The significance of recent developments in Law Firm Tech in the past five years are widely documented. As the provider of one widely-used and highly-praised transaction tool, we thought we would take the opportunity to share the results of a survey we conducted about the use of artificial intelligence (AI) in Real Estate transactions. We undertook research with real estate professionals across Europe to find out their views on the current use of AI, their predictions for its use in the future, and what may be preventing its adoption.
We found that the use of AI in real estate transactions is accelerating, despite perceived barriers such as a lack of relevant skills to implement AI technology. We also found that while AI is already being applied successfully to processes such as due diligence and improving decision making, its use will increase significantly over the next five years. This is encouraging because it heralds an age in the not so distant future when our data rooms will be able to mechanically create fully automated due diligence reports in 95% of all cases at the touch of a button. The remaining 5% will be managed by specialists. This will significantly improve the entire process, which is currently very long-winded.
Summary of Research Findings
More than half (54%) of real estate professionals surveyed by Drooms use AI to improve the keyword search process when working on transactions. However, this figure rises to 69% of respondents who say they will be using AI for keyword searches in five years’ time. Other processes that will become more widely used include foreign language translation, identifying red flags, routing documents to the right decision makers, and topic modelling.
The majority of real estate professionals believe that AI already benefits their firm and gives it competitive advantage by enabling a much higher volume and variety of documents to be searched at high speed. Almost the same number say that AI speeds up the due diligence process, while a third believe it improves the accuracy of decision making. Other benefits of AI include minimizing risks and liabilities in an overall deal, reduced reliance on legal services and securing the best deals before other professionals. When asked where AI has the greatest impact on improving the efficiency of processes, three quarters said identifying relevant documents in a virtual data room. More than two thirds said it was avoiding time-consuming manual review processes and half chose preventing human error. Other benefits highlighted included the ability to automatically create contracts and reports and deciding who needs to view and make decisions about data.
The Barriers Facing AI
Despite these benefits, there are still perceived barriers preventing the uptake and use of AI in the real estate industry. The biggest of these is lack of confidence in AI’s ability to match human intelligence and decision making, followed by lack of skills available to implement relevant AI technology, technology being too difficult to use, lack of trust by senior management in AI, and concern that AI will replace investment professionals’ roles.
Only a small number of respondents said the main barrier was lack of demand. Most respondents believe that AI will always work best in conjunction with human intelligence, compared with a fifth who think AI will eventually be a substitute for human skill and intelligence in real estate processes. Very few thought that AI would never be a substitute.
How AI Applies to Real Estate Transactions
As a pioneer in the digitization of due diligence in real estate, Drooms is helping to change existing processes by integrating artificial intelligence into its virtual data room. Our aim when building AI into our VDR technology is to enable real estate professionals to reduce manual review work, eliminate unnecessary errors and reduce reliance on expensive third-party costs. We believe that AI will always work best in conjunction with human skills and intelligence, because AI needs to learn from human behavior and there is no substitute for years of experience, instinct, and knowledge. However, AI complements those elements and adds huge value by making real estate processes much more automated, efficient, and cost-effective.
By Jan Hoffmeister, Co-Founder and Chairman, Drooms
This Article was originally published in Issue 6.1 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.