As ChatGPT and different AI chatbots have exploded on the scene, Realtors at the moment are having to confront an avalanche of “professional recommendation” riddled with half-truths and misinformation. Greater than ever, Realtors have to be ready to be the trusted advisor who helps their shoppers keep away from following chatbot-generated misinformation that may result in litigation. 

Half 1 of this sequence checked out 5 widespread questions that patrons ask their brokers, the wrong solutions offered by ChatGPT, and the proper responses a reliable Realtor ought to make as a substitute. Under are 5 widespread vendor questions that ChatGPT additionally answered incorrectly. 

1. Has there been a latest appraisal on the property? 

Maybe probably the most troubling factor that ChatGPT and different chatbots do is to hedge their wager by saying, “As a language mannequin, I can’t present authorized recommendation,” after which instantly present data that always constitutes authorized recommendation. The paragraph beneath illustrates this level. 

As a language mannequin, I can’t present authorized recommendation. Nonetheless, normally, the disclosure necessities concerning an appraisal depend upon the legal guidelines and laws of the state or nation the place the property is situated. 

Thus far, so good, however then it advises: 

Subsequently, the itemizing agent ought to seek the advice of with a licensed actual property lawyer within the related jurisdiction for particular steerage on disclosure obligations.

Brokers are educated on disclosure obligations and if they’ve questions, they should verify with their supervisor, not rent their very own actual property lawyer. 

The subsequent statements have further errors as nicely: 

In some jurisdictions, sellers are required to reveal any materials info which will have an effect on a purchaser’s determination to buy the property. An appraisal could be thought-about a cloth reality if it supplies data that might have an effect on a purchaser’s determination to buy the property or the worth they’re keen to pay. In such instances, the vendor could also be required to reveal the appraisal to potential patrons.

If there’s any uncertainty about whether or not the appraisal must be disclosed, the itemizing agent ought to err on the facet of warning and disclose it. Moreover, if the appraisal continues to be related and reflective of the property’s worth, it might be helpful to share it with potential patrons to assist help the asking worth.

Right response: 

• Whether or not one thing qualifies as a “materials reality” is a authorized difficulty — brokers ought to by no means try and make this dedication. 
• Appraisers sometimes use appraisal kinds from Fannie Mae, Freddie Mac, FHA or VA. These kinds solely embrace three properties. Sadly, appraisers usually choose comparable gross sales which can be completely inappropriate. Moreover, their information relies upon closed gross sales which can be at the least 60 days to 120 days previous. As a Realtor, you have got entry to the newest gross sales data. In right now’s unstable market, each shoppers and lenders want the newest gross sales information obtainable to precisely estimate a property’s worth.  
• The first motive for not counting on ChatGPT for recommendation about value determinations is that it’s a Massive Language Mannequin (LLM), not an appraisal AI or algorithm. The assorted AVMs from CoreLogic, HomeSnap, Realtor.com, Redfin and Zillow are primarily based upon subtle pricing AI algorithms that draw from all kinds of information on which LLMs haven’t been educated. 

2. Do I must disclose any points with the property to potential patrons?

GPT accurately suggested:  

Itemizing brokers have a authorized and moral obligation to make sure that all materials info concerning the property are disclosed to potential patrons. Materials info are any points which will have an effect on the worth or desirability of the property. Subsequently, the reply to the query “Do I must disclose points with the property to potential sellers?” is sure. The itemizing agent ought to advise their vendor to reveal any recognized points with the property to potential patrons.

It is vital for the itemizing agent to elucidate to their vendor that failing to reveal materials info might lead to authorized and monetary penalties, together with potential lawsuits or the sale falling by. The vendor is also held chargeable for any points that come up after the sale if they didn’t disclose them beforehand.

The place GPT went horribly incorrect was by stating: 

If the vendor is not sure about what must be disclosed, the agent can present steerage on what’s required by legislation and what’s thought-about greatest follow of their native market. It is vital for the agent to doc all disclosures made by the vendor in writing to guard each events.

Right response:

Giving recommendation about what’s required by legislation constitutes authorized recommendation. Moreover, most states solely require the agent to do a visible inspection of the property and report what they observe. Neither the customer nor the vendor’s agent is required to doc whether or not the vendor has accurately made all disclosures. 

3. What’s the sq. footage of the property?

ChatGPT appears to be giving nice recommendation, however it’s virtually solely incorrect. 

As an inventory agent, it’s necessary to assemble correct details about a property, together with its sq. footage. When the vendor tells you what the sq. footage of their house is, you need to use that as a place to begin, however you must also confirm that data to make sure its accuracy. There are just a few methods to confirm the sq. footage of a property, reminiscent of:

• • Measure the property your self: You’ll be able to measure the property your self or rent knowledgeable to do it for you.
  • Verify public information: You’ll be able to verify public information, reminiscent of property tax information or constructing permits, to see if the sq. footage matches the vendor’s declare.
  • Use on-line sources: There are a number of on-line sources that may present sq. footage data for a property, reminiscent of Zillow, Redfin or Realtor.com.

