Over the past few years, we have seen a social media savvy generation of home buyers looking for other solutions beyond the status quo when it comes to real estate. Whether it be marketing a new development on Instagram or showcasing an apartment on TikTok, the way real estate is advertised has been rapidly changing, and the migration to digitalization has only been accelerated by the pandemic. But could an actual real estate transaction be streamlined with the use blockchain technology and more specifically, non-fungible tokens (NFTs)?
Let's rewind slightly as it's likely most of us hadn't heard of NFTs until recently when they caught the media's attention and started being sold for eye watering amounts of money. At a very high level, most NFTs are part of the Ethereum blockchain. Ethereum is a cryptocurrency, like bitcoin, but its blockchain also supports these NFTs, which store extra information that makes them work slightly differently.
It is this information that makes each NFT unique, and as such, they cannot be directly replaced by another token. They cannot be swapped like for like, as no two NFTs are the same. Banknotes or bitcoin, in contrast, can be simply exchanged for another; if they hold the same value, there is no difference to the holder between, say, two five-pound notes.
NFTs are one of the fastest-growing sectors in the crypto industry and can be anything digital such as drawings, music or digital art.
So how does this relate to real estate (which is definitely not digital), you ask. Last year the first ever property was sold as an NFT -- a studio apartment in the Bay Area of San Francisco. It was made possible by switching the property ownership from individual ownership to a US-based legal entity. Doing so remarkably enabled the transfer of ownership via NFT, which automatically exchanged ownership of the property. Then a special protocol was created which exchanged an asset from one digital wallet to another, collected personal names and complete simple background checks -- all of which helped ensure the transaction?s integrity.
Apparently the new NFT owner was thrilled with the process -- it took only 22 minutes to process -- and now plans to rent out the studio (online of course). However, this of course doesn?t take into consideration in the months of research and tech work involved to make this transaction possible. However, we do now know it is possible, and whether this transaction was an NFT gimmick or not, Millennials and Gen Zs are already purchasing high-value assets such as expensive avatars or automobiles online. It is fair to expect they will look for a similar kind ease and transparency when buying real estate. However, higher levels of security and more data integrity are necessary to avoid wire and other forms of cyber fraud which are common in such transactions.
So, could NFTs bring significant change to our industry? It is possible, but there are key skills and values that brokers bring to a transaction which will help them remain in the driver?s seat. Their network, local knowledge, and property expertise will remain vital to the sales process, including providing accurate valuations, marketing, viewings, receiving offers, arranging sales and support with the legal process.
Brokers who are interested in setting themselves apart from the competition are actively learning and engaging in the crypto space as clients become more educated about blockchain. Changes in technology are reflected by changes in the real estate industry, and at the minimum, this is a novel marketing tool to reach an audience interested in the Metaverse. On the other hand, who?s to say this could not one day revolutionize our concept of purchasing and what buyers will come to expect in a transaction.