This April, one of Inman’s most popular recurring features returns: back to basics. Throughout the month, real estate professionals from across the country share what works for them, how they’ve developed their systems and tools, and where to invest personally and professionally to drive growth in 2022. It’s always smart to get back to the basics with In-Man.
When a digital artwork by an artist known as Beeple was sold last year for $69.3 million, much of the world was confused.
The piece, which looks like a collage of smaller images, is what’s known as a non-fungible token, or NFT. What that means is that while anyone can see the jpeg version of the art, the owner has exclusive rights to the original digital file. This file can be encrypted and stored in a digital wallet, a bit like a digital copy of the Mona Lisa; There is only one owner, but we can all buy the postcard.
A multi-million dollar NFT JPEG file from Beeple. credit: Christie’s
The Beeple sale and several subsequent high-profile NFT deals have turned the concept into the newest and hottest frontier in the cryptocurrency world. Sports organizations, celebrities and others have raced to release exclusive digital works that can be bought, sold and traded like art.
A year ago, Inman asked if real estate would be the next place NFTs would catch fire. At the time, it was not clear to what extent the concept could be useful for an industry inherently connected to the physical world. Will NFTs flare up, like a fidget spinner once captivating but now forgotten? Or will it finally enter the era that is long overdue but did not come from the widespread use of cryptography in housing?
The answer is still not clear, but what is clear now is that real estate professionals have devised new ways to use NFTs. Here are some examples of those new uses, as well as some of the challenges ahead. However, keep in mind that it is still early days and many of these uses are still experimental.
NFTs as gifts
Perhaps the most obvious way that real estate professionals use NFTs is through art – kind of how they were conceived and why the concept first caught on fire. Specifically, Newgard Development Group will use NFTs as a kind of closing gift to each of the buyers of an upcoming apartment building currently under development as part of its Lofty brand in Miami.
Harvey Hernandez
Harvey Hernandez, founder and CEO of Newgard, told Inman that his company is commissioning physical artwork that will be displayed around the property, and then will provide NFT copies of that art to residents.
“We wanted to provide a way for our owners to enjoy art similarly to the way they enjoy their noble possessions,” Hernandez said.
Giving gifts to new homeowners is a common practice in real estate, and agents routinely give out everything from doormats to key chains to food subscriptions. An agent who has spoken to Inman in the past hires a local watercolorist to paint small portraits of newly purchased homes.
The Hernandez Company is essentially offering an NFT version of this ancient practice. But he argued that there was an additional benefit.
“It’s different because of the fact that they can gain value,” Hernandez said of NFT gifts. “It is liquid and tradable.”
In other words, Lofty owners will be given an item that can evolve into something similar to their type of coin.
When asked about the monetary value of such NFTs, Hernandez said it was difficult to put a price on them because they hadn’t been given a talent yet – the luxury building is still under development – and because the open market ultimately determines the cost of the NFT. It’s also unclear how big the NFT market overall, or how much staying power the idea will have.
But Project Lofty shows that real estate professionals are participating in the first wave of NFT in which technology is used as a kind of luxury goods.
Home as an NFT
Some NFT pioneers are looking beyond luxury goods and trying to blend NFTs with the real world. One such experiment is also taking place in Florida, where ONE Sotheby’s International Realty and Voxel Architects are currently building a mansion that will exist as a physical property and an identical virtual display.
Daniel de la Vega
“We’re just trying to build digital extensions of real-world habitats,” Daniel de la Vega, president of ONE Sotheby’s International Realty, told Inman.
De la Vega argued that there are several reasons for creating a home with physical and virtual components. For starters, as the concept of the metaverse grows, people will want spaces in their virtual worlds, and having a property that reflects their real environment can be attractive.
Selling an NFT that has a physical home attached to it also changes the nature of the transaction. The company is planning to sell the house via the Ethereum blockchain and this should offer an experience in transaction simplification and decentralization. Although the outcome has yet to be determined, the hope is that a crypto-oriented sale is easier to implement than a traditional one.
Whatever happens, though, de la Vega sees NFTs and cryptocurrencies as the future.
“I think the demand is just to move more into a decentralized space where people can be more creative and own assets through blockchain,” he said.
NFTs as transaction management
Some of the pioneers in the field also believe that NFTs represent an opportunity for new entrants to get into real estate. Natalia Karayaneva, CEO of real estate startup Propy, told Inman that her company first conducted the NFT deal in 2017. The property was a Kyiv apartment that was owned by the founder of media company TechCrunch, and selling it as an NFT allowed her to do so. Gain access to a pool of potential buyers who may have never considered real estate at all, let alone an apartment in a foreign country.
Natalia Karayaneva
Karayaneva recalls: “We had 40 bidders, and the winner was this millennial from San Francisco. He had never bought property. He wanted to invest in real estate but was afraid of the process.”
