What if buying a piece of real estate wasn’t a complex and time-intensive process? Dealing in real estate typically involves interacting with an intermediary, swimming through paperwork, and paying steep fees and commissions.
Even with the latest advancements in technology, many jurisdictions still require real estate buyers and sellers to show up in person to execute their documents. Most often, this is due to notaries being required to see people physically sign documents, and while some notaries can do this task virtually, not all have the same capabilities.
Now, with the help of cryptocurrency (specifically NFTs and smart contracts), the trajectory of real estate transactions is rapidly changing. We’re talking about taking out the middleman and obtaining and transferring ownership with ease. Sales can even be made through sites similar to eBay, but with a new level of added security.
In this writing, we will be specifically focusing on crypto’s effect on the luxury real estate market. But first, let’s start with the basics—how NFTs and smart contracts work.
What is an NFT?
NFTs, short for non-fungible tokens, are cryptographic tokens that can come in the form of many things (e.g., music, drawings, videos). Each NFT is 100% unique and cannot be replicated or replaced. Many times, NFTs represent digital ownership of something, such as a piece of digital art. In other instances, they can be representative of a physical item, such as real estate property and memberships.
NFTs use blockchain technology to maintain their verifiability and proof of ownership. Theoretically, the actual digital file that an NFT lies on can, in fact, be copied, but this does not mean that someone has taken over ownership. The culprit would need access to the smart contract that’s attached to the NFT as well. Moreover, they would have to be able to alter the smart contract that has been recorded on the blockchain, which is virtually impossible to do.
What is a smart contract?
Smart contracts are self-executing pieces of code built to facilitate a transaction. The transaction automatically resolves after pre-defined conditions have been met. The contracts are coded into the blockchain and maintained by regulators after recording them.
They are binding contracts that do not require the interference of a central authority or legal system. Because of this, they’re much more cost-efficient. After all, attorneys, realtors, and appraisers are never cheap.
How are the two transforming luxury real estate?
As previously mentioned, the two above elements are changing the luxury real estate industry by cutting out intermediaries, but another way is by innovating the use of memberships. If you’ve ever owned a timeshare or had a country club membership, you probably know that ownership is not easily transferred. Moreover, your package typically includes an annual renewal process and membership dues.
Now, with promising memberships such as the Aspen Lakes Membership by RHUE Resorts, assets can be owned in perpetuity without the need for annual renewal. Said assets can even be passed down through family members and friends if desired. Conversely, memberships can be sold in secondary markets such as OpenSea, an NFT marketplace that’s similar to eBay.
Through the NFT membership model, Aspen Lakes Membership purchasers can enjoy:
Little to no application process or fees
No annual recurring dues
Transferability with ease (no middleman required)
Existing amenities, such as the world-class 18-hole golf course, pro-shop, restaurant, wedding and event center.
Most NFTs are restricted to being purchased with cryptocurrency only which can ostracize certain investors. RHUE Resorts is combating this by allowing the purchase of memberships through cryptocurrency or debit/credit cards. This allows them to appeal to the traditional market while also engaging crypto-enthusiasts.
Another example is the crypto project City DAO. The idea here is that a person can purchase a piece of land in Wyoming and sell rights of governance to interested parties. Those who want to be a piece of the government structure must obtain a certificate of citizenship via NFT. It’s important to note that citizens are not the owners of the land. They only make decisions regarding it, which includes policy changes and regulations.
Of course, in this kind of “government” structure, there are only so many memberships that can be purchased.
FlyFish Club (FFC) brings an interesting spin to the food industry. The private dining club hosts the world’s very first NFT restaurant that requires an NFT membership for dining access. Said restaurant will feature over 10,000 square feet and be in an “iconic location” in New York City. In addition, FFC NFT purchasers can enjoy “various culinary, cultural, and social experiences,” according to the FlyFish Club website. The project makes several big promises, however, it’s still in its infancy.
Great offerings and optimistic ideas
While NFTs and blockchain are opening doors in several industries, it’s still hard to tell which ventures are going to “stick.” Projects like City DAO have interesting ideas but have yet to provide anything concrete. On the other hand, companies such as RHUE Resorts are established and flourishing, providing luxury in real life immediately.
The blockchain looks to revolutionize numerous industries with the many efficiencies and advantages it has over traditional alternatives. Real estate has shown that it’s ripe for improvement and looks to be the perfect candidate to enter the world of cryptocurrency and NFTs.