Artificial Intelligence and Iowa Real Estate

We close 2024 as a more technologically interconnected society than ever before. Every day we access instant communication tools capable of gathering almost any piece of information necessary to support our businesses, allowing us to reach out to our friends and family, or supporting our social media doomscrolling habits. 

We even carry around virtual assistants that rely on Artificial Intelligence (“AI”) to help with daily tasks – every time you ask ‘Siri’ a question, you are engaging AI to answer that question. While AI can help us with menial tasks like finding directions to a given locale, or give the answer that settles that barroom debate without much issue, there are larger scale AI resources that have started to trickle into the practice of real estate. 

Some REALTORS® have found and embraced the use of AI tools to aid their business. Indeed, there are many ways that AI can be used to supplement REALTORS’® businesses, from refining real estate marketing to lead generation to customer relationship management. Of course, every rose has its thorn. It is important that REALTORS® exercise caution in using AI. For those REALTORS® choosing to engage in using AI resources, this article examines common ways AI is used by REALTORS® and potential legal and ethical pitfalls to avoid. With that, though, let us first consider what AI is, exactly. 

By now, many people are familiar with various AI bots – ChatGPT, Microsoft Copilot, Jasper, and various others. The concept of AI has actually existed for thousands of years, dating back to 380 B.C., though generative and analytical AI really snapped into public consciousness early in the 2020s.  Many folks have a vague idea of what AI is, but not necessarily what it does or can potentially do. The University of Illinois Chicago briefly defines AI as “… represent[ing] a branch of computer science that aims to create machines capable of performing tasks that typically require human intelligence.” They further describe how AI develops, noting that it is capable of performing tasks including “…learning from experience (machine learning), understanding natural language, recognizing patterns, solving problems, and making decisions.” Additionally, among the many distinctions in types of AI, for REALTORS® and their businesses, the most likely uses are Generative and Predictive. Generative AI takes the users inputs to create new content, while Predictive AI forecasts future events based on historical data. Every day, as people submit queries to these AI bots, their databases of information grow larger and larger, allowing them to potentially more accurately respond to the next round of queries. 

As these AI tools have developed, REALTORS®, ever resourceful, have found myriad ways to adopt AI into their practice. Some use AI tools to provide predictive analytics, allowing participants to input historical data to try to extract market trend predictions. Others are used to generate content based on inputs, including potentially answering questions based on a combination of previous answers in the bot’s resource database. Below are a few examples of AI usage by REALTORS®.

REALTORS® are frequently tasked with creating content – each time a REALTOR drafts a listing description for a ‘charming cozy bungalow with great potential’, they are tasked with finding a new way to describe an old concept. Housingwire notes that agents were immediately drawn to ChatGPT as a tool to draft content. AI can certainly be a force multiplier when it comes to enhancing marketing materials. AI can potentially be a tool to help REALTORS® create that new way, or at least to help them reframe and refocus those descriptions. Some AI bots allow the user to input a brief description of what they need, at which point the bot will give back a product that may meet their specifications. This can include making the content more concise, making the content more specific, or even entirely rewriting the input. 

Likewise, some REALTORS® have engaged with Canva and other AI Visual Marketing services to create more striking visual marketing materials. This includes using integrated AI assistance to suggest color palettes, layouts, and possibly even digitally enhancing images to make them more appealing. Other uses include using AI to provide a version of the Buyer’s vision of the property – effectively, this is what the property could look like once the work is completed. 

In the client management space, there are potential use cases for Generative AI. Some REALTORS® have taken to using AI as the ‘front line’ of their client engagement, AI can be used to boost responsiveness to common inquiries, thereby improving response times and client engagement. In the property management space, it is also seeing usage as a response mechanism for drafting replies to tenants for maintenance requests, then passing those requests on to the property maintenance entity.

Another potential use case for AI is in property analysis. In both the residential and commercial spheres, one application for AI has been to rethink the way property valuation happens. Some AI models create Automated Valuation Models (“AVMs”). AVMs are capable of analyzing and synthesizing large amounts of data to provide objective property valuations. These AVMs can also further use that synthesized information to predict future market trends, allowing agents to inform their decision making and make better pricing choices. 

While the above represents a very brief overview of some of the ways REALTORS® have found to use AI to benefit their practice, before engaging in the use of any AI tool, it is important that each REALTOR® evaluate the potential pros and cons of using their AI tool of choice. In particular, REALTORS® must recognize their ethical and legal obligations to ensure honest dealings with clients and customers, including providing brokerage services honestly and in good faith and diligently exercising reasonable skill and care. Furthermore, consider the fiduciary duties each REALTOR® has opted into – those duties of obedience, loyalty, disclosure, accounting, reasonable care, and diligence. Each of these duties informs the decisions REALTORS® make on a daily basis and, in the case of using AI resources, reasonable care and diligence are certainly foremost concerns. Additionally, each REALTOR® has chosen to be bound by the National Association of REALTORS’® Code of Ethics, which provides some ethical considerations that the tech-inclined REALTOR® should strongly consider before engaging their preferred AI bot.

