Tips for Using AI To Buy a Home

Find Out How AI Can Ease and Speed up the Homebuying Process

Fact checked by Vikki VelasquezReviewed by Andy SmithFact checked by Vikki VelasquezReviewed by Andy Smith

Artificial intelligence (AI) can help speed up time-consuming tasks like creating a travel itinerary, writing a resume, or planning a social media calendar. But did you know that you can also use AI to help you in the homebuying process? 

From finding and analyzing great deals to crafting a compelling offer and creating floor plans, there are plenty of use cases for AI in real estate transactions. Find out how artificial intelligence can help you purchase a home. 

Key Takeaways

• Using AI can help streamline some aspects of the homebuying process.
• There are many use cases for AI analysis, including finding a home, writing an offer, exploring lending options, and more.
• Homebuyers should fact-check AI outputs, as some information may not be up-to-date.
• You should still engage the help of qualified licensed real estate professionals for the best outcome for your real estate transactions.

How AI Tools Can Help Homebuyers

As a prospective homebuyer, you can use AI in many stages of the buying process. The key is to understand what you want an artificial intelligence to do in your transaction.

“AI tools have already proven to be very good at providing tailored insight for homebuyers,” says Matt Parker, CEO of the startup Alokee, which uses AI to assist buyers and sellers with agentless real estate transactions. “AI can provide information to augment what buyers can find on real estate search sites like Redfin and Zillow.” 

He adds that “AI can be invaluable in helping buyers find the right neighborhood that will meet their unique needs and preferences. For example, buyers can ask an AI tool questions like: ‘Which community has the most walkable access to diverse, high-end dining?’ to help them narrow their search and find a home that will suit their needs.”

Tip

The more specific you can get with your prompts or questions, the more helpful your results will be.

Property Valuation and Pricing

Depending on how you structure your prompts, you can probe for information on real estate trends in certain markets and extrapolate some predictions based on past trends, known as predictive analytics. 

Here are some examples of prompts that can help you with property valuation and pricing:

• Median home prices
• Affordable markets in a given region or state
• Prevailing market trends

Property Search

You can enter details about your personal financial circumstances and preferences to find an area or region that will meet your needs based on certain criteria. 

For instance, if you’re looking for 55+ communities in Florida with on-site golf course access, an AI chatbot can dig up several options for you in just a few seconds. You could also ask for the best financing options based on your annual income and desired monthly housing budget. 

Here are a few other sample prompts:

• Walkable areas with public transportation options
• Regions with affordable waterfront properties 
• Top-ranking school districts within a given area
• Area with the lowest crime rates
• Advice on the ideal mortgage type, maximum housing budget, and market based on your financial circumstances and preferences

Mortgage Application Process

Imagine spending a few years preparing to buy your first home and then finding out at the pre-approval stage that you’re one or two requirements away from getting approved for your home loan. Perhaps your credit score is a few points below the lender’s criteria, or you lack a sufficient job history. You might even be short on your down payment. 

AI can help you avoid these nasty surprises. You can describe your financial circumstances to an AI chatbot and ask for the likelihood of loan approval for a home in your price range, plus get tips on how to improve your approval odds.

The chatbot may recommend focusing on compensating factors like a larger down payment, adjusting your price range, improving your credit score or even getting another type of loan that will work better for your situation. 

Tip

Getting an idea of your approval likelihood can save you time and money before engaging a lender.

Writing Assistance

Yes, there are plenty of resources on the web about buying a home, screening real estate professionals, and drawing up an offer, but an AI engine can provide customized suggestions that are specifically tailored to the circumstances in question.

For example, you can describe a scenario where a home needs renovations, but you’d like to use as little of your own cash as possible to make the repairs. 

Suggestions may include using an FHA 203(k) loan or another type of renovation loan, adding contingencies, requesting the seller complete some repairs before closing, asking for closing costs, or a combination of all approaches. To create a more compelling offer in this transaction, you could also use an AI prompt to craft a persuasive letter to accompany your offer. 

