NFTs have proven to be mostly scams and silly art. Collections and people looking to make money off a fad lost their money on NFTs in 2021. Unfortunately, the technology hasn’t proven to be widespread, but though digital art is pretty much synonymous with NFTs, they aren’t its only use case. Did you know NFTs are being used in the real estate industry? It’s a growing industry, so buckle up because today, we’re going to explore NFTs in real estate.
Cryptocurrencies had a wild year in 2021, but we all knew they would. However, no one predicted the unprecedented skyrocketing with NFTs. Beeple’s $69 million digital art NFT, Everydays: The First 5000 Days, set the year off with a bang. Since then big-name brands, the rich, and the famous have all joined in on the digital art action.
Is There Even A Need For NFTs In Real Estate?
Digital art NFTs helped struggling artists get their names out and make sales through the power of social media and online campaigns. Decentralization played a role here since there was no longer a need for artists to vie for precious display space or time at a gallery or auction. The core fundamentals of what makes blockchain necessary in today’s world allowed for NFT digital art to take off.
The NFT space is evolving and it looks like the real estate industry is poised to experience a similar revolution with NFTs as its jet fuel. Let’s take a look at the challenges that the industry faces before we take a look at what value NFTs bring to the table.
Real Estate Fraud & Theft
In 2020, an FBI report stated that over 13,600 people reported losses in real estate and rental-related crimes. Over $213 million were lost and this only accounts for what has been reported. The crimes have increased steadily over the past few years and it isn’t surprising. With the advent of technology, stealing personal information to forge property ownership became just too easy.
What makes it so easy is that photos, documents, and anything physical can be duplicated, given enough time and skill. Therein lies the problem with current real estate documentations. Since NFTs represent physical objects and authenticate ownership, tokenizing the deeds to homes would prevent thieves from even attempting to forge anything. The same concept can be applied to titles, bills of sales, contracts, or stock shares.
Paper Documentation Is Inefficient
Visit any real estate agency and you’ll immediately see filing cabinets lining the walls of the office space. Though you won’t find a typewriter there you will find artifacts of office technology from the ‘90s such as printers, fax, and copy machines. You’ll see the admin stapling stacks of documents while management is signing the ones that need authorization. Ask the real estate agent to provide you with transaction document copies and see how long it takes for them to find them.
All the inefficiencies mentioned here can be addressed by tokenizing the documents into NFTs. Since NFTs are driven by smart contracts, as soon as the right conditions are met the program will automatically execute. Imagine a buyer’s digital signature that’s automatically imprinted on a contract NFT once the seller’s conditions are met. In a few moments, the NFT will be recorded and authenticated on the blockchain which makes it virtually impossible for fraudsters to intervene.
Visualizing An NFT Driven Real Estate Industry
Real estate investing is only for the rich – at least that’s what most people think, there’s some truth to this, considering the upfront capital needed to purchase properties. Getting a great deal on a property was traditionally closed off to those in the know.
Recently, NFT marketplaces that specialize in online real estate have been popping up and they have evened the playing field. Companies like LABS Group and Unirealchain provide opportunities for all types of investors and having large amounts of capital just isn’t a requirement anymore to get in on the action. Upon becoming a member, you can buy or sell real properties.
Owning fractional shares is available for purchase through their liquidity pools. This allows investors to own multiple properties (fractionally) without paying for the full amount or the full property. Investors with low capital can take advantage of this by pooling their money together with other like-minded investors to crowdfund a higher-priced investment property. Crowdfunding property isn’t anything new since REITs have been doing exactly this for decades already.
NFTs, however, are revolutionizing the industry by bringing speed, security, and efficiency that has never been seen before. Blockchain records are immutable so there won’t be any complications when filling out forms required by various jurisdictions. Escrow transactions are governed by the rules written on smart contracts and thus automatically executed. Careless mistakes made by human error, let alone fraud, are reduced to near non-existent levels.
The Real Estate NFT Ball Is Rolling
Earlier this year, Michael Arrington the founder of TechCrunch, sold his Kyiv apartment which had a price tag of over $93,000. It wasn’t the price or the location that made this story headlines news. This sale became part of blockchain and real estate history because it was the first property to be sold via an NFT transaction. Devon Bernard, the buyer, paid for the property in full with Ether.
RedSwan is a powerful player in the NFT real estate industry with over $3 billion in acquisitions, private equity transactions, and dispositions. The properties are listed in New York, California, Florida, and Texas, with the latter hosting most of them. When visiting their website you can see the properties that are listed in each of the respective locations. The listings include various targeted metrics such as investor IRR, equity multiple, and average cash yield. Each property’s minimum investment is set at $1000 which makes it attractive to those who can’t afford to throw down serious cash.
Various ancillary services are cropping up as well which aim to strengthen the NFT based real industry as a whole. SafeWire’s objective is to combat malpractice that runs rampant with current systems while also working to protect important transactions from hackers. Propy is on a mission to tokenize land registry and are working with jurisdictions to record everything related to real estate on the blockchain. Even governments in countries like Ghana and Sweden are looking to tokenize land registries via blockchain.
The Future Of NFTs And Real Estate
We are beyond the point of asking whether NFTs can be used in real estate. The real estate industry is evolving with blockchain technology but as with any industry, adoption is key to success. The internet took decades before the world embraced it. These days businesses, governments, and economies can’t run without it.
NFTs looks like they can bring about a revolution in the real estate industry. The seeds for a major overhaul have been planted and once they mature, we will likely never turn back to our archaic methods. As cryptocurrencies, metaverses, and digital art continue to propagate the news, NFTs will eventually become a household name. However, only time will tell when a fully NFT-integrated real estate industry will happen.
This post was written by Ironsung on Fiverr. I hire Fiverr writers to write on topics they are proficient in, this helps us all learn about a variety of subjects.
Be cautious when you invest. I do not recommend investing in fads; crypto and NFTs are fads that get super popular and burst in inflated value. Be careful and think clearly before you invest. Subscribe for more investing posts. Have a lovely day.
Disclaimer
I want to make it unequivocally clear that I do not promote any cryptocurrency, nor do I endorse any crypto investments. This website is dedicated to providing information and insights into the world of cryptocurrencies to help you better understand what crypto is.
If you ever find yourself in a position where you need to explain your decision not to invest in cryptocurrencies to friends or acquaintances, you can use the content on this site as a guide to discourage people from falling victim to scams or making hasty financial decisions. My ultimate goal is to empower individuals with knowledge and awareness so that fewer people become financial victims.
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