Turn on the news or scroll through your favorite social media app and you are sure to come across someone’s opinions about Artificial Intelligence (“AI”). For every article, hot-take, or social media post, you get a different perspective on what it is, how it will impact the world, and how it will impact your daily life. While there is still much to be determined when it comes to these questions, one thing is clear, AI is here to stay.
Moreover, AI is likely to become more integrated into your life and your work as time moves on, which poses various important questions. When it comes to the real estate industry as a whole, and if you are a REALTOR® specifically, you must begin to grapple with how you are going to use it as a part of your practice. But before getting to the practical issues raised by AI and how it can be used as a tool, more fundamental questions need to be asked. At the end of the day, as a REALTOR®, you need to be smart about how (or even if) you use AI in a given circumstance. Working through these questions protects not only yourselves as professionals and the brand of REALTORS® as a whole, but it also protects your clients and preserves the trust they have placed in you.
So, what are the questions you should be asking yourself? Whether you are a broker or agent, as a REALTOR®, ask yourself: should I be using AI in my practice? You may be surprised to realize answering this question is not as simple as it seems. Many professionals have ChatGPT, CoPilot, or DeepSeek downloaded directly onto their devices (and are already using it), but the reality is that people often do not stop to consider how to properly use a new technology in their day-to-day practice.
Anyone, when properly trained at least, can operate the relevant AI applications and use them in their practice. The real meat of the issue, however, is figuring out when you should use AI and understanding the legal concerns when you do use it. Technically, it is obvious that you can use AI, but whether you should use AI for a certain task depends on whether you have proper guard-rails in place to make sure you use it safely and ethically.
This article is an attempt to provide a starting point for how to think through using AI in a manner that complies with California law and regulations, the National Association of REALTORS® (“NAR”) Code of Ethics (the “Code of Ethics”), and good ole’ common sense.
What is AI?
Before diving into the ethics and practical impacts of AI in real estate, let’s define what we are even talking about when we use the term “AI.” In October of 2024, California Governor Gavin Newsom signed Assembly Bill 2885 (“AB 2885”) into law to define the term AI for the purpose of clarifying existing California law and providing a uniform definition for the various California agencies that deal with regulation touching on or involving AI. For the purposes of California law, AB 2885 defines AI as an, “engineered or machine-based system with varying levels of autonomy that can infer from input to generate outputs that influence physical or virtual environments.” For the purposes of this article, we will be using this definition.
Should You Use AI?
Well, the answer to this question depends on who you are, what you are comfortable with, and what you are using it for. AI is probably not good or bad in and of itself (although some authorities offer well-founded words of caution on this point). Rather, how you intend to use AI, and what you are using it for, will probably help you answer the question of whether you should use it in any given circumstance.
What does the law say?
It is not illegal for a real estate licensee to properly use AI in California.. There is no blanket prohibition on using AI, and in fact, anecdotally at least, its use is becoming more widespread for a variety of purposes in the real estate industry. We have spoken with brokers and agents alike. Some are using AI to conduct market analysis, some to develop advertising and marketing materials, and some use AI to perform certain simple drafting tasks. While not prohibited by the law, it is critical to understand that there are guidelines that must be followed. Agency law, privacy law, data storage and protection, fiduciary duty, copyright, trademark, and regulatory law (just to name a few) can all be implicated by the use of AI and you need to aware of how AI use intersects with each.
What do the Code of Ethics and MLS Rules say?
How about the NAR Code of Ethics? Are REALTORS® prohibited from using AI under the Articles of the Code of Ethics? No. But, as with the law, there are various Articles and Standards of Practice that may be implicated by a REALTOR® using AI. Depending on how AI is being used in a given situation by the REALTOR®, Articles 1, 2, 9, 11, and 12 can all come into play.
What does Common Sense say?
