Are AI real estate agents the future for homebuyers? These firms think so
While some in the real estate industry are expecting to see a decline in the number of buyer’s agents as a result of the National Association of Realtors‘ (NAR) nationwide commission lawsuit settlement agreement, others have taken it a step further and are betting their companies on it.
Meet the AI real estate agent. Unlike human agents, these AI agents really are available 24/7 and will quickly answer every little question you have about the homebuying process. They will even know the specifics of how things work in your local market.
With the rapid improvement of AI technology coinciding with the business practice changes outlined in the NAR settlement, many in the proptech industry believe now is the right time for the rise of the AI agent.
“There is obviously a tremendous opportunity out there as a result of NAR’s class-action settlement,” said Mike Logozzo, the president and chief operating officer of reAlpha. “This was kind of the lightning-in-a-bottle moment for us to create the solution for a problem that was going to hit and has since hit on Aug. 17.
“Homebuyers in the past essentially had a commission-free Realtor because they paid the commission with the purchase price. However, things have changed now and buyers have to have a separate buyer agreement. And if those fees can’t be negotiated into the transaction, the buyer is going to have to come out to pocket now in order to have a human Realtor represent them.”
reAlpha is just one of the many AI agent platforms that have sprung up recently. HousingWire chatted with three firms that have emerged in this space to get an inside look at their models and why they feel it is the right time for the ascension of the AI agent.
reAlpha
Founded in 2020, reAlpha went public in October 2023 on the Nasdaq Capital Market under the symbol AIRE. Initially, the platform used AI technology to help investors decide whether a property would be a good short-term rental property through platforms like Airbnb, and it acquired roughly 20 properties on its own. But when interest rates began to rise in 2022, reAlpha decided to pivot and eventually launched its AI agent platform.
The new solution is geared toward homebuyers, since that is where executives feel the most immediate problems lie.
“We see it has helped numerous people, including ones who just want to save on commissions, but underrepresented populations as well because it provides them with a commission-free platform for homebuyers,” Logozzo said.
Right now, the platform is only available in Florida and is 100% commission free, as Logozzo said, but company executives hope to eventually expand the platform across the U.S. and even worldwide.
Users log on to the platform via website or mobile application and can be guided through the homebuying process by reAlpha’s AI technology. Consumers who utilize the platform must sign a buyer representation agreement with reAlpha Realty, but they are allowed to break it at anytime and will not incur a penalty.
“In order for us to represent the buyer, we have to be a licensed agent, so that is why we have reAlpha Realty and we have human licensed agents that work behind the scenes,“ Logozzo said, “which is important because we can’t just flip a switch and have everything fully AI. There is a learning curve, and if somebody wants to speak to an actual human, someone is there for them.”
Looking ahead, reAlpha executives believe AI and automation are the way of the future for the real estate business, as the world has witnessed in other industries.
“In the stock brokerage industry in the late ’90s and early 2000s, they used to charge 1.5% per trade. And then Charles Schwab came in and said, ’$49 a trade.’ And then soon, several other players came in and we have Robinhood with a 0% commission,” said Giri Devanur, the founder and CEO of reAlpha.
“The same thing happened to the travel agent industry. In the real estate industry, the question is, ’How soon is it going to happen?’”
Modern Realty
Modern Realty shares similarities with reAlpha in that it is currently operational in only one state — California — and those who work with the firm must sign a buyer representation agreement, giving them access to both an AI and a human real estate professional. But unlike reAlpha, Modern Realty is much newer, having officially launched only three months ago.
“The legal side of things — mixed with the NAR settlement, mixed in with what we are actually seeing in the field — it is very interesting. And there are a lot of other moving parts, like the introduction of AI, so it is a very exciting time to be in this space,” said Raffi Isanians, the CEO and co-founder of Modern Realty.
Isanians and his team want to use AI to make the homebuying process faster and less scary for consumers. To best serve buyers, the Modern Realty team has built unique Realtors for different types of clients.
“If somebody mostly cares about data, it will feed them as much data as humanly possible, and if the homebuyer cares more about the emotional elements of the transaction, the AI will respond with a bit more emotion,” Isanians said. “And all of this is with the intention of making the homebuying process better and more enjoyable for the people involved.“
Part of how Modern Realty does this is by training its AI to mimic the top 1% of real estate agents.
“When you buy a house, you don’t always get a top agent, but with Modern Realty, you do,” Isanians said.
Consumers wanting to use Modern Realty must first go through an onboarding process with a human staff member, who talks them through the process and the options they have. They are then given a phone number to text and communicate with their AI agent at any time.
Most consumers who use Modern Realty will still have to pay a commission, as they would with a human agent, but it is possible to greatly reduce the amount or even eliminate it.
The company has two service tiers. For 1% of the home’s purchase price, buyers can use what Isanians describes as a “self-service model“ that is mainly geared toward investors. Other buyers who want or need higher-touch service have a negotiable commission, but the company also offers a grant program where people can apply and have the commission waived entirely.
“We believe that buying a house is very hard and it is not getting easier,” Isanians said. “So, we are genuinely on this mission to make it better, so very early on we had a conversation that if people meet certain criteria, we will waive the entire commission.”
Looking ahead, Isanians said that Modern Realty hopes to expand nationwide and will eventually consider taking on sellers as well as buyers.
“It is scary, if I am being completely honest,” Isanians said of the rapidly changing real estate landscape. “Everyone is following the puck, but nobody knows where it is going to go.
“We have focused most of our efforts on what we know is going to stay the same — and that is that buyers are going to want an incredible experience, and we believe they deserve to have that. So, really, what then is changing is the advancement of large language models, which we are leveraging to provide consumers with the experience they want.”
Homa
Unlike Modern Realty and reAlpha, Homa does not represent buyers in transactions, and as such does not require users to sign a buyer agency agreement.
“Homa is really meant to help those homebuyers looking to represent themselves and are trying to find a way to work through the process,” said Arman Javaherian, a former director of product at Zillow and the co-founder of Homa.
Homa is a tool that allows unrepresented homebuyers — or even represented buyers — to have all their urgent questions about the homebuying process answered. It is available to consumers across the country. The platform guides consumers through the entire homebuying process, from getting preapproved for a mortgage to making an offer and eventually closing the transaction.
Functionalities include putting together comparative market analyses on properties the buyer is interested in, allowing them to price their offer appropriately. Homa even helps them fill out the appropriate forms for their state and coaches them through any negotiations that may occur.
Additionally, in Florida, Homa has a partnership with home showing platform Showami that allows buyers to tour a property with an agent for a one-time fee, which is typically about $50. Javaherian said he hopes to expand this partnership nationwide to better serve all Homa users.
Having just launched earlier this month, Homa is currently free to all users as Javaherian said he and his team are currently bootstrapping the project. Moving forward, he said the firm is thinking of charging users a one-time fee of roughly $100.
“The main reason we started this is that we want to keep costs low, and charging thousands of dollars for access is not doing that,” Javaherian said. “I want this to help homebuyers.”
The most recent NAR Profile of Homebuyers and Sellers published in 2023 found that 89% of buyers used a real estate agent. But Javaherian said he is confident that share will go down in light of the business practice changes and conditions outlined by NAR’s settlement.
“I don’t have a quantitative analysis, but based on conversations and statistics I do have, I feel good about this,” Javaherian said. “In a typical year, roughly 70% of homebuyers are repeat homebuyers, so they have gone through the process and have confidence in it.
“Of that 70%, the ones that are more tech-friendly, like the millennials, are going to be very open to using something like this. A lot of people think they can transact real estate by themselves, and I think that is going to drive them to find a way to figure it out.”