‘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 “professional recommendation” riddled with half-truths and misinformation. Greater than ever, Realtors should 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 collection checked out 5 widespread questions that consumers ask their brokers, the wrong solutions supplied by ChatGPT, and the right 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 current 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 not present authorized recommendation,” after which instantly present info that always constitutes authorized recommendation. The paragraph under illustrates this level.
As a language mannequin, I can not present authorized recommendation. Nevertheless, normally, the disclosure necessities concerning an appraisal rely upon the legal guidelines and rules 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 subsequent statements have extra errors as nicely:
In some jurisdictions, sellers are required to reveal any materials information that will have an effect on a purchaser’s resolution to buy the property. An appraisal will be thought of a fabric reality if it gives info that might have an effect on a purchaser’s resolution to buy the property or the worth they’re keen to pay. In such circumstances, 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 aspect of warning and disclose it. Moreover, if the appraisal remains 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 value.
- Whether or not one thing qualifies as a “materials reality” is a authorized difficulty — brokers ought to by no means try and make this willpower.
- Appraisers usually use appraisal kinds from Fannie Mae, Freddie Mac, FHA or VA. These kinds solely embody three properties. Sadly, appraisers usually choose comparable gross sales which can be completely inappropriate. Moreover, their information is predicated upon closed gross sales which can be no less than 60 days to 120 days outdated. As a Realtor, you may have entry to the latest gross sales info. In immediately’s risky market, each shoppers and lenders want the latest gross sales information out there to precisely estimate a property’s worth.
- The first cause 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 varied AVMs from CoreLogic, HomeSnap, Realtor.com, Redfin and Zillow are primarily based upon refined pricing AI algorithms that draw from all kinds of information on which LLMs haven’t been skilled.
2. Do I must 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 concerning the property are disclosed to potential consumers. Materials information 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 is crucial for the itemizing agent to elucidate 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 way of. The vendor may be held answerable for any points that come up after the sale if they didn’t disclose them beforehand.
The place GPT went horribly fallacious 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 finest 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 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 accurately made all disclosures.
3. What’s the sq. footage of the property?
ChatGPT appears to be giving nice recommendation, however it’s nearly fully fallacious.
As an inventory agent, it’s necessary to collect 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 info to make sure its accuracy. There are a couple 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 information: You possibly can examine public information, similar 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 info for a property, similar to Zillow, Redfin or Realtor.com.
It’s necessary to notice that the accuracy of the sq. footage info 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 finest 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 in case you have sq. footage numbers from the title firm, the county tax assessor or another supply, these numbers could differ and will each be fallacious. All the time advise your vendor to keep away from quoting sq. footage or the place the boundary strains 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 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 dwelling?
ChatGPT accurately suggested brokers to offer 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, similar to timelines for finishing inspections, repairs, or different necessities.
It’s not possible 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 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 info 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 bought, together with its present property tax info.
If the vendor gives the agent with a duplicate of the county tax assessor/collector’s invoice for property taxes for the earlier yr, brokers can embody that info if there’s a subject on the MLS itemizing enter sheet for that information.
The place ChatGPT made a variety of egregious errors was within the following piece of recommendation.
One technique to disclose the present property tax info 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 primarily based on these figures. If the property taxes are anticipated to extend for the brand new purchaser, the agent must also present info 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 info within the itemizing description, the itemizing agent needs to be ready to debate the property tax info with potential consumers and reply any questions they might have. Offering clear and correct info upfront will 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 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 obligation to their vendor, to not the client.
Essentially the most evident errors, nonetheless, had been these two suggestions from GPT:
The itemizing agent needs to be ready to debate the property tax info 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 info 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. 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 selected tax fee (e.g., in California, property taxes are 1.2 p.c of the gross sales value), 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 consumers to contact the town/county tax assessor for info 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 simplest ways to offer your shoppers with correct and dependable info 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 printed articles. Find out about her dealer/supervisor coaching applications designed for ladies, by ladies, at BrokerageUp.com and her new agent gross sales coaching at RealEstateCoach.com/newagent.