Chess Prodigy uses algorithms to buy houses for big investors

  • Former chess prodigy AJ Steigman is Atlanta’s top residential real estate broker.
  • He created software that analyzes large datasets to find undervalued homes.
  • But its clients aren’t your typical family buyer — they’re hedge funds and private equity firms.

AJ Steigman sold more homes in Atlanta last year than any other broker – despite living in Florida and having no full-time staff.

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

The system’s algorithms analyze large data sets to identify undervalued single-family homes ahead of human competition. Its name refers to the Terminator’s villainous “Skynet” artificial intelligence network, as first reported by The Wall Street Journal.

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

Steigman declined to name his clients, but told Insider they included hedge funds,

net value

billion dollar family offices and private equity firms. Institutional investorswho can range from small temporary owners to major players on Wall Street bought a record 18.4% of US homes in the fourth quarter of 2021, red fin announced in February.

“While record house prices are problematic for individual buyers, they are one of the reasons why investor demand is stronger than ever,” said Sheharyar Bokhari, economist at Redfin. mentioned in response to the growing trend. “Investors buying up a record share of homes for sale is one of the factors making this market difficult for repeat buyers.”

This is because large investors can often afford to put in offers all in cash, while regular homebuyers rely on mortgages and financing. When it comes to the seller and the listing agent, cash buyers are much 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 that was just a “fraction” of his total closings (including Florida sales), which he estimates at 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 got a national chess master title at age 13 and was ranked No. 1 in the United States in his age group for eight straight years, according to Steignet’s website.

“I was analyzing my games with the computers back then and always trying to spot all the different moves and sequences,” Steigman, who is now 36, told Insider. “So I take this very scientific and quantitative approach to real estate.”

These pattern recognition skills explain how Steigman predicted residential real estate would become a scalable investment early on, he told Insider. While other companies focused on the workforce, Steigman said he doubled down on the data.

“Just like a chess supercomputer can wipe out 50 grandmasters, if you’re building a very powerful system, you don’t need to have a huge number of employees to be able to do that,” he added.

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

In Atlanta, nearly a third of homes sold in the fourth quarter of 2021 were purchased by investors, according to data from Redfin.

Novikat/Getty Images

Until recently, the biggest player in algorithmic real estate was the iBuying arm of Zillow, which shut down in November. The company has invested millions in developing advanced algorithms to appraise homes, buy properties and flip them quickly for profit.

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

Steigman said there isn’t a key feature that differentiates its algorithms from its competitors,” comparing the software design process to Elon Musk building a rocket.

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

In Atlanta, nearly a third of homes sold in the fourth quarter of 2021 were purchased by investors, according to data from Redfin. This is the highest percentage of any US state. Meanwhile, out-of-town buyers with larger 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 worry that Wall Street’s shift to residential real estate has pushed ordinary people out of the market. But while the presence of homebuying investors has grown in cities like Atlanta and Charlotte, consumers still far outnumber investors, as Vox once did. reported.

“To be honest with you, consumers are the largest proportion of the market,” Steigman told Insider, adding that companies are strictly limited by the types of properties they can purchase. “They’re going to crush every institution put together.”

Sharon D. Cole