Wed. Sep 27th, 2023
Chess Prodigy Uses Algorithms to Buy Homes for Big Investors
  • Former chess prodigy A.J. Steigman is the top residential real estate broker in Atlanta. 
  • He created a software that scans large data sets to find undervalued homes. 
  • But his clients aren’t your typical family buyer — they’re hedge funds and private equity firms. 

A.J. Steigman sold more houses in Atlanta last year than any other broker — despite the fact that he lives in Florida and has no full-time staff. 

He’s able to sell residential properties from thousands of miles away thanks to a $20,000 computer and a proprietary software system called “Steignet” that he launched at the University of Pennsylvania in 2018.

The system’s algorithms scan large data sets to identify undervalued single-family homes before the human competition. Its name is a reference to the Terminator’s villainous artificial intelligence network “Skynet,” as The Wall Street Journal first reported. 

But you won’t find any mom and pop homebuyers on Steigman’s client roster. Instead, he works with investors that flip the homes or rent them out for profit.

Steigman declined to name his clients, but told Insider they include hedge funds, high-

net worth

family offices, and billion-dollar-plus private equity firms. Institutional investorswhich can range from small time landlords to major players on Wall Street bought a record high of 18.4% of US homes in the fourth quarter of 2021, Redfin announced in February.  

“While record-high home prices are problematic for individual homebuyers, they’re one reason why investor demand is stronger than ever,” Redfin economist Sheharyar Bokhari said in response to the growing trend. “Investors buying up a record share of for-sale homes is one factor making this market difficult for regular homebuyers.”

That’s because big investors can often afford to put down all-cash offers, whereas regular homebuyers rely on mortgages and financing. As far as the seller and listing agent is concerned, cash buyers are a lot less complicated to deal with. 

Last year, Steigman sold 300 properties in Atlanta for a total of $86 million, according to the Atlanta Realtors Association. He said this is just a “fraction” of his total closings (including Florida sales), which he estimates to be around $130 million. 

The high-tech broker credits his success in the real estate game to a childhood spent training as an international chess champion. Steigman earned a national chess master title by age 13 and was ranked the #1 US player in his age group for eight consecutive years, according to Steignet’s website. 

“I would analyze my games with the computers at the time, and always try to spot all the different moves and sequences,” Steigman, who is now 36, told Insider. “So I take that very scientific and quantitative approach to real estate.”

Those pattern recognition skills are how Steigman predicted residential real estate would become a scalable investment early on, he told Insider. While other firms focused on manpower, Steigman said he doubled down on the data. 

“Just like a chess supercomputer can obliterate 50 Grandmasters, if you build a very powerful system you don’t need to have a large headcount to be able to do it,” he added.

Atlanta, GA homes with the Midtown skyline in the background.

In Atlanta, nearly one-third of homes that sold in the fourth quarter of 2021 were bought by investors, according to Redfin data.

novikat/Getty Images

Until recently, the largest player in algorithmic real estate was Zillow’s iBuying arm, which shut down in November. The company poured millions into developing advanced algorithms to value homes, purchase properties, and quickly flip them for profit.

Zillow CEO Rich Barton said on an earnings call that the iBuying models couldn’t handle the unpredictability of the pandemic-era housing market, which led them to overpay for listings. Zillow, Redfin, and Opendoor stock have all crashed since last autumn because of the failed iBuying efforts.

Steigman said there’s not one key characteristic that differentiates his algorithms from competitors,’ comparing the process of designing the software to Elon Musk building a rocket. 

“It’s not like the fuel is the secret sauce,” he told Insider. “It’s all of the iterations that are constantly being perfected.”

In Atlanta, nearly one-third of homes that sold in the fourth quarter of 2021 were bought by investors, according to Redfin data. That’s the highest percentage of any state in the US. Meanwhile, out-of-town buyers with bigger  budgets than local residents are driving up property costs, fueling fears of a housing bubble. 

As homeownership becomes increasingly out of reach for many Americans, some people fear that Wall Street’s move into residential real estate has priced ordinary folks out of the market. But while the presence of investor homebuyers has become more prominent in cities like Atlanta and Charlotte, consumers still greatly outnumber investors, as Vox has previously reported.

“To be honest with you, consumers are the largest proportion of the market,” Steigman told Insider, adding that corporations are strictly limited by the types of properties they can buy. “They will squash all of the institutions combined.”

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