Tuesday, August 9, 2022

Guide to Using NFTs in Real Estate

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Shreya Christinahttps://cafe-madrid.com
Shreya has been with cafe-madrid.com for 3 years, writing copy for client websites, blog posts, EDMs and other mediums to engage readers and encourage action. By collaborating with clients, our SEO manager and the wider cafe-madrid.com team, Shreya seeks to understand an audience before creating memorable, persuasive copy.

Co-founder at top key. Passionate about real estate, technology and driving international business growth.

So far, most NFTs seem to be fun works of art and fashionable alternatives to cryptocurrency investments. But as we understand more about how they work and what they can do, NFTs are starting to infiltrate other facets of life as well; even big brands register products on the blockchain and apply features and special features to give buyers more bang for their buck.

So, how does a digital artwork or song do all that? Well, you can program your NFT – whatever it represents – to perform automated functions through a built-in smart contract.

Okay, but nobody’s going to buy a house like that, right? In a handful of successful trades, they have already done so. The first real estate NFT was sold in 2017 and was recently re-auctioned through Propy, a blockchain-based real estate platform. A change in the way we buy and sell real estate seems to be just around the corner. Here’s what you need to know about where the real estate market is likely to go and how it will affect everyday life.

Virtual Real Estate vs. Physical Real Estate NFTs

First, it’s important not to get confused by the terminologies. As the metaverse continues to expand, developers are creating virtual worlds where we can explore cities, participate in new social environments, and even buy and sell.

Virtual real estate is land or real estate that you can buy in these environments or games. Just like in the real world, these digital environments are developed with NFT houses, or you can invest in a single NFT apartment in an NFT building. Some virtual real estate NFTs are tied to real-world physical properties. In addition, the digital world and the buildings where major brands and operations are concerned are often replicas of real locations.

These digital assets are bought and sold as NFTs registered on a blockchain. A physical real estate NFT is created by registering a real-life asset (your home, office or business premises) on a blockchain.

Why would you do that? Well, it creates a title deed and every transaction it has ever been or will be a party to. They are transferred directly and easily between peers and offer a wide range of features and benefits.

The impact of NFTs on the physical real estate sector

The real beauty of an NFT is that it is programmable. Smart contracts within each NFT automate simple or complex actions, creating faster, more efficient operations. Here are some features to note.

Irrefutable History of Ownership

Each blockchain ledger provides a history of every step and transaction for every asset. That’s a lot of information. For example, if you buy an apartment with NFT assets, you can check every previous buyer, investment, action, legal dispute, payment and more. It must be part of the complete transaction history and recorded in the NFT.

Secure, fast transfers

With NFTS, asset transfers are secure and almost instantaneous. Imagine buying a home right now. Traditional methods can take weeks and even months to go through the entire process. Even with an agreement, signing and exchanging contracts can take a few weeks.

For assets and payments – using crypto or fiscal currencies – you can make those transfers without the traditional middleman. Just imagine how much time you could save? I believe NFT has the potential to provide a much more cost-conscious option.

Secure and automated through smart contracts

When you’re exchanging contracts with a lawyer, that’s exactly that. However, when you buy real estate with smart contract functionality, it can trigger various automated actions for payments, rentals, maintenance, dividends, and more.

In theory, an NFT sale of real estate could be as simple as a few clicks, covering digital validation of funds and identity, and transferring the real estate. In addition to transparency, prompt delivery, and irrefutable proof of ownership, some other reasons you may want to use real estate NFTs are enhanced security and data integrity.

NFTs and Fractional Ownership

One of the most important practical applications is how investors can organize multiple investment projects. Fractional Property Tokenization splits each property into tokens that act like stocks.

Splitting a single deed into tokens offers benefits for joint investors, as well as for shared properties (for example, joint mortgages between couples or partners). Smart contracts can contain different elements with their own rules and automation. For example, they could hold individual parties independently accountable for their contributions, and when multiple investors are involved, hold each accountable to majority decisions.

It should be noted that full asset tokenization is one of the regulatory areas to be addressed in these early stages where, for the time being, fractional ownership tokenization manages to sidestep around that particular legislative area.

NFT Real Estate Interaction

It is likely that those who want to adapt real estate to a real estate NFT platform will find a way; after all, technology and business rarely stand still. For that to happen, the industry must bring together the necessary partners to ensure safe and legal operations.

However, once the legal requirements are met, the next practical steps are how properties are punched onto each blockchain. They need a consistent method of description, including legal data. Soon, bidding on a property and winning it can take place on your phone, as can payment and digital transfer of paperwork.

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