What Would an NFT in Real Estate Look Like?
The short-term rental market is constantly adapting to changes as the way we do business continues to evolve. The use of cryptocurrency in real estate is one of the most exciting trends to influence the way we buy and sell homes. However, since real estate is a heavily regulated market, change happens more slowly compared to other sectors. Specifically, the use of NFTs, or non-fungible tokens, has been a hot topic in the real estate world.
An NFT is a unique digital token that belongs to one specific person — and it grants a digital right to almost anything. It can be purchased with cryptocurrency and confers sole ownership to another entity through a blockchain. Though NFTs are typically used to acquire or sell digital assets like art, it has also been used in physical transactions. So what does this mean for those who want to use cryptocurrency to buy and sell homes? What would using an NFT in real estate look like?
Cryptocurrency Into Physical Assets
Purchasing real estate with cryptocurrency is a relatively new concept. In 2017, the first Bitcoin home purchase in Texas happened. In the same year, an NFT was used to purchase an apartment in Ukraine. Though these transactions show that buying and selling homes through cryptocurrency is possible, the real estate market is highly regulated and slow to adapt to changes.
However, the market is feeling the ever-growing demand from buyers who want to convert their cryptocurrency into physical assets. The race is on to find a way to make real estate transactions as easy as pushing a button. This can only happen by making the legal and tax issues streamlined with the use of NFTs. But with no signs of crypto going anywhere, change is bound to happen. The question is no longer “if,” but “when.”
Applying Theory to Reality
In digital transactions, NFTs are used to trade ownership rights. In theory, this should also work for real estate transactions. However, as seasoned investors know, the process to acquire new properties involves a lot of paperwork. How can this complicated and thorough process be completed with just the touch of a button? Can deeds and property titles be traded that quickly and easily? Crypto experts believe that this convenience is on the horizon — though it’s years off due to regulations.
Using NFTs Right Now
If you want to use an NFT in a real estate transaction, do not expect the process to be any faster than using cash or a loan. Currently, NFTs would be used to buy real estate, followed by all the traditional steps normally required to complete the home sale. This means that whatever steps are required for title transfer, closing, etc., all continue to be done as you would expect. The only difference is your method of payment.
In previous NFT real estate purchases, the homes were purchased via NFT, and a legal team was responsible for making sure everything else was in order. Title transfers, deed registration, and other legal necessities were done in the traditional way to ensure 100% transfer of ownership. Until digital sales become able to securely transfer deeds and titles, you can expect much of the same process. The only difference is that title, and escrow will now be closed in the standard way and on the blockchain as well.
Normalizing NFT in Real Estate
It’s going to take some time for the buying and selling process to catch up with consumer trends. For an NFT to be fully sufficient for transferring ownership and legal rights, it must be “wrapped” in a legal entity like an LLC. Laws will also need to change to allow NFTs to certify property titles. If these changes can happen, it can improve the prices of title insurance and reduce common recording issues regarding such transfers. It will be exciting to see what happens in the next 5 to 10 years regarding using cryptocurrency in real estate, so be on the lookout for how regulations and technology continue to evolve.
Work With the Best
Whether you want to optimize your rental portfolio or look for new real estate investment opportunities, connect with our team at OpenAiRE. We will be happy to discuss trends like cryptocurrency along with other market updates and how to make your new acquisitions successful.