s crucial for consumers to understand how their personal data will be utilized by these systems, as highlighted by Tompkins. When purchasing a home, individuals often have to provide a wide range of sensitive information, such as bank statements, credit scores, and social security numbers, making this inquiry especially significant.

However, for many individuals who have grown up using the internet, placing trust in a bot with their private information may feel natural. According to Isanian, millennials tend to “look online” and inquire, “are there other options available? This is where we step in.”