In a given circumstance, it may be beneficial to your client to use AI to help draft marketing or promotional materials. If you use AI to draft such materials, it is your responsibility to ensure that all the materials contain accurate information and that the use of AI to draft those materials is clearly communicated to the client. Conversely, if you use AI to draft a contract that would be legally binding on the parties signing it, did you accidentally engage in the unlicensed practice of law violating both California law and the Code of Ethics? Whether it is good sense to use AI in your specific practice will depend upon a variety of variables that are unique to each situation. While there will be no steadfast answer for every scenario you may want to use AI, the law, the Code of Ethics, and common sense can help you put together a good framework for how you make decisions concerning its use in your practice.
The Beginnings of a Framework for Using AI as a REALTOR®
Know the Relevant Rules and Laws at Play
The relevant rules and laws at issue will likely vary depending on what task the AI is being utilized to perform. As noted above, though, there are significant implications for the use of AI in agency law, the law of fiduciary duty, the MLS Rules, and the Code of Ethics. The examples discussed under this bullet point are two limited examples of the possible laws and rules that can be at play.
Agents owe a duty of care and diligence to their principals. (Kelly v. Steinberg, 148 Cal. App. 2d 211, 217.) Any use of AI on behalf of the client must be done with the utmost care and competence. Implications of the duty of care include but are not limited to: double checking all AI outputs for accuracy and confidentiality, being fully informed of how the AI software works, what happens to the information that is uploaded to it, and being fully transparent with your clients regarding your use of AI.
Under the Code of Ethics, REALTORS® owe a duty of confidentiality to their clients. Article 1, Standard of Practice 1-9 states: REALTORS® have a duty “to preserve confidential information (as defined by state law) provided by their clients in the course of any agency relationship or non-agency relationship recognized by law continues after termination of agency relationships or any non-agency relationships recognized by law.” If you use AI in your practice, you must be sure of what is happening to the information you submit to it. Using a platform that sells the data you submit on the back end or uses the information you upload to train itself could very easily be a pitfall if you are uploading confidential client information to the platform. An array of consequences arises out of this, but at a minimum, you need to understand what data the AI transmits, how any such data is stored and secured, and how such data may be used, etc.
Garbage In Means Garbage Out, Hallucinations, and Other Limitations
First, when it comes to using AI in a commonsense manner, understand AI’s limitations: generative AI hallucinates, i.e., it creates arbitrary and false answers to prompts. An infamous example of this occurred where an attorney utilized an AI platform to draft his briefing and the platform created fake cases and authority out of thin air. At the end of the day, there is no replacement for your responsibility to check the work if you are using AI. The law and the Code of Ethics can guide this.
Further, as the saying goes, “play stupid games, win stupid prizes.” So it goes with AI that if you ask less than thoughtful questions, you will get less than thoughtful answers. AI will only provide you with answers as strong as the questions you ask. While this may change in the future (as AI technology evolves), using AI today still involves the hard work of analyzing and updating the information and data you are submitting into the platform in order to ask the right questions. If you do not do the hard work on the front end, you will get potentially sloppy results on the back end. Whether you do the hard work at the front or the back end, your duty of due diligence to your clients demands that you double check the responses of the AI to confirm their accuracy.
A Word for Brokers
Brokers, when it comes to managing your offices, do you have policies in place for how (or if) your agents are permitted to use AI? How are you training your team when it comes to understanding the various laws, rules, and ethical issues at play? Do you know who on your team is even using AI? Are the terms of your vendor contracts compliant with the various laws and regulations imposed on you regarding client confidentiality and privacy? These are all questions you should have answers to if you are managing an office, and if you don’t you should start moving forward on obtaining them.
Conclusion
This article is just a starting point. There are numerous other legal and ethical issues implicated by the use of AI in the real estate industry and an infinite number of factual scenarios that may arise. To get started on proper footing, however, know the laws and rules you must abide by in your practice and understand the significant limitations of AI at this time. AI is a powerful tool, but stopping to think and analyze what you are doing and put proper guardrails in place, will allow you to harness that power effectively and ethically.