AI resources can present a significant confidentiality concern, as AI bots tend to store their queries to provide better outputs for future users.  Pursuant to Article 1 Standard of Practice 1.9 of the Code of Ethics, REALTORS® maintain an obligation to protect their clients’ confidential information. To this end, note that for the most part, information input into an AI bot will be deposited into that bot’s information database. REALTORS® must exercise the utmost care to ensure that the information entered does not disclose any personal or confidential client information. It is certainly beneficial to remove any specific references in any query as well as obtaining informed consent from the client prior to using any personal or property-related AI tools. It can also be helpful to review the privacy policy of any AI service to determine the extent to which the client’s information will be retained or stored and how. 

Code of Ethics Article 2 requires that “REALTORS® shall avoid exaggeration, misrepresentation, or concealment of pertinent facts relating to the property or transaction.” Likewise, REALTORS® have a duty to exercise reasonable care and diligence in providing brokerage services. Under this Article, REALTORS® are, among other things, bound by a duty to ensure that the information contained in their listing descriptions is accurate. The duty to ensure that the property description provided by the AI bot is an accurate description of the property ultimately falls on the REALTOR®, and in a very real sense with that REALTOR®’s brokerage, as the actions of the REALTOR® can be imputed to their broker given the broker’s supervisory responsibilities. The AI bot does not actually know the features and characteristics of the property – it is responding to an input from the REALTOR®, but does not “know” that the output it is providing is an accurate representation of the property or not. Also, the AI bot is unlikely to undergo the ordeal that is an ethics complaint, so the AI-inclined REALTOR® should constantly check and double-check any inputs and outputs from any resource they may include AI.

Indeed, a real case study of the pitfalls of using Generative AI to create a listing arose from an Australian real estate firm. One of the principals of the firm LJ Hooker admitted to using ChatGPT to create property listings for a rental home. While that is not inherently an issue, the issue occurred when the AI output included information about schools in close proximity as a selling point. The problem is that those schools did not actually exist. In this instance, the AI bot included false information, as they do from time to time. The real issue is that the AI bot’s output was not then reviewed for accuracy, but the ad was still posted.

The same concerns appear in the case of using AI to digitally touch up images, REALTORS® must be sure to disclose that the images have been altered in order to avoid potential misrepresentation claims. While there is certainly a benefit to taking a plain listing photo and making it into something more visually appealing so as to better serve your client’s needs, there is also an inherent risk of misrepresenting the property or falsely advertising the property. The ethical REALTOR® must ensure that the digitally altered images do not misrepresent the property. In the same way the REALTOR® must review the language of the output regarding the listing description, they must also ensure that the fact that the image has been digitally enhanced is disclosed.

As noted above, AI analysis can be a particularly powerful tool, as it can potentially tell you information about the businesses and services that surround a property. REALTORS® must take care to ensure that in using this information, they do not commit even unwitting Fair Housing violations. AI outputs are unlikely to recognize Fair Housing violations and may provide action items that can potentially result in Code of Ethics Article 10 violations. The Department of Housing and Urban Development has gone so far as to release guidance concerning the application of the Fair Housing Act to “…the tenant screening process and its application to the advertising of housing opportunities through those online platforms that use targeted ads” in order to curb the potential of Fair Housing Violations resulting from AI usage. HUD’s guidance includes best practices on the use of AI services for tenant screening in the property management field. HUD notes that when AI is improperly or incorrectly used, it can actually contribute to Fair Housing discrimination by resulting in unintentional biases that prohibit certain protected groups from accessing housing. REALTORS® must be conscious of how they construct their queries and be cautious of the information they receive from those queries. 

Last but certainly not least, there may be a temptation to allow Generative AI to create documents – after all, if AI has a massive repository of information and is capable of creating content, surely it can create a form agreement addressing a practice point, correct? ∫ AI bots are not equipped with the knowledge to ensure that those documents comply with State and Federal Law. Moreover, they will not be liable if and when that AI generated document fails to protect the client or the client’s interests. Furthermore, even outside of the potential accuracy concerns arising from using AI to create content, there are also very real unauthorized practice of law concerns under the Iowa Code, Iowa Administrative Code, and Standard of Practice Article 13. 

In summary, while AI may be a strong addition to a REALTOR®’s business, there are legal and ethical considerations to make prior to and during its use. REALTORS® need to make sure that they are not accidentally causing their clients’ confidential information to be disseminated without the client’s consent. They must ensure that the outputs from the bot avoid exaggeration and misrepresentation, and they should disclose when AI is used to create or modify listing contents. REALTORS® must ensure that any outputs they intend to use do not cross over into potential fair housing concerns. Finally, they must be sure that they do not engage in the practice of law.