‘Do I Need To Disclose?’ More Real Estate Queries ChatGPT Can’t Answer
As ChatGPT and different AI chatbots have exploded on the scene, Realtors are actually having to confront an avalanche of “knowledgeable recommendation” riddled with half-truths and misinformation. Greater than ever, Realtors have to be ready to be the trusted advisor who helps their purchasers keep away from following chatbot-generated misinformation that may result in litigation.
Half 1 of this collection checked out 5 widespread questions that consumers 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 essentially the most troubling factor that ChatGPT and different chatbots do is to hedge their guess by saying, “As a language mannequin, I can not present authorized recommendation,” after which instantly present data that always constitutes authorized recommendation. The paragraph under illustrates this level.
As a language mannequin, I can not present authorized recommendation. Nevertheless, usually, the disclosure necessities relating to an appraisal rely upon the legal guidelines and laws of the state or nation the place the property is situated.
To this point, so good, however then it advises:
Due to this fact, the itemizing agent ought to seek the advice of with a licensed actual property legal professional within the related jurisdiction for particular steering on disclosure obligations.
Brokers are skilled on disclosure obligations and if they’ve questions, they should examine with their supervisor, not rent their very own actual property legal professional.
The following statements have extra errors as properly:
In some jurisdictions, sellers are required to reveal any materials details that will have an effect on a purchaser’s determination to buy the property. An appraisal will be thought of a fabric reality if it offers data that would have an effect on a purchaser’s determination to buy the property or the value they’re keen to pay. In such circumstances, the vendor could also be required to reveal the appraisal to potential consumers.
If there may be 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 could be helpful to share it with potential consumers to assist assist the asking worth.
- Whether or not one thing qualifies as a “materials reality” is a authorized challenge — brokers ought to by no means try to make this dedication.
- Appraisers usually use appraisal types from Fannie Mae, Freddie Mac, FHA or VA. These types solely embrace three properties. Sadly, appraisers typically choose comparable gross sales which are completely inappropriate. Moreover, their knowledge relies upon closed gross sales which are at the very least 60 days to 120 days previous. As a Realtor, you could have entry to the newest gross sales data. In as we speak’s unstable market, each purchasers and lenders want the newest gross sales knowledge obtainable to precisely estimate a property’s worth.
- The first purpose for not counting on ChatGPT for recommendation about value determinations is that it’s a Giant Language Mannequin (LLM), not an appraisal AI or algorithm. The assorted AVMs from CoreLogic, HomeSnap, Realtor.com, Redfin and Zillow are primarily based upon refined pricing AI algorithms that draw from all kinds of knowledge on which LLMs haven’t been skilled.
2. Do I must disclose any points with the property to potential consumers?
GPT appropriately suggested:
Itemizing brokers have a authorized and moral obligation to make sure that all materials details concerning the property are disclosed to potential consumers. Materials details are any points that will have an effect on the worth or desirability of the property. Due to this fact, 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 identified points with the property to potential consumers.
It will be significant for the itemizing agent to elucidate to their vendor that failing to reveal materials details might end in authorized and monetary penalties, together with potential lawsuits or the sale falling by means of. The vendor may be held accountable for any points that come up after the sale if they didn’t disclose them beforehand.
The place GPT went horribly improper was by stating:
If the vendor is uncertain about what must be disclosed, the agent can present steering on what’s required by regulation and what’s thought of greatest follow of their native market. It will be significant for the agent to doc all disclosures made by the vendor in writing to guard each events.
Giving recommendation about what’s required by regulation 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 client nor the vendor’s agent is required to doc whether or not the vendor has appropriately made all disclosures.
3. What’s the sq. footage of the property?
ChatGPT appears to be giving nice recommendation, however it’s virtually fully improper.
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 should utilize that as a place to begin, however you must also confirm that data to make sure its accuracy. There are a couple of methods to confirm the sq. footage of a property, corresponding to:
- Measure the property your self: You possibly can measure the property your self or rent knowledgeable to do it for you.
- Verify public information: You possibly can examine public information, corresponding to 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, corresponding to 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. When you’re unable to confirm the sq. footage, it’s greatest to reveal that to potential consumers and allow them to make their very own assessments.
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 have sq. footage numbers from the title firm, the county tax assessor or another supply, these numbers could differ and will each be improper. All the time advise your vendor to keep away from quoting sq. footage or the place the boundary traces are on the property.
When the client 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 traces 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 appropriately suggested brokers to supply a transparent and clear clarification of the brokerage’s insurance policies and costs. 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 certain that all agreements are in writing and totally 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, corresponding to timelines for finishing inspections, repairs, or different necessities.
It’s inconceivable to know all of the charges that can be related to promoting the property. A giant a part of that’s regulated by TRID and brokers should comply with these pointers precisely.
Furthermore, there isn’t any 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 obtained 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 offers 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 area on the MLS itemizing enter sheet for that knowledge.
The place ChatGPT made a variety of egregious errors was within the following piece of recommendation.
One strategy 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 needs to be ready to debate the property tax data with potential consumers and reply any questions they could have. Offering clear and correct data upfront will help consumers make knowledgeable choices about whether or not or to not buy the property.
Listed below are the important thing issues with this piece of recommendation:
- There isn’t a 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 knowledge enter sheets.
- Beneath the Company Legal guidelines in most states, the itemizing agent has a fiduciary responsibility to their vendor, to not the client.
Probably the most obvious errors, nevertheless, have been these two suggestions from GPT:
The itemizing agent needs to be ready to debate the property tax data with potential consumers 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. By no means 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 selected tax fee (e.g., in California, property taxes are 1.2 % of the gross sales worth), you possibly can present purchasers with a hyperlink to the state’s property tax codes. In different states the place values are assessed individually, advise the consumers to contact the town/county tax assessor for data on the property they intend to buy.
As AI chatbots like ChatGPT develop into 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 one of the best ways to supply your purchasers with correct and dependable data and to keep away from making errors that may result in expensive litigation.
Bernice Ross, president and CEO of BrokerageUP and RealEstateCoach.com, is a nationwide speaker, creator and coach with greater than 1,000 revealed articles. Find out about her dealer/supervisor coaching packages designed for girls, by girls, at BrokerageUp.com and her new agent gross sales coaching at RealEstateCoach.com/newagent.