What if buying real estate was not a complex and time-consuming process? Dealing in real estate usually involves dealing with an intermediary, swimming in paperwork, and paying hefty fees and commissions.
Even with the latest advances in technology, many jurisdictions still require real estate buyers and sellers to show up in person to sign their documents. Most often, this is because notaries are required to see people physically sign documents, and while some notaries can perform this task virtually, not all have the same abilities.
Now, with the help of cryptocurrency (especially NFTs and smart contracts), the trajectory of real estate transactions is changing rapidly. We’re talking about cutting out the middleman and getting and transferring ownership easily. Sales can even be made through sites similar to eBay, but with an added new level of security.
In this article, we will focus specifically on the effect of crypto 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 take many forms (e.g. music, designs, videos). Each NFT is 100% unique and cannot be reproduced or replaced. Often, NFTs represent digital ownership of something, such as a piece of digital art. In other cases, they may be representative of a physical item, such as real estate and memberships.
NFTs use blockchain technology to maintain their verifiability and proof of ownership. Theoretically, the actual digital file an NFT is based on can actually be copied, but that doesn’t mean someone has taken ownership of it. The culprit would also need to access the smart contract that is attached to the NFT. Moreover, they should be able to modify the smart contract that has been registered on the blockchain, which is practically impossible to do.
What is a smart contract?
Smart contracts are self-executing pieces of code designed to facilitate a transaction. The transaction resolves automatically once the predefined conditions have been met. Contracts are encoded in the blockchain and kept by regulators after registering them.
They are binding contracts that do not require the interference of a central authority or legal system. For this reason, they are much more profitable. After all, lawyers, real estate agents and appraisers are never cheap.
How are the two transforming luxury real estate?
As mentioned earlier, both of the above are changing the luxury real estate industry by cutting out the middleman, but another way is to innovate in the use of memberships. If you’ve ever owned a timeshare or been a member of a country club, you probably know that ownership doesn’t transfer easily. Additionally, your plan usually includes an annual renewal process and membership fees.
Today, with promising memberships such as Aspen Lakes Membership by RHUE Resorts, the assets can be held in perpetuity without the need to renew them each year. These assets can even be passed on to family members and friends if desired. Conversely, memberships can be sold on secondary marketplaces such as OpenSea, an NFT marketplace similar to eBay.
Through the NFT membership model, Aspen Lakes membership purchasers can enjoy:
- Little to no application process or fees
- No recurring annual fee
- Easy transferability (no intermediary required)
- Existing amenities, such as the world-class 18-hole golf course, pro shop, restaurant, wedding and events center.
Most NFTs can only be purchased with cryptocurrency, which can ostracize some investors. RHUE Resorts combats this by allowing subscriptions to be purchased using cryptocurrency or debit/credit cards. This allows them to appeal to the traditional market while engaging crypto enthusiasts.
Another example is the City DAO crypto project. The idea here is that a person can buy land in Wyoming and sell governance rights to interested parties. Those who want to be part of the government structure must obtain a citizenship certificate through NFT. It is important to note that citizens are not the owners of the land. They only make decisions about it, which includes policy changes and regulations.
Of course, in this type of “government” structure, there are only so many memberships that can be purchased.
Fly fishing club
FlyFish Club (FFC) brings an interesting twist to the food industry. The private dining club hosts the world’s first-ever NFT restaurant that requires an NFT membership for restaurant access. Said restaurant will have more than 10,000 square feet and will be located in an “iconic location” in New York. Additionally, FFC NFT shoppers can enjoy “various culinary, cultural and social experiences,” according to the FlyFish club website. The project makes several big promises, however, it is still in its infancy.
Interesting offers and optimistic ideas
While NFTs and blockchain are opening doors in several industries, it’s still hard to say which companies will “stick”. Projects like City DAO have interesting ideas but haven’t delivered anything concrete yet. On the other hand, companies such as RHUE Resorts are established and thriving, immediately delivering real-life luxury.
Blockchain seeks to revolutionize many industries with the many efficiencies and advantages it presents over traditional alternatives. Real estate has shown that it is ripe for improvement and seems like the perfect candidate to enter the world of cryptocurrency and NFTs.