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Helping clients navigate real-world home decisions can be a hard problem, even for an experienced real estate agent.
But for a new crop of agents, the job comes with the added challenge of helping mistrustful clients avoid an array of scam opportunities, as the underlying market continues to muddle through a dramatic crash in prices.
This is the world in which the first metaverse real estate agents have found themselves, particularly in the crypto-powered virtual realms of Decentraland and the Sandbox, according to agents who spoke with Inman.
In these metaverses, entirely virtual plots of land can be bought and sold as unique tokens called NFTs, then rented out to developers and other users.
But since their respective high points in November, the crypto assets that underlie every virtual land transaction in the two largest metaverses have lost more than 80 percent of their value against the U.S. dollar.
Value of Decentraland’s Mana cryptocurrency (in U.S. dollars)
“It is quite risky and it is quite painful,” said Sebastian Pelle, co-founder of Decentraland Property Group. “However, we’re also finding that people are willing to come and spend more because it’s cheaper at the moment, which is also good.”
Land that changes hands in the largest of these virtual worlds is paid for in unique cryptocurrency tokens. In Decentraland, the name of that token is Mana. In the Sandbox, purchases are made with a cryptocurrency called Sand.
The crash in these metaverse markets has been even more severe than plummeting prices of the most popular blockchain-based financial assets, Bitcoin and Ethereum.
And for some of the largest early investors, millions of dollars are on the line.
A crypto ‘land’ boom
When Facebook changed its name to Meta in October, it drove crypto investors to pour millions of dollars into this nascent category of digital metaverses.
These decentralized virtual worlds — including Decentraland, the Sandbox and others — would begin to take off as some of America’s largest tech companies put money into building their own metaverse platforms.
Some tracts of digital land sold for millions — including one $2.4 million plot in Decentraland and a $4.3 million tract in the Sandbox.
Now, the same amount of cryptocurrency used to purchase each of those tracts of land would trade for less than $1 million.
A number of smaller investors also bought in. Pelle was one of them.
“I own a land,” Pelle said. “The land has gone down a lot [in price], which isn’t ideal.”
Still, the rental yields from owning land in the metaverse can be quite good, Pelle said. The problem is that there isn’t a robust market for renters, because the process is viewed by many as prone to scams.
That’s where Pelle and his co-founder, Ollie Cardone, got the idea for their virtual real estate business.
Obstacles to overcome
Lots of virtual landowners would like to rent their properties out, Pelle and Cardone said.
The problem has been finding renters, in part due to the risk involved for nonowners.
The way the current rental process is set up in Decentraland, there’s little to stop a bad actor from scamming would-be renters, they said. A landowner can add a renter as an operator, deposit their rent in their own crypto wallet, then simply remove the renter as an operator of the property again.
“We decided we could probably create a better system that is safer for people to use and eliminates all risk of scams,” Pelle said.
As agents, Decentraland Property Group vets renters and owners, matches their clients with reputable partners, and handles the process on their end to ensure up-front payment for landowners and continued access to the land for renters through the duration of the agreement.
These measures to cut down on vulnerability to scams have proven valuable to clients, they said, even in a world where many investors are highly skeptical of middle-men.
This skepticism of agents and other intermediaries is widely felt throughout the crypto community, the CEO of a metaverse developer told Inman in February.
“That entire concept of an agent is an anathema to the crypto ecosystem, and the metaverse ecosystem is the crypto ecosystem,” Janine Yorio, CEO of the developer Everyrealm, said on a video call at the time.
But the rise of scams and other difficulties have opened the door for a human intermediary. Several other firms are active on Decentraland’s Discord server, reaching out to potential clients with properties to buy, sell and rent.
For now, the main use for agents in the metaverse is in helping owners rent land out, Cardone said. Other agents do offer help with buying and selling, but most users are comfortable handling that process themselves, he said.
“Decentraland itself has a marketplace for lands to buy and sell,” Cardone said. “So you technically don’t need an agent to buy and sell a piece of land.”
The crypto market crash — which has been felt by users of popular blockchains like Bitcoin and Ethereum as well as holders of these metaverse tokens — has come with pros and cons for metaverse real estate agents, Pelle said.
“It’s been quite difficult because our commission has almost halved, because we do most of our transactions in the Mana token,” Pelle said.
At the same time, the cheaper prices have led to a larger volume of clients, and an opportunity to grow their customer base in case the highly volatile market for virtual land goes up again.
The hope among nearly all investors in this space is that the market for these cryptocurrencies will eventually return to their previous highs, Pelle said. Mana, once trading around $5 per token, fell dramatically in recent months and was still trading for less than a dollar Monday afternoon.
“If we went back to Mana within $5, everything would be five times the amount that it is now, roughly,” Pelle said.