In recent years, home buyers of the social media-savvy generation have been increasingly on the lookout for other solutions beyond the status quo when it comes to real estate. Advertising methods have evolved rapidly, as platforms such as Instagram and TikTok entered the fray, with the pandemic creating an even greater need for digitalisation – but could blockchain technology, or more specifically, non-fungible tokens (NFTs) be used to streamline an actual real estate transaction?
To many of us, NFTs are a fairly novel concept. In truth, they hadn’t really entered the mainstream consciousness until recently, when they started being sold for astronomical sums – so let’s rewind slightly.
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’s this information that makes each NFT unique, and as such, they cannot be directly replaced by another token. By contrast, banknotes or bitcoin are replicated and can simply be exchanged on a like-for-like basis. For example, that’s not the world’s only five-pound note in your wallet, and there’s therefore no difference between that one and the countless others in circulation.
So, how does this relate to real estate? Well, 2021 saw the first ever property sold as an NFT. It was a studio apartment in San Francisco and the deal was made possible by transferring the ownership of the property from the individual to a legal entity based in the US, and in doing so, this enabled the ownership to be transferred through NFT, allowing for an automatic exchange. Then, a special protocol was created, which exchanged an asset from one digital wallet to another, collected personal names and completed simple background checks − all of which helped ensure the transaction’s integrity.
While months of research and tech work will have preceded the exchange, the transaction itself took just 22 minutes to process, and this trailblazing act has redefined what’s possible, and with millennials and Gen Zs already buying high-value assets such as expensive avatars or cars online, it’s perfectly plausible that they will look for a similar kind ease and transparency when buying real estate. However, to avoid wire and other forms of cyber fraud (which are common in such transactions), higher levels of security and more data integrity are often required.
So, could the introduction of NFTs spark significant change in the industry? While it’s definitely possible, you simply can’t discount the key skills and value that brokers bring to a transaction that still give them the upper hand – for the time being, at least. 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.
What’s more, the most dedicated brokers are always looking for ways to stay ahead of the competition, and are actively embracing the crypto space as clients become more knowledgeable about blockchain. Technological advances are reflected by changes in the real estate industry, and at the very least, this is a novel marketing tool to reach an audience interested in the Metaverse. That said, you can’t rule out this one day transforming our concept of purchasing, and reshaping buyer expectations when making a transaction.