Despite its slow adoption in real estate, digital currency has the power to improve accessibility to homeownership and shorten the home-buying process.
- Using digital currency and the blockchain to buy and sell property could be a huge game changer for the real estate industry.
- Now is the time for real estate professionals and companies to jump on the cryptocurrency and blockchain train.
- This type of digital transaction has the power to make homeownership possible for people who once thought such was out of reach.
Kristin Smith, a real estate agent at Dave Perry-Miller Real Estate in Dallas, has been investing in cryptocurrency since 2017.
Not long before she started investing, she had an experience that brought to light the power and accessibility of digital currency. She and her brother traveled to Cuba with cash in hand. They thought they’d brought enough with them for the duration of the trip, but they ran through their money faster than expected.
Smith recalls the painful process of accessing more money, noting that wire transfers took days and she had to have a Cuban citizen pick up the cash for her, further delaying her access to her money.
“It was eye-opening. If I just had crypto, it would have been there for me right away,” she adds.
The access and transparency of cryptocurrency, or crypto for short, had Smith hooked from the start, and she’s long felt that this innovative financial technology could change the real estate industry. She’s been advocating for more real estate professionals to get involved in crypto ever since. She’s also the chair of the National Association of REALTORS® Cryptocurrency Presidential Advisory Group, which was established to study how the technology is impacting the real estate market and how industry professionals can best move forward in this realm.
Natalia Karayaneva, founder and CEO of Propy, a real estate transaction platform that is a member of NAR’s REACH accelerator program, says her company is proof that the change is already happening.
Propy has already completed over $4 billion in real estate transactions on the blockchain. Recently, the company seamlessly transferred ownership of a Tampa, Fla., condo in 15 minutes. The process offered transparency that the traditional real estate transaction does not. Everything from the appraisal to the offers was available online.
The blockchain, crypto and nonfungible tokens are still novelties to most real estate agents, says Smith, but she thinks this new era in finance is an important one to jump into.
A Brief Intro to Fintech and Digital Currency
For beginners, the new wave of doing business with the blockchain, cryptocurrency and tokens can be overwhelming. The terminology feels foreign if digital technology isn’t something you’ve explored before.
“Fintech,” or financial technology, is defined by Columbia University as “a catch-all term referring to software, mobile applications and other technologies created to improve and automate traditional forms of finance for businesses and consumers alike. Fintech can include everything from straightforward mobile payment apps to complex blockchain networks housing encrypted transactions.” It includes transactions such as depositing your check using your smartphone, raising money for a business startup on an online platform like Kickstarter or using digital money, among others.
Here are some of the main terms you’ll hear when referring to digital currency and the digital sales world:
Cryptocurrency – This digital form of money, Smith says, allows transactions to be verified and records to be maintained by a decentralized system using encrypted databases, rather than by a centralized authority such as a government. Digital currency is bought and sold online and has no tangibility, as does a paper dollar or a coin.
Some of the top cryptocurrency systems include bitcoin, ethereum, XRP, cardano and litecoin. The digital money can be used as a virtual form of cash to pay for many items these days, including homes.
Blockchain – This technology enables the existence of cryptocurrency. It is a shared, unchangeable ledger that facilitates the process of recording transactions and tracking assets in a business network, Smith says. When you decide to buy an asset that costs 100 bitcoin, for example, you submit the transaction; that 100 bitcoin becomes a block, which is added to that digital currency’s chain with all of the other transactions that have taken place using that currency.
An asset can be property, car, cash or intangible items such as intellectual property, patents, copyrights and branding.
NFTs – Nonfungible tokens are unique blockchain-based assets that represent items such as artwork, music, videos and real estate, says Karayaneva. “NFTs are in full compliance with U.S. regulations,” she says.
What Makes Cryptocurrency and the Blockchain Appealing in Real Estate
As a real estate professional with 15 years of experience, Karayaneva was frustrated with the traditional real estate transaction, which is time-consuming and rife with fraud potential. She wanted something better, safer and faster for all parties involved. At first, though, she didn’t think this kind of fintech was the answer.
“In fact, three years ago, I was interviewed by reporters and told them it was not possible to achieve this type of transaction within the next 10 to 20 years,” she says.
Karayaneva says she is surprised by how fast the technology has come along. Making the homebuying experience a process complete in a couple of clicks is a big feat.
The Tampa condo deal is one example of the ease and speed at which a real estate deal can be settled with the use of the blockchain and NFTs. Karayaneva says it was completed through Propy’s new NFT Marketplace, which provides all participants in the transaction with the ability to view the process in real time.
Smith believes that transactions completed on the blockchain move so quickly because of the lack of credit and background checks. Unlike traditional funding, cryptocurrency does not use these processes to purchase assets.
“They only look at your collateral. It opens up a whole new world of buyers,” she adds. “You are no longer being judged on credit score or background checks.”
Many people are afraid of cryptocurrency because of its unpredictability, but there are some types of cryptocurrency, called “stablecoins,” that reduce risk.
The Tampa condo sale was completed using a form of stablecoin called USDC, whose value is tied to the U.S. dollar, to limit the risk.
How Blockchain and Crypto Could Make Homeownership More Accessible
Though more risk is involved when background checks and credit checks aren’t completed, using cryptocurrency and the blockchain opens the world of real estate up to a pool of buyers that might have otherwise been ineligible.
For instance, some companies will lend crypto users up to 50% percent of the loan if the collateral is in bitcoin, a particular kind of crypto. That same person might not have qualified for a traditional loan because of their credit score or lack of tangible collateral, but crypto opens up their options.
Smith believes that even without credit checks, more private lenders will come forward to be a part of the blockchain and crypto movement. Those lenders, she says, will likely charge higher interest—she believes from 8% to 10%—but she says that people will pay that amount.
Even though the real estate market is slowing, prices are still high, and competition is still tough. For instance, 100,000 people moved to Dallas from 2020 to 2021, Smith says. Some can’t compete with all-cash buyers or get a loan because of a lack of down payment funds or a low credit score. Paying a higher interest rate is not a deterrent for people who want to buy a home but haven’t been able to either because of the state of the market or because they don’t qualify for a mortgage in a traditional setting.
“If the lenders only look at your collateral, it’s a whole new world of buyers. They will no longer be judged on credit score,” she adds.
How Real Estate Professionals Can Learn About Blockchain Sales
New and intangible things like crypto are scary, but at one time, the internet was considered new and intangible as well.
Smith says removing the fear starts with learning more about how the blockchain and crypto work. That’s why she’s getting the word out.
At the April Brokers Summit in Phoenix, Smith gave a presentation on the basics of the blockchain and cryptocurrency and how they are used in the real estate market. When she started learning about this kind of fintech, she consumed everything she could, turning to podcasts, articles, YouTube videos and whatever else she could find in her research. Smith encourages others to do the same.
Karayaneva says Propy offers a Crypto Certified Agent course. There are seven sessions of 30 minutes each, explaining crypto transactions in the housing industry. Currently, over 1,000 real estate professionals across the country are certified. She says these agents share their knowledge every Friday with agents who are new to the course during an online session. Karayaneva also suggests looking at websites such as CoinDesk.com and Cointelegraph.com for updated information.
Both Smith and Karayaneva believe that the blockchain and crypto will continue to be a game changer in the real estate industry. For that reason, the more industry professionals who understand how they work, the better.
“Blockchain is a huge phenomenon that will change our world,” says Karayaneva. “It already is—just like the internet did. Fundamentally, it will change finance, real estate and other aspects of our lives.”