Bitcoin and cryptocurrency offer fascinating opportunities and risks for real estate. Virtual reality and its brethren are building beautiful environments — do they really help resale?
- Bitcoin and cryptocurrency offer fascinating opportunities and risks for real estate. Virtual reality and its brethren are building beautiful environments -- do they really help resale?
Not all of this year’s predictions are about cryptocurrency and venture capital funding startups. Big money is also bringing traditional efficiency to the real estate brokerage business.
With all the flashy real estate technology surrounding us, we have to stop and ask ourselves, who is this technology good for: us, our clients or consumers?
People are buying homes with cryptocurrency. “I’ll sell my house for bitcoin” is the latest marketing tactic, and it’s working, at least for publicity.
Most of the transactions I hear about involve bitcoin being used as proof of funds, and then converting it to cash before closing. Not so far off from a traditional sale, we’re seeing FNMA mortgage pre-approvals with cryptocurrencies used as verified assets, as equity in other securities would be. The final sale is conducted all in dollars, so “bitcoin sale” is a bit of a misnomer.
Of course, there could be situations where a homeowner would trade a deed directly for crypto-coins, but the storyline is often more sizzle than steak.
That’s not to take anything away from the bitcoin-friendly agents and lenders using this marketing to benefit their clients and their businesses. If it gets your listing on the cover of Inman, kudos.
Is there a potential downside for cryptocurrency in real estate? Anonymity is already a problem in some domestic sales. The “cash buyer from China who has no intention of occupying this home” is a common storyline.
Foreign assets parked in vacant domestic homes to avoid overseas financial instability is problematic.
In increasing numbers of high-end sales, buyers are anonymous LLCs, and that’s gotten the attention of regulators investigating potential money laundering.
A cryptocurrency platform seems like an excellent place to wash money of its past sources. Might blockchain technology, hailed for its ability to verify past digital transactions, ironically be the basis for currencies that make the funding of real estate transactions even more opaque?
The bitcoin underbelly
Smarter people than me believe in bitcoin, and I have no doubt that cryptocurrency will eventually have tremendous value. I have the uncomfortable feeling, though, that bitcoin in particular is going to leave a lot of people who can’t afford to lose their shirts out in the cold.
Very powerful people (financially and intellectually) are leading a lot of starry-eyed investors into a gamble; if it goes south, they won’t be able to escape until it’s too late.
When Winklevoss hucksters tell you bitcoin is gold 2.0, it sounds like the ads that run during late night cable news. They’re searching for the common man to invest — maybe one who just finished a couple of scotches.
Bitcoin’s only similarity to gold is that it retains value without the backing of a government. Yet gold’s inherent value is in its ability to be physically verified, and its finite volume. Bitcoin is the opposite.
Leaders of nations will defend the existence of their currencies with massive governmental and even military might. They have people, resources, jobs, land, institutions and constitutions to protect.
“Leaders” in cryptocurrency will not. They just have money and technology, which can be exported elsewhere.
There will be no bitcoin patriots. If it starts to crash, the transactional friction of bitcoin will allow only the richest participants to jump quickly into a different investment, the proverbial barons escaping in private jets with the masses’ riches in tow, while the working class rattles at the fences holding them in for the fall.
The use of blockchain for cryptocurrency has huge future potential. Today, bitcoin’s potential to implode into nothing in an instant is terrifying. I’m sure one of you will read this back to me in a year, grinning, from your BTC-purchased maison in Saint-Tropez.
More money, old problems
It might not be the cutting edge agent-consumer technology that has the biggest impact on the brokerage business. It could be big money acquisitions followed by an old-school business focus on specialization of skill, implemented at scale.
Think the Amazonization of the brokerage world. Merge, acquire, grow a mega-business.
Build out large warehouses or service centers that can easily replicate mundane tasks in huge numbers for pennies on the dollar compared to traditional retail competitors. The mom-and-pop brokerage is going to be forced to assess how it can compete.
Imagine what your brokerage wouldn’t need to be physically handling anymore with remote management of simple tasks, automated contract review, intelligent and dynamic routing of customers and employees through decision-making processes, simplified payment, tracking and bookkeeping systems in the cloud.
Big money in real estate will cut away the redundant labor that exists in an industry of 100,000 individual warehouses, where 20 larger ones could achieve a significant portion of what they do faster and less expensively.
Then creative salespeople will just sell and market. Dynamic brokers will innovate and grow their agents’ productivity. The local MLS can stop hiring salaried local staff to take tech support calls and manually enter faxed listings from agents.
The investments flooding real estate are allowing brokerages and related companies to take big risks that the traditional mom-n-pop or franchise never could.
Wherever they find inefficiencies and opportunities while spending those gobs of cash, it will light a path for others to follow, eventually at a much lower cost. That’s good for the industry.
AR/VR/MR/XR — and the resale paradox
I know, enough already with the acronyms for virtual reality and its brethren (XR attempts to encapsulate them all). There are some great new applications for new construction single family homes, but even more for complex layouts in built environments that can help with urban planning, utility development, etc.
At NAR Annual in Chicago, I had a chance to talk with one of the folks working on Sidewalk Labs/Google/Alphabet’s new neighborhood being build in Toronto, and it’s fascinating.
XR technologies will allow developers to create a connected, changeable, intelligent urban environment that has been “lived in” already by its designers, more so than ever in the past.
What about resale, though? Do these technologies really help the average residential agent or broker?
The core job of a real estate agent is to get a client the best possible exposure to drive the best purchase contract. Especially in an inventory-starved market, one photo on the MLS will often drive more buyers to visit the home in-person than a 30 photo listing with a virtual tour.
Client or consumer?
That’s really our paradox with these new technologies. Doing what’s best for our client sometimes means doing what feels like a hassle to other consumers.
Building the most exhaustive, remotely available digital portfolio means many consumers will never show up to see the home in person because they didn’t like the way the virtual master bedroom looks out upon the virtual great room.
They won’t have that in-person emotional hook that so many salespeople have seen: falling in love with the baby nook at the top of the stairs, the view of the creek in the back, or the neighborhood families having their weekly cookout.
Yes, it’s entertaining to put a CGI Millennium Falcon flying through your virtual tour, but is it really converting better terms for your sellers, or is there a better place to invest your resources?
Put that in your hip pocket for #ICNY this month, and let’s chat about it. I’ll be the guy in the VAMXR headset by Startup Alley.