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Periodically there are trends in the market that gain momentum and significantly change the way we do business. For instance, in 2019-2020 agents started noticing the number of cash buyers in the market, and it’s safe to say that cash buyers have become a force to reckon with.
As we look forward to the next 18 months, there are three trends poised to take over the industry and shift the real estate landscape as we know it.
Technically speaking, this new development isn’t exclusive to blockchain, but blockchain makes it better and more accessible. There are a lot of different aspects to fractional home ownership. Still, the Real Estate DAO (pronounced DOW), is a decentralized autonomous organization that is poised to make a big impact in the coming months.
The Real Estate DAO has been compared to a REIT, but there are different models that would enable the DAO to operate as a power buyer, a fix and flip operator, a long-term landlord or as an investor in fractional home ownership similar to a real estate fund.
There are platforms in the making now that will create a Real Estate DAO between friends or colleagues to effectively manage their fractional ownership purchase of a vacation home. These DAOs are typically fully funded and operate as cash buyers, further changing the landscape and putting financed buyers at a disadvantage.
Home Equity Investments (HEI)
These offerings are spiking, and several companies already tokenize entire homes for investment purposes. The fractional model shows signs of massive growth ahead, and if we combine fractional home opportunities with HEI companies, the result is a win for everyone. The idea of selling a portion of your home, or having a co-investor on a purchase seems like novelty at this point, but the idea is gaining momentum.
Companies like Point, Cityfunds (a sister company to Nada), Hometap and more are pushing the home equity sharing concept into the national conversation. These groups have focused on current homeowners with equity, but several are working on pilot programs to assist with purchase transactions.
Imagine a buyer has 10 percent to put down, the HEI company puts 10 percent down (no additional monthly payments), and the buyer secures the additional 80 percent of funds with a conventional loan. This new conventional loan has no PMI, which keeps payments lower with better terms.
This model helps the homeowner qualify, the investor diversifies, and the lender has less risk to take on. This program is on the horizon, and it’s only a matter of time before we see this making a positive impact on the purchase business we see.
NFT home sales
In the last year we have seen several high-profile home sales processed as Non-Fungible Tokens (NFTs), and expect this trend to continue. Expect to see more companies enter this arena, but it will be several years before the full transaction is recorded as a blockchain event on a regular basis.
This long-term shift will threaten title company revenue as verification of ownership becomes easier to track with a transparent and open source blockchain. The easiest NFT adoption is likely to take place at the offer stage.
Several blockchain companies already have built platforms that facilitate, organize and rate offers in real-time, adding a layer to that where the earnest money deposit (EMD) is determined by bidding on an NFT. The funds from the NFT bidding can be calculated in USD using a stable coin pegged to the US Dollar, reducing risk and fear of volatility.
Blockchain technology has a place in our business; whether we are comfortable with this or not is irrelevant. Innovation in the area is coming. Any idea that has the ability to safely add more transactions, reduce friction and lower barriers to entry should be welcome. Fractional home ownership, home equity investments and NFTs are all innovations that promise to improve the home buying experience.
Sundance “Monty” Brennan is a new business development executive specializing in proptech, fintech, and blockchain technologies. You can connect with him on Twitter and Linkedin.