Why buying and selling a house could soon be as simple as trading stocks

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Artificial intelligence in housing could completely change the way we buy, sell and live.

On a recent weeknight, Dahlia and Adam Brown came home to their spacious Colonial on a quiet cul-de-sac in Marietta, Ga. The Browns both work demanding jobs and have two young sons. They bought the house in June using Knock, a company that’s trying to revolutionize the real-estate industry with a “home trade-in platform” making it easier to buy and sell at once.

But these families are also part of a massive industrial revolution. Information technology has remade processes as disparate as ordering dinner delivery, hailing a cab and trading stocks. Now it’s coming for an industry so 20th century that much of the paperwork is still done on paper, where customers are often steered among professionals scratching each other’s backs, and where there’s enormous incentive for the incumbents to keep it hard for customers to manage on their own.

Krishna Rao, a Zillow analytics executive, likened the current evolution in real estate to the democratization of stock trading decades ago.

The promises — and the peril — of this new endeavor are weighty. Zillow’s stock ZG, +0.77% tanked after its last earnings report, in which management revealed that a small sliver of the homes it had purchased were being held longer than they had accounted for. “At Trulia they unlocked the database of listings, and now they’re unlocking the other side — how do we actually solve the problem of the transaction?” said Stephen Freudenberg, Knock’s first employee and a former real-estate agent. “Most of these other companies are solving for the agent’s pain, not the consumer’s pain.”

The back-and-forth went on for months, and some of the futility of getting a machine to learn how to think like a veteran salesperson are captured in their internal chats, as seen below. He offers an example: A family might spend $100,000 remodeling a kitchen but add only $50,000 to their house’s listing price because properties in the surrounding area, which are comparable listings, might not have such upmarket kitchens. “So they’re stuck with what the neighborhood sold for, but, if we’re actually looking at the data, then everyone could theoretically get a better deal.”

Still, a revolution has to start somewhere. The industry’s focus on automating valuations means that, very soon, the Federal Reserve is likely to finalize a regulation stating that appraisals will no longer be required on most property sales valued at up to $400,000.

 

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Artificial intelligence . . . could completely change the way we buy, sell and live.

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