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  • Writer's pictureAdam Oldham

How AI Is Changing the Way We Buy Real Estate

We often think of the industrial revolution or the creation of the internet as the greatest achievements of the 21st century. Yet, we are near to embarking on the next greatest advancement known as artificial intelligence. Now you may be asking yourself artificial what? Yea that's right artificial intelligence. More specifically, artificial intelligence is the process of using machines (aka computers) to learn from thousands & thousands of examples. Think of yourself back in math class when you were learning multiplication tables. How many times did it take you to remember what 12x11 equals? I know for me it took a while & still to this day it takes me a second to think about it. Now imagine that we train our machine (aka computer) on how to do this multiplication thousands of times. Do you think it's going to get it wrong? No of course not, it’s had tons of practice! Now let's extrapolate this to a more complex problem such as real estate.

If you took a list of all the properties in your city & knew what they were bought & sold for, do you think that would be helpful in identifying a good deal? Do you think understanding your market & home prices would give you a competitive advantage & the ability to make offers quickly?

More importantly, instead of trying to learn from everybody in our market(maybe some of those people bought a bad deal…we would never do that though right? 😅 We would want to train from the best. Who doesn’t like to train from the best? It accelerates the learning curve similar to when Jimmy Neutron was able to chew bubble gum books & learn all the content until his head exploded!

Well machines can do that without their head exploding quite well. So here at Top Notch Leads we have created a machine learning model that analyzes the top cash home buyers in our market(Indianapolis) who are purchasing investment properties.

Why did we choose the top cash home buyers for our model? These entities have had enough repetitions to know what a good deal is & how to buy it. These individuals are likely buying properties before you even know about it & they are often getting the best deals, otherwise they wouldn’t be in business very long. So who better to learn from & master their techniques?

In order for our model to work we had to give it a ton of relevant data such as zip code, property address, ownership information, assessed value, equity levels, and area crime . Then we let it run through practice problems that we trained it on. So imagine we gave it a ton of math problems that we already knew the answer to? In this case we manually assigned which properties were bought from the top cash buyers & asked our model to train & learn patterns on the type of properties they are buying.

Then we gave it a test set of data(imagine the big exam, now it's time to shine!). During this test the machine tries to make a prediction as to whether this house will sell to a cash buyer. If it gets it wrong it learns why & makes adjustments to the algorithm, if it gets it right though, it adds reinforcement to the algorithm.(Imagine when you were kid every time you got a math problem right your parents gave you a piece of candy, except here the machine doesn’t need candy as a reward, what a great kid!)

After the machine learning runs through thousands of examples it is able to identify highly correlated factors that will indicate a sale to cash buyers & as we update our database with home sales it can predict who will be very likely to sell to a cash buyer. More importantly the model gets better & better over time as it's able to train over & over, similar to a master jedi like Yoda taking on the Darth Sith with all of its knowledge & expertise!

Now going into 2022 we all know real estate is hot & that it's very difficult to find quality leads. So why not let machines & numbers guide your decision making so you can spend more of your time making money & relaxing, instead of chasing bad deals.

If you are interested in learning more about how AI & machine learning can give you a competitive edge in the real estate market, reach out to us to learn more about Top Notch Leads & the products we offer!