Ever wondered what an NFT was? NFT or NFTs stand for Non-Fungible Tokens. Non-Fungible means that it’s unique and can’t be replaced with something else. These non-fungible tokens are cryptographic “tokens” that represent something unique like a piece of art, music, or any other collectibles. NFTs certify digital ownership of these products. It has been very hard to trace real ownership and authenticate digital art and music, as you could just download the file. NFTs provides a unique, unforgeable signature so owners can now prove ownership and owner history.
The future of Real Estate is looking exciting, as you could soon be able to buy a building, air rights or the virtual rights of any physical space using NFTs. Transferring ownership in this day and age is expensive and labour intensive. If we were to tokenise property rights it would be easier to manage and exchange them.
What if you could buy a house as an NFT, and then borrow against the NFT using DeFi* or TradFi* products with a 2-4% interest rate. Why would you go to a bank with their months of headache due diligence?
*DeFi – decentralized finance – new digital blockchain based financial services startups that are unregulated and do not perform Know Your Customer – thus enabling anonymous users.
*TradFi — standard retail, commercial and investment banks, along with FinTechs (tech finance companies).
As slow as the real estate market is in adopting new technologies, there are still some issues with NFTs. If you lose passwords, cryptographic keys or add the wrong wallet link (a Bitcoin wallet for Ethereum) then you could lose your money. You could consider locking the money but not the asset to avoid unclaimed property rights.
Here’s how a real estate NFT sale could work:
1] Legal preparation for the sale of a property as an NFT.
2] Then an NFT is “minted” meaning it includes descriptive and legal data about the property. (paperwork, disclosures, reports, image files, and even videos)
3]The NFT is proof of ownership. Whoever has possession of the NFT, legally owns the property.
Say you want to sell that property later, that same NFT which would live on a distributed ledger, can be listed on a NFT marketplace for sale, like OpenSea or a future NFT property Marketplace. Potential buyers would bid for the property. Once a buyer is found, he pays for the property in cash or crypto currency, probably through a third party escrow service or smart contract designed to perform these escrow duties. In a limited time window, after funds are released to the seller and the NFT is transferred to a wallet controlled by the buyer, the buyer completes paperwork to finalise legal ownership transfer. Otherwise the transaction is reversed.
There is a huge potential to use NFTs in many markets beyond art work, music and other unique digital items. As we have seen above they have the potential to be used in the property market. Dubai, UAE is constantly looking for new ways to develop and improve. Could we see property move quicker with NFTs where we see quicker turnaround times with less labour and expense. Could Dubai, UAE be the first to use NFTs to sell property?