Another use case for AI would be to help you screen the professionals you’ll work with during the buying process. AI chatbots can help you generate questions to ask real estate agents, title service providers, lawyers, lenders, and home inspectors. Again, the more specific your inputs, the better your outputs. 

For instance, you can explain any concerns you have about buying a wood-frame home in a warm, humid place or an older structure that requires renovations. You can ask AI to analyze common renovation needs for certain style homes built in a given time period.

Sample prompts may include:

• What are common repairs required for bungalows in the Midwest built in the early 1900s?
• Which states have the largest concentration of Cape Cod homes?
• What are the best ways to preserve the features of a graystone home? 

From there, you can look for real estate professionals who have experience in these matters. Additionally, you’ll have enough questions queued up so that screening goes quickly and easily. 

Getting ready to buy your first home? We’ve created a guide to walk you through each step so you can make smart financial decisions in an unprecedented market. Check out “Owning It: How To Buy a House“ to learn more. 

Other Uses of AI in Real Estate

AI can be helpful in other aspects of real estate. Here are some additional use cases to note:

• 3D modeling: Tools like Matterport can turn scans into interactive high-quality 3D models and virtual tours of physical spaces.
• Smart home devices: These tools use voice control and natural language processing (NLP) to control and manage a home. Capabilities can include energy management and optimization and machine learning to adjust settings to users’ habits and preferences about the home.
• Real estate sales and property management: Chatbots and virtual assistants facilitate customer service interactions and automate routine tasks.

Caveats

AI has the potential for use in many real estate applications. However, these technologies are only as effective as the user inputs and datasets they’re given. For this reason, AI outputs can be prone to errors and inaccuracies.

Inaccuracies

Always fact-check the information you receive from your AI chats. Most AI tools do not have access to real-time data for real estate markets, others may not have access to information updated within the last year or two and in some cases, more. Work with experienced professionals to help you confirm or refine the guidance you’ll receive from AI.

Limitations

Depending on the platform, you may not be able to ask certain questions that might violate the Fair Housing Act. For example, neither ChatGPT nor a real estate agent will tell you whether your local elementary school is a “good school.”

At one point, there were plug-ins for ChatGPT from platforms like Zillow and Redfin that allowed deep analytics of their real-time data, but those have since been removed. It appears that restrictions prevent similar ones from being published on the platform.

Availability

Because of the limitations above, it may be difficult to get straightforward or accurate responses about some real estate trends from platforms like ChatGPT or Google’s Gemini. However, companies in the real estate space are already developing and using proprietary AI solutions, integrated within their own platforms, to overcome these limitations.

Is It Legal To Use an AI Assistant To Write an Offer Letter for a House?

Yes, it’s legal to use AI to write an offer letter. However, you should consult with a professional, such as a real estate agent or lawyer, to review the letter before you submit it. In some states, you may be required to hire an attorney to participate in the closing process.

What Are the Benefits of AI in Real Estate as a Buyer?

Homebuyers can use AI to uncover market trends, refine search criteria for a home, prepare for mortgage approval, and streamline many tasks associated with the homebuying process.

Will AI Replace Real Estate Agents?

It’s nearly impossible to predict rates of job displacement due to technological advancements. However, AI may replace some key aspects of real estate agents’ jobs in the future. The question is whether AI will replace agents altogether or serve as a tool to automate tasks while humans manage the relationship-building aspects of the job.

The Bottom Line

AI shows promise for many real estate applications. With AI, the average homebuyer has access to a battery of tools to support, streamline, and add efficiencies to the buying process. This is a huge win for consumers—both buyers and sellers. 

However, AI tools come with limitations including reduced access to real-time data and the potential for factual errors. Homebuyers still need to engage the help of qualified, experienced professionals to ensure the best outcomes for everyone involved in the transaction, whether facilitated with AI or not. 

Read the original article on Investopedia.