‘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 inaccurate solutions supplied by ChatGPT, and the proper responses a reliable Realtor ought to make as an alternative. Beneath 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’t present authorized recommendation,” after which instantly present data that usually constitutes authorized recommendation. The paragraph beneath illustrates this level.
As a language mannequin, I can’t present authorized recommendation. Nevertheless, typically, the disclosure necessities relating to an appraisal rely on the legal guidelines and rules of the state or nation the place the property is positioned.
Up to now, 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 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 lawyer.
The subsequent statements have further errors as nicely:
In some jurisdictions, sellers are required to reveal any materials information which will have an effect on a purchaser’s choice to buy the property. An appraisal will be thought-about a fabric truth if it gives data that might have an effect on a purchaser’s choice to buy the property or the worth they’re prepared to pay. In such instances, the vendor could also be required to reveal the appraisal to potential consumers.
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 remains to be related and reflective of the property’s worth, it might be useful to share it with potential consumers to assist assist the asking worth.
- Whether or not one thing qualifies as a “materials truth” is a authorized subject — brokers ought to by no means try to make this dedication.
- Appraisers usually use appraisal varieties from Fannie Mae, Freddie Mac, FHA or VA. These varieties solely embody three properties. Sadly, appraisers usually choose comparable gross sales which might be completely inappropriate. Moreover, their knowledge relies upon closed gross sales which might be a minimum of 60 days to 120 days outdated. As a Realtor, you’ve got entry to the newest gross sales data. In at the moment’s risky market, each purchasers and lenders want the newest gross sales knowledge accessible 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 Massive Language Mannequin (LLM), not an appraisal AI or algorithm. The varied AVMs from CoreLogic, HomeSnap, Realtor.com, Redfin and Zillow are based mostly upon subtle pricing AI algorithms that draw from all kinds of information on which LLMs haven’t been skilled.
2. Do I have to disclose any points with the property to potential consumers?
GPT accurately suggested:
Itemizing brokers have a authorized and moral obligation to make sure that all materials information in regards to the property are disclosed to potential consumers. Materials information are any points which will have an effect on the worth or desirability of the property. Subsequently, the reply to the query “Do I have to 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 is crucial for the itemizing agent to clarify to their vendor that failing to reveal materials information may end in authorized and monetary penalties, together with potential lawsuits or the sale falling by means of. The vendor is also held accountable for any points that come up after the sale if they didn’t disclose them beforehand.
The place GPT went horribly flawed was by stating:
If the vendor is uncertain about what must be disclosed, the agent can present steering on what’s required by legislation and what’s thought-about greatest observe of their native market. It is crucial for the agent to doc all disclosures made by the vendor in writing to guard each events.
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 fully flawed.
As a list agent, it’s vital 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 number of methods to confirm the sq. footage of a property, similar to:
- Measure the property your self: You possibly can measure the property your self or rent knowledgeable to do it for you.
- Test public data: You possibly can examine public data, similar to property tax data or constructing permits, to see if the sq. footage matches the vendor’s declare.
- Use on-line assets: There are a number of on-line assets that may present sq. footage data for a property, similar to Zillow, Redfin or Realtor.com.
It’s vital 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 consumers and allow them to make their very own assessments.
You haven’t any enterprise measuring the property your self, counting on the vendor’s claims in regards to the lot dimension, 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 should each be flawed. 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 dimension, the sq. footage of the enhancements, or the place the boundary strains are positioned, please rent your personal inspector and/or surveyor to make these determinations.
4. What are the charges and commissions for promoting my dwelling?
ChatGPT accurately 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, similar to timelines for finishing inspections, repairs, or different necessities.
It’s inconceivable to know all of the charges that will likely 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 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 bought this a part of the reply to this query partially proper:
Itemizing brokers have a accountability to reveal correct and full details about the property being offered, together with its present property tax data.
If the vendor gives the agent with a replica of the county tax assessor/collector’s invoice for property taxes for the earlier 12 months, brokers can embody that data if there’s a area on the MLS itemizing enter sheet for that knowledge.
The place ChatGPT made a lot of egregious errors was within the following piece of recommendation.
One approach 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 may state the present property tax fee, the assessed worth of the property, and the estimated annual property tax quantity based mostly 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 rationale 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 consumers and reply any questions they might have. Offering clear and correct data upfront may help consumers make knowledgeable selections about whether or not or to not buy the property.
Listed below are the important thing issues with this piece of recommendation:
- There is no such thing as 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 based mostly upon these figures. Neither is there a spot on the MLS knowledge enter sheets.
- Underneath the Company Legal guidelines in most states, the itemizing agent has a fiduciary obligation to their vendor, to not the customer.
Probably the most obvious errors, nonetheless, have been these two suggestions from GPT:
The itemizing agent ought to be ready to debate the property tax data with potential consumers and reply any questions they might 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 rationale for the rise, and when the brand new tax fee will take impact.
Brokers are prohibited from giving tax recommendation. In no way ought to they try to clarify 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 may 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 grow to be more and more prevalent in the actual property business, 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, writer and coach with greater than 1,000 revealed articles. Study her dealer/supervisor coaching packages designed for girls, by girls, at BrokerageUp.com and her new agent gross sales coaching at RealEstateCoach.com/newagent.