Propy’s approach differs from Miami Mansion because rather than creating virtual homes for still-nascent homes, the idea is to increase transparency and ease. For example, Karayaneva said that NFTs allow transaction-related documents to be uploaded to the owner’s digital wallet. Information sticks to properties more easily. Over time, this means that the owner can easily access a wide range of documents related to transactions that would normally be difficult to access.
“You can look at NFT as your address,” she explained. “And you have full access to your address in your wallet.”
Since the Ukrainian deal, Propy has since moved on to sell other properties such as NFTs, including a home in Tampa, Florida, this week. The company has more than 1,000 people on its queue for future NFT transactions, and Karayaneva described demand for the service as “strong.”
NFTs and Membership Cards
Daniel Chamuel is the founder and CEO of VORO, a brokerage and platform provider. Agents can sign up for the platform in order to access things like transactions and back office management.
Shamooil launched VORO in 2012, but last year announced plans to sell a batch of NFTs. And in this case, NFTs are not like a piece of art and more like a membership to a gym.
“Once you become a member of the NFT, you can access the benefits of membership,” Schmuel said. The perks include discounts on prices, as well as participation in the future metaverse that the company is planning.
So why not just sell traditional membership?
Shamwell said NFT prices for his company are $600, but they are also tradable. Meaning that unlike a gym membership, which must be renewed and can only belong to one person, the owner of VORO NFT can sell it at a profit.
“It is one of the digital assets that you own,” he said.
future opportunities
Everyone who spoke to Inman for this story described the convergence of NFTs and real estate as being in its infancy at the moment. Although players like Propy have been in the space for several years now, it is still a very experimental field and it is unclear which solutions will last.
But there are speculative ways in which NFTs can develop further. Schmuel noted that the NFTs sold by his brokerage will have a practical effect similar to an initial public offering (IPO) on the stock market: They will provide the company with an infusion of cash, while giving traders assets that grow in value as demand rises.
In this context, Chamuel noted that it’s easy to imagine more companies looking to NFTs as a fundraising strategy. In the same way that mergers with private acquisition firms, or SPACs, have become a huge trend in recent years, fake NFT IPOs can proliferate well into the future. That future certainly depends on how well companies like VOROs handle the idea in the near term, but it’s at least one that’s easy to imagine.
Such a future could also see NFTs offered to dealers and company employees, much in the way companies like eXp Realty and Compass currently distribute inventory as part of their compensation packages. NFTs certainly have a long way to go in terms of mainstream adoption before this happens, but some real estate companies have shown a willingness to adapt quickly, putting NFT compensation packages within the realm of possibility.
Propy’s point about documentation also presents a potentially expanding frontier. For example, De la Vega predicted that within 10 years, “everything that is done at home from the last nail will live on the blockchain.” This means that homes can have a ledger describing things like construction and repair that today have limited or no documentation at all. In a future where every home has an NFT attached – a future that de la Vega sees as not particularly remote – all this information can be easily managed in one digital place.
NFTs . Challenges
Companies that work with NFTs are seeing demand for their products, but several sources who spoke to Inman for this story also acknowledged that there was a long way to go before the general public fully internalized the concept. In fact, this appears to be the biggest short-term obstacle to broader adoption.
“A lot of people are still very new to this space,” Schmuel said.
This problem may work over time as people read more about the topic.
But the potential bigger problem is that it is unclear what role, if any, government should play in the real estate world of NFTs. Dave Jones is the co-owner of Windermere Abode in Tacoma, Washington, and owns a number of non-real estate NFTs. He is a fan, user and close follower of technology. However, Jones also said that the decentralized nature of NFTs means that there are not many rules in place yet.
Dave Jones
He noted, “You can get out of the honor system, but as you’ve seen in the Web3 space, there are a lot of people who might not be in it for the best of reasons.” “Currently, there is not a high level of security in the NFT space. Without any middlemen or centralization, people are going to burn left and right.”
This means that people can risk large amounts of money, but without the support of the regulators who usually control the housing industry. Jones also said he doesn’t think regulators will content themselves with objecting to the rise of the NFTs, so it remains to be seen what system they might eventually impose.
“The [Federal Communications Commission] It won’t let us start decentralizing ownership and making NFTs do things without hesitation,” Jones suggested.
Jones was optimistic about the world of NFTs, but his point was that there were still some major unknowns about the field. And for those dipping their toes into the space, he suggested starting with the big brands, which offer more security, and diving into YouTube videos that offer in-depth explanations. Either way, though, Jones and other industry members agreed that a more digital and more experimental future lay ahead.
“Metaverse is coming,” Jones concluded.
Email Jim Dalrymple II
