The real estate industry has often been slower to embrace new technology relative to other industries. The old-school nature of buying and selling real estate and the large number of unique variables involved in every transaction has acted as a barrier to innovation.
However, over the last few years, technology has played an increasingly important role in the sector, from fintech firms offering streamlined mortgage applications to appraisal firms augmenting human appraisers with technology to help solve staffing shortages.
Traditionally, to get funding to close a real estate transaction, the parties have relied on going to a bank to pick up a bank-certified check or sending wire transfers. However, this process has long been considered inefficient.
The application of blockchain has — among many benefits — the potential to revolutionize when transactions are funded and potentially allow real estate to be bought and sold around the clock and in rapid time.
These transactions can occur in a matter of seconds depending on the blockchain platform. For example, Solana is one of the most high-performance blockchains in crypto. While others like Bitcoin and Ethereum support about 10 transactions per second (TPS), Solana can handle up to 50,000.
The U.S. is one of the leaders in utilizing cryptocurrency payments for real estate. Looking ahead, it may become a very common trend to see more real estate transactions centered around crypto.
The largest crypto real estate payment the U.S. has seen to date took place in May 2021, where a property sold for $22.5 million. And more recently, one New York penthouse was listed for $29 million — specifying that offers could only be made in Bitcoin. This signals a shift in the real estate market towards the acceptance of crypto as a mainstream currency.
Of course, cryptocurrencies have risks. Due to the anonymity of crypto and regulation uncertainty, it can be difficult to find an escrow company willing to handle the transaction. Also, it’s a highly volatile market that (as an investor) you either love or hate. This volatility is a stark contrast to the historically stable nature of real estate investment.
However, talk of regulation — like the announcement that federal agencies will provide more clarity on banking and crypto handlings — could help stabilize and bring crypto further into the mainstream. As more people continue to invest in and hold cryptocurrencies, demand for crypto to be used as payment for acquiring real estate is only set to grow.
Hot off the heels of the NFT craze, talk of a virtual world called the metaverse is fast gathering pace thanks to Facebook’s much-publicized focus. Because this digital realm is facilitating more social interactions and trades, it hasn’t taken long for real estate to also enter into the equation.
In November 2021, it was announced that Tokens.com purchased the equivalent of around $2.5 million on metaverse real estate in Decentraland. Shortly afterward, that record was smashed by a New York-based company called Republic Realm that bought digital land for $4.3 million in The Sandbox.
The pace of metaverse real estate transactions could signal the start of a boom in digital land trading. However, there remain some questions — particularly how real estate is valued in an infinite digital space. What’s more, the future of this space also relies largely on cryptocurrency and potential regulations that digital assets might face in the future.
Machine Learning and Artificial Intelligence
The implementation of artificial intelligence and machine learning can help provide a clearer overview of the real estate landscape. For investors, it’s a vital tool when analyzing, for example, whether a property is ripe for investment. In addition, predictive knowledge graphs can help investors make better decisions based on real-time data.
The efficacy of AI in real estate investing was brought into question following the collapse of Zillow Offer in 2021. The company relied on algorithmic trading to buy and flip houses. Ultimately, the strategy it pursued was unsuccessful, leading to significant losses and the mass liquidation of real estate portfolios. This led some to presume that attempting to use algorithms was just not viable.