Quick Summary Of Real Estate NFTs

In real estate, think of an NFT as a property listing and a contract that can be transacted with.  

Contrary to how NFTs have been portrayed elsewhere, the value of the NFT in real estate is NOT in proof of ownership, scarcity, or authenticity.  The value lies in its utility and added marketing.  

Let’s say you’re looking to lease your apartment.  You have to (1) create a listing, (2) find qualified candidates, (3) create a lease contract and (4) collect payment.  With an NFT, 3 of these 4 steps can be taken care of.  The lease contract could be combined with the listing in the form of an NFT and the payment can be made to get the NFT.  All you would be responsible for is finding a qualified candidate.  The NFT could be involved in all, any or none of the 3 steps.  

The example above was for a lease, but it could similarly be applied to a sale or a short-term rental.  Legal and regulatory considerations are the same as if you didn’t use the NFT.  

Now let’s think about the added marketing ability.  Where do you create a listing?  You can do it on MLS or apartments.com or another site that would cost listing fees for each individual platform.  With an NFT, you can create it once and it shows up on every platform that lists NFTs, opening the potential buyers to the crypto community.  

What Can NFTs Represent?

Fundamentally, an NFT represents a right granted to the NFT holder by its creator or previous holder.  This basic definition holds true for both digital items and items in the real-world.  

In the digital world, an artist can use an NFT to represent ownership of digital art they create or a video game developer can use it to represent usage rights of their game’s items.  The NFT simplifies the sale of these items and enables subsequent resales.  The NFT’s value is tied to the rights the artist or developer attached to the NFT.  If the game is no longer played or if the developer closes shop, the value of the NFT will reflect that.

In the real world, property owners can similarly use an NFT to represent real estate they own or occupy.  Homeowners could create NFTs to represent ownership rights to their home’s deed or monthly usage rights to their home or whatever rights they choose to attach.  If the homeowner doesn’t honor that right or doesn’t hold the right in the first place, the value of the NFT is zero. 

Creating an NFT is an many ways the same as creating a custom legal contract.  The language and terms of the contract can be attached to the NFT itself.  The main difference is one is digital and saved on a blockchain and the other is written on paper.  If you wanted, you could create both and within the language of one, defer to the other.  

Legal & Regulatory Considerations

Anyone can mint an NFT for anything, just like how you can write a contract for anything.  You can mint an NFT or write a contract to rent out the Eiffel Tower but if you don’t have rights to do that, neither have any force or effect, and are equally worthless.  The legal process for a dispute is therefore no different with NFT than it is for any other contract. 

In this regard, the NFT acts not as some protection against fraudulent use, but as a tool for marketing or transacting the property by those people who actually have legitimate use.  

The regulatory considerations are also the same as if you were to write out a custom contract, or use  use Craigslist or Airbnb to sell or rent out your property.  You’d want to make sure you can do it in the first place and follow applicable regulations.