NFTs and Real Estate!
Today I want to discuss a topic I have seen buzzing through the headlines for the past year, but hasn't exactly been explained in a way that I have been able to really understand or realize the importance of. That's right! We're going to talk about NFTs in Real Estate, how they relate to the industry now, in the future, and what exactly the technology is thats supposedly going to replace my job!
I just read an article about a virtual property, that is a digital 3D image of a home has just sold for over four million dollars in the Sandbox metaverse. That's right, you cannot live in the home, it doesn't have a pool, or a backyard, or any bathrooms! Not ones that you can use anyway, and it sold for well over what most people make in a year, if not several years of earned income and savings. Now, that definitely made me a little bit curious about what's going on with NFTs and how they might play into the real estate market, today and in the future.
For over a decade I have been a real estate agent in the Coachella Valley, working through every imaginable combination of deals, clients, and roadblocks. It is my goal over the course of this blog to go over NFTs and their supposed usefulness to the actual real estate market, is it more than just a buzz word? Will we see NFTs in real life use cases spreading exponentially in the future or is this tech going to bust when it tries to scale? NFTs are non-fungible tokens now if you don't know what that means then this is not the article for you. But do not feel insecure if you don't know what that means, I thought it was non-fundable tokens for a really long time!
So there's two basic applications for NFTs we will be discussing, outside of changing the modern art , sports memorabilia, and even video game industries. They are being used to buy parcels of virtual land, homes, art pieces, even clothing for your virtual avatars. Then there is the theoretical application on how NFTs can and are being used in real world real estate transactions.
Obviously one of the issues with current real estate standards is that even a typical sale can be a complicated and tedious procedure. The standing conjecture is that NFTs and blockchain technology will facilitate real estate purchases, by reducing red tape and ensuring the process is safe and reliable. Meaning that soon your next home purchase could be just one click away!
So, the basic idea is that NFTs could be a more practical and progressive way to transfer properties from one person or entity to another, much like the way we use an LLC (Limited Liability Company) to allow for multiple owners and a simpler transfer of ownership. At this time the assets under an LLC are transferred to a new buyer or a new partner with the purchase of the LLC. While they currently don't have any legal regulation, the same could be written into a contract for an NFT, reducing both options to a similar function.
This could potentially be a better method of documenting the chain of transfers, under that NFT property, from one owner to the next. There would be a more guaranteed chain of title, that could not be forged or faked in any way. There are definitely some great applications for NFTs in the real estate market, but don't feel like we'll be seeing them anytime soon. No matter how great these might work in theory, we have yet to see how this new technology might factor at scale, the only evidence we have for this is anecdotal and overwhelmingly on the tech enthusiast side.
For now, let's talk a little bit more about what's behind NFTs and the technology that allows the to function in such a unique way. Now you've probably heard a lot about blockchain technology and I'm not sure that anybody else has explained it like this before, so here we go: If you've ever played Telephone, the children's game where you whisper something in one persons's ear and then they whisper into the next person's ear, well usually it ends with the word being completely different by the end. It gets distorted and changed as it goes down the group. Blockchain is like having someone stand behind the whisperers from the beginning, ensuring that each child says the correct word or phrase into the next person's ear. That might not seem like a very fun game, but it is an excellent way of cementing information into a digital ledger that can never be altered or deactivated unless all parties agree to it.
This blockchain technology is much like playing telephone with a guarded security guy standing behind you verifying the message again and again, from each owner and transfer to the next. I feel like that's the easiest way to explain blockchain technology, and if you still need some help understanding it please reach out to me. And if you think my explanation didn't make any sense, well you should reach out to me too!
There are so many applications in not only real estate but any place where things are traded and traded again to verify the chain of title and the assets of that property. There's a lot going on in this new realm and we're going to be keeping our finger on it!
If you have any questions or comments put them below! I hope to see you again in our next round of where technology and the real estate market is going in 2022 and into the future.
To skip the reading and watch Jenell's video on the topic, click here!
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