Responsible AI: Should companies be more accountable for their AI algorithms?
/AI is the future. AI can help with jobs that are time consuming and tedious, but there is a price to pay. AI algorithms are as good as the information you consider while you train the model and the intent of the business that creates the model. That intent itself may not be inherently bad, but can still affect some group of groups of people. Often, companies use AI without considering who may be affected. Whether this is on purpose, which is highly unethical, or unintentional, businesses should do more to use AI in a responsible way. I was fortunate to work in the AI space at Microsoft for the past year, where I learned a lot about how AI can, even unintentionally, affect people (see Microsoft’s responsible AI guidance).
Recently I was one of those people, negatively affected by an AI algorithm and I want to share my story.
In September we listed our condo for sale. Like many people, my husband and I found ourselves working from home and wanting to buy a house, where we can each have a dedicated working space. At the time of the listing, Redfin estimated our condo to be worth $1, 016.000, so we listed it for $999.950 thinking that was a fair price. I know that real estate prices are based on more than just Redfin estimates, however, many people, when looking for real estate, start with sites like Redfin and Zillow and judge value by looking at their estimates. I know I do. If the listing price is much higher than the estimate, I immediately think the property is overpriced and therefore, not good value. I may even consider not going to see it, thinking that even if I like the property, offering a price that is much lower than the listing price (but in line with Redfin estimate) would be insulting. And the owner has missed out on a potential sale. This is what I used to think, until I listed my condo and observed what Redfin does.
When my condo was listed, we had some viewing but given the fact that we are mid pandemic, which is unprecedented in terms of real estate, and the fact that people that can, now work from home, market for condos was extremely slow. Seems that everyone wanted to do what we wanted to do – sell their condo and buy a house. As soon as we listed the condo, Redfin adjusted the estimate to under the listing price. Now my condo was no longer a relatively good deal. Surely their AI algorithm cannot be that simple that it just tracks the listed price?
We dropped the price to $979.000, somewhat to incentivize the potential buyers but also because we were conscious of Redfin’s new estimate. The moment we adjusted the price, Redfin dropped their estimate to $969.000. Again, my property now did not seem such a great value and any offer I may get would probably reflect their estimate but this change happened instantly with my price adjustment, so unlikely that it was a reflection of the more complex algorithm, which considers other prices or sales in the area – which would actually make sense.
It was still slow on the market front and since it has been 6 weeks, we decided to lower the price to $950.000, mostly because we moved out and were motivated to sell and move on with our lives. At that price, our condo was extremely good value and I thought, with Redfin estimate now at $969.000, this price will be attractive to buyers. But, as you are probably guessing now, as soon as the price was adjusted to $950.000, Redfin instantly adjusted its estimate to $938.000. And even at that price, which made my condo a good price, my agent was asked by people coming to an open house if there is scope to lower the price. Why wouldn’t they ask, after all Redfin estimate says it’s worth less. Quite frankly, if I was thinking of buying it I would do the same.
Source: Redfin
Redfin re writes estimate history to make their algorithms seem more accurate
But I realized at this point that I will never win over Redfin estimate, it was a game of wack-a-mole. Not only that, their 5 year tracker adjusted accordingly too. Surely a 5 year tracker should track, accurately, what they predicted each given month in the past, and not give you information that is based on lies and adjustments? It seems as if I am not alone in thinking this is grossly unfair to people selling their properties in what is already, pretty tough market. Comments on Blind reflected my thoughts:
“I think the worst part about the estimates is that Redfin retroactively smoothes them out. Throughout most of 2019, when real estate was dipping in Seattle, instead of representing a dip, they went back and erased the 2018’s peak, smoothing it out to make it look like a consistent upward trend. It was downright dishonest.”
“Redfin has a conflict of interest, which is that it does better when it sells more homes. Users are more comfortable investing in a home if they believe the value is steady appreciating over time, rather than depreciating, or growing but with great volatility. It is inherently dishonest to rewrite historical trends to create the illusion that home prices are trending up when they actually are trending down, and Redfin financially benefits from this trend smoothing. Estimates should indeed reflect the best guess with the current information at that time, as you say. An estimate should represent “this is what we think the price is, at this time, with this information.”
“Redfin retroactively changes all their price estimates and retains no history. Example, in May, Redfin said my house was worth $860 in May. Today, it says my house was worth $802 in May, but is worth $808 today. I do not mind that they use an estimate. I mind that they opaquely change an historical estimate and do not retain what the estimate was at that point in time or disclose why the historical estimates changed. It feels very manipulative, like false advertising, and should not be legal.”
Imagine having to sell your property because, like so many people, you lost your job or business due to the pandemic, and your house is now the only asset you have. How much would you have to devalue it for Redfin to stop lowering the price each time you do?
Photo by Rowan Heuvel on Unsplash
What might happen if I lowered my condo’s listing price to something ridiculous? Like $100.00? Has anyone tried? Tell me what happened. Additionally, people listing with Redfin agents have a different problem, which also seems unethical:
“The Redfin estimate is a joke. I used to have a condo and the value of the identical condos in the building varied by +/- 15%. They also clearly use the list price in their calculation which completely invalidates their estimate as a data point. They also seem to inflate the estimate for their own listings. I listed with them and my own estimate inflated by $50k the day the listing went live and dropped back down the day I pulled the listing.”
It seems I am not the only one that noticed redfin’s unethical and misleading practices – see this detailed article. In 2017, Redfin’s press release boasted that their estimates are the most accurate but I wonder if that still holds.
And I know that there are no regulations on this issue and technically, what Redfin does may not be illegal but I believe businesses should have a moral and ethical compass guiding them through their use of the AI technology. First and foremost, they should ensure their algorithms are fair and transparent.
People should not be put in a desperate situations where they have to accept low offers for their property because Redfin’s estimate is not programmed to be fair.
And companies should be accountable for how they conduct their business when it comes to AI. This is also good business sense. A bad AI algorithm can ruin your company’s reputation, which may then be irreparable. This happened to Amazon more than once (see here and here).
My own story of selling my condo did not result in a happy ending. We decided to take the condo off the market and move back in, having incurred losses on the rental we moved in to. I know that if the market was more buoyant right now, people would take less notice of Redfin estimates because of the demand. But we are going through tough times right now and it seems that, when people are already struggling to sell their properties, which some are forced to do, Redfin kicks them when they are down. And guess what, as soon as the condo was delisted, Redfin’s estimate shot to over a million within 24 hours. That’s right, my property jumped in value by over $60.000 almost overnight. Maybe to incentivize me to list it again so they can screw me again? Since then it dropped again. It keeps me on my toes, that’s for sure.
I wonder how long will it take before Redfin loses credibility and gets replaced by another, more ethical company, who care about their effect of people. Responsible AI practices are becoming more desirable and many companies are already doing their best to uphold them. It’s a shame Redfin is not one of them. Personally, I know that I will never use Redfin again as a way or gaging property values. Once bitten, twice shy as they say. And whenever possible, I will make sure I never use their services.