Click, Click, Close: How Web3 Is Re-Engineering Real Estate
The couple-clicks, home-buying experience is something many in the real estate industry have talked about for years. In a transaction that typically requires lots of paperwork, people, and legal checkpoints to happen, it didn’t seem possible.
Thanks to blockchain and a burgeoning world of NFTs (Non-Fungible Tokens), this wave of possibility is already within view. It’s like we’re sitting on the shore, we see the wave coming, and we’re grabbing our boards to surf it.
You see, the couple-click, faster, simpler, more secure transfer of real estate assets that everyone who is tied to the transaction – the buyer, seller, and agent – has yearned for over a decade, is now accessible to everyone through Web3 technologies.
What happened on Wednesday, April 13th, 2022, in Tampa, Florida – the couple-click experience, has made that dream a reality.
Until now, the conversation around Web3 innovation has been dominated by the art world and seen as a way of proving and securing ownership of digital assets.
Reid Hoffman (founder of LinkedIn and venture capital firm Greylock) stated in a recent podcast that web2 was for real identities and relationships, and now web3 is the upgrade of the web for ownership. Because obviously, “once you have a cryptographically secure ledger, it isn’t just digital assets that could be there”.
Ownership is something that exists not in objective reality, but as a result of human interaction. It exists because humans agree that it exists. Some examples of social constructs are countries, money, and private property. Car ownership is just a title, it’s a record in a database, thus it’s a digital asset. Thus it could be governed via blockchain.
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What about real estate? Here I am, sitting in my new home in Miami and going through the process of buying a new home for my in-laws, and experiencing the same thing so many buyers are – making one blind offer after another on multiple properties, and now 8-months later, having lost weeks of our lives in this process, a more transparent, smoother and faster process can’t come soon enough.
Imagine this better future: You find the house you want, you either connect your wallet or your online banking in one place, and with a couple of clicks you participate in an online, transparent auction. If you need a loan, you apply and get approved within the auction process, instantly.
So what happened in Tampa
My team reported: “We are ready, the smart contract is deployed, the NFT is minted, and the sale can start”. I said, “Ok, let’s do it”.
This is how a 24-hour sale started and how the world would observe the offers coming in.
This sale was the world’s 3d NFT sale of a home. In my previous article, I explained how the first real property NFT was born. This recent sale was different because it also accepted USDC instead of Ether – our response to our Propy Twitter community vote.
The buyer who made the highest offer had been at the open house but at the time of the sale was traveling in Texas. On April 13th, they became owners via Web3 settlement.
Once the sale was concluded the buyer called and asked: “What’s next?”. When my team shared this with me over zoom, I smiled. It was hard for people to believe that at that moment, as it occurred after the last two NFT sales, the buyers became owners immediately. They had all the documents in advance for due diligence. All that was left was to receive the code for the smart lock to receive the key.
No hassle. Totally secure. Lightning-fast.
Here’s the link to this transaction on Etherscan (it’s a browser for blockchain records).
This home sale is now immutably recorded on a public blockchain. While Ethereum is supported, no one can change or delete this proof and the NFT can further change hands. And of course, it can be done on any decentralized blockchain.
While there’s been over $4 billion of real estate transactions recorded on blockchain, for the first time in history, this instant settlement on blockchain has been achieved for a small number of assets for now.
Just like streaming on Netflix NFLX has scaled, and buying goods online has scaled, it can scale for real estate – a couple of clicks on the front end connected to smart contracts and a person owns a home. The ownership is legally de-attached from county recording and now lives on-chain.
This future is already here
In 2021 12% of first homebuyers tapped into their crypto funds to secure down payments. This means a new generation of buyers are willing to invest in using a different method of payment and transactional experience to buy real estate. The ramifications of this are breathtakingly endless. Instead of the $1.7 trillion turnover, we’ll likely see, the real estate market could potentially increase to a $3 – 5 trillion market. Moving from state to state for jobs, family or opportunity is already part of the culture for young people, as well as owning crypto. Why not buy instead of renting homes when moving, and own a property in their wallet within minutes?
What people can now envision, is that Web3 (which includes NFTs, smart contracts, and blockchain) is primed to completely transform how homes are bought and sold. They enable the process to be handled completely online, making transactions more efficient, automated, and with fewer middlemen. The entire sale is handled on a secure platform, creating transparency for all parties.
Another great advantage of web3 is that the “fake it till you make it” concept is close to impossible – you either have a record of transactions on immutable on-chain or you don’t.
You might think that this innovation will not scale because of the mortgage problem as traditional lenders don’t accept crypto holders’ earnings statements. Well, key players in the new finance world are actively developing novel products to provide mortgages for homebuyers secured by crypto portfolios, common among the new generation of homebuyers. And a number of defi protocols are also looking to expand to provide down payment loans and mortgages for crypto holders, such as XBTO, Milo, Helio.
One can also envision a new global marketplace for buying and selling homes, not unlike OpenSea NFT marketplace today. It could be OpenSea, but buying real estate requires each wallet (it’s almost like your login), that you are “login-ing in” and buying assets with, to be identified, but the current NFT marketplaces intentionally are built for anonymous users. Thus use cases that need identities attached to wallets will require new products to evolve. A showcase of homes ready to be transacted on immediately, all anchored in a solid legal framework governing the secure transfer of real property rights.
We are not talking about fractional ownership. The concept was already there with crowdfunding platforms and REITs, and now will drastically improve with new companies like SolidBlock, LoftyAI, RealT, Acrew, and will make it more appealing for the crypto community. Rather it’s a full ownership transfer of homes via blockchain, easily just like we buy books on Amazon.
Ultimately, the foundation of Web3 exists as a combination of blockchain, smart contracts, decentralized currency and lending, and ownership of data and assets. All of these technologies will work together to provide the products and services consumers are – and will – demand.
Today, we’re seeing crypto token standards like ERC721 used as a representation of real property ownership in the real world and virtual property in the metaverse. Blockchain and smart contracts are being used to help manage transactions, offer, title, and more. Consumers now trust blockchain technology, they trust smart contracts rather than small tech startups. Consumers understood that no government or corporation can take over their data or an asset if it’s in their crypto wallet. And that’s why more use cases such as real estate will yet evolve and turn into the next big things.
While NFT art and music sales are cooling down, – lower volume on OpenSea, and a symbolic Jack Dorsey’s first tweet now can’t sell for the same price, the innovation will stay, artists and creators will earn more from now on. Capital flow, sparked by art NFT popularity, accelerated the search for new applications for this technology in other industries, including bringing it into reality in the field of real estate.
What will be the next big culturally relevant movement that leads to the evolution of known economic and financial systems, is yet to be discovered.