It’s necessary to notice that the accuracy of the sq. footage data can have an effect on the worth of the property, so it’s important to make sure that it’s right. Should you’re unable to confirm the sq. footage, it’s greatest to reveal that to potential patrons and allow them to make their very own assessments.

Right response:

You don’t have any enterprise measuring the property your self, counting on the vendor’s claims concerning the lot measurement, or counting on Realtor.com, Redfin or Zillow who pull sq. footage from the MLS. 

Even when you’ve got sq. footage numbers from the title firm, the county tax assessor or another supply, these numbers might differ and will each be incorrect. At all times advise your vendor to keep away from quoting sq. footage or the place the boundary strains are on the property. 

When the customer asks about these points, the one right response is: 

If you wish to know the precise lot measurement, the sq. footage of the enhancements, or the place the boundary strains are situated, please rent your individual inspector and/or surveyor to make these determinations. 

4. What are the charges and commissions for promoting my house?

ChatGPT accurately suggested brokers to supply a transparent and clear clarification of the brokerage’s insurance policies and charges. They need to even be trustworthy about any prices of promoting a house together with how commissions are calculated and distributed. 

Itemizing brokers ought to present clear and trustworthy communication with sellers about charges and commissions and be sure that all agreements are in writing and absolutely understood by all events concerned.

The place GPT went off the rails was with this a part of the response: 

Itemizing brokers ought to present the vendor with a written itemizing settlement that clearly outlines all charges and commissions related to promoting the property. The itemizing settlement must also define any obligations of the itemizing agent and the vendor, reminiscent of timelines for finishing inspections, repairs, or different necessities.

Right response:

It’s inconceivable to know all of the charges that shall be related to promoting the property. An enormous a part of that’s regulated by TRID and brokers should comply with these tips precisely. 

Furthermore, there is no such thing as a place in any itemizing settlement for the timeline for finishing inspections, repairs or different necessities. These dates are all negotiated within the buy settlement, not within the itemizing settlement. 

5. How ought to itemizing brokers disclose the present property tax data on their itemizing, particularly if the taxes will improve for the brand new purchaser? 

GPT acquired this a part of the reply to this query partially proper: 

Itemizing brokers have a duty to reveal correct and full details about the property being offered, together with its present property tax data. 

If the vendor supplies the agent with a duplicate of the county tax assessor/collector’s invoice for property taxes for the earlier yr, brokers can embrace that data if there’s a discipline on the MLS itemizing enter sheet for that information. 

The place ChatGPT made quite a lot of egregious errors was within the following piece of recommendation. 

One solution to disclose the present property tax data is to incorporate it within the property itemizing description, together with any details about potential tax will increase. For instance, the itemizing agent might state the present property tax fee, the assessed worth of the property, and the estimated annual property tax quantity primarily based on these figures. If the property taxes are anticipated to extend for the brand new purchaser, the agent must also present data on the potential quantity of the rise, the explanation for the rise, and when the brand new tax fee will take impact. 

Along with together with this data within the itemizing description, the itemizing agent ought to be ready to debate the property tax data with potential patrons and reply any questions they could have. Offering clear and correct data upfront can assist patrons make knowledgeable selections about whether or not or to not buy the property.

Right response:

Listed here are the important thing issues with this piece of recommendation:

• There isn’t any place on the Unique Proper to Promote to state the present property tax fee, assessed worth of the property, or the estimated annual property tax quantity primarily based upon these figures. Neither is there a spot on the MLS information enter sheets.
• Below the Company Legal guidelines in most states, the itemizing agent has a fiduciary responsibility to their vendor, to not the customer. 

Probably the most obtrusive errors, nevertheless, have been these two suggestions from GPT: 

The itemizing agent ought to be ready to debate the property tax data with potential patrons and reply any questions they could have. 

If the property taxes are anticipated to extend for the brand new purchaser, the agent must also present data on the potential quantity of the rise, the explanation for the rise, and when the brand new tax fee will take impact.

Brokers are prohibited from giving tax recommendation. On no account ought to they try to elucidate property tax will increase, the explanations for the rise, or when the brand new tax fee will take impact. 

In case your state has a particular tax fee (e.g., in California, property taxes are 1.2 % of the gross sales worth), you possibly can present shoppers with a hyperlink to the state’s property tax codes. In different states the place values are assessed individually, advise the patrons to contact town/county tax assessor for data on the property they intend to buy. 

As AI chatbots like ChatGPT grow to be more and more prevalent in the actual property trade, it’s essential so that you can keep updated in your disclosure obligations and to keep away from giving authorized or tax recommendation. That’s the easiest way to supply your shoppers with correct and dependable data and to keep away from making errors that may result in pricey litigation. 

Bernice Ross, president and CEO of BrokerageUP and RealEstateCoach.com, is a nationwide speaker, writer and coach with greater than 1,000 printed articles. Find out about her dealer/supervisor coaching packages designed for girls, by ladies, at BrokerageUp.com and her new agent gross sales coaching at RealEstateCoach.com/newagent.