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What’s an NFT and Can It Help Me Buy or Sell a Home?

By Tanya Svoboda
July 2021

The housing market is so hot right now, that even digital homes are selling for unbelievable prices. Recently nine adjacent Genesis plots on virtual land sold for approximately $1.5 million. This purchase was completed as a non-fungible token (NFT) and while it’s an interesting trend, it means little to house hunters searching for a physical roof over their heads.

However, NFTs are creeping into the world of physical real estate as well. The address, 221 Dryden St. in Thousand Oaks, California was listed for sale as an NFT with bidding starting at $117,000. The home comes with a trippy digital art-work video and the duo was poised to be a groundbreaking moment in NFT history. But home buyers with limited experience working with NFTs were hesitant to make a move of the investment. The house is now being listed the old-fashioned way.

It may not be today, but NFTs are making their way into the world of physical real estate sales. So, what, exactly is an NFT and how will it affect your search for a physical home?

What is a Non-Fungible Token?

“Non-fungible” is an investment term that means you are buying or selling something unique. Money is considered fungible because a five dollar bill and five one dollar bills have the same value. In the physical world, a non-fungible trade would be the equivalent of buying a piece of art for a rare book. You’ve assigned value to each item, but each item is unique, and once you trade (money for product) you have something entirely different.

Non-fungible tokenization refers to unique trades made digitally. The idea started taking off in the world of digital art where artists have been selling ownership rights to their digital artwork, often for lots of money. As the process of digital trading evolves, its applications are being realized in the physical world of real estate as well.

How Might NFTs Be Used to Buy Physical Property?

NFTs, or the tokenization of asset ownership, get recorded on the blockchain (an unalterable database of transactions time-stamped and linked in chronological order). Having the freedom to transfer ownership digitally has obvious benefits to real estate in the physical world.

Natalia Karayaneva, and award winning real estate developer notes, “The notion of “custody” as it applies to real property in the US is closer to an abstract function involving legal and accounting operations than the physical handling and warehousing required by movable personal property or commodities.”

NFTs will help expedite the lending and closing processes in the final stages of a real estate transaction.

The Future May Be Digital, But the Present is Still Physical

NFTs may make traditional financing, piles of paperwork, and in-person closings a relic in the world of real estate, although likely not any time soon. There are hurdles to overcome before you can expect to have the option to buy a physical property as an NFT using DeFi systems (decentralized financial systems that don’t rely on banks or credit unions for funds).

NFTs present the current real estate industry with serious challenges that may keep them from being common practice for some time.

One of the main challenges is the security of crypto tokens. These digitally based tokens are susceptible to security hacks. And there’s the small issue of what happens if you forget or lose your password. Currently, if you lose your “cryptographic keys” you lose your bitcoin forever. In the cryptocurrency world that means lost money, in the NFT and physical real estate world that means unclaimed property rights.

Other challenges are the lack of regulations surrounding real estate deals of this type. There are currently no laws or tax rules governing how these transactions should occur.

Real Estate NFTs May Change Parts of the Home Buying Process

NFTs will change the way physical property is financed, bought, and sold. It’s not likely to change how you search for and choose your dream home. Some argue that NFTs may put REALTORS® out of business but it’s more likely they will change the way REALTORS® do business not eliminate them entirely. You’ll still want to see the property you plan to buy, you’ll want to understand the neighborhood you’re buying in, and you’ll want to have a firm understanding of the property’s value (be it in dollars or cryptocurrency).

If NFTs become more commonplace in the physical real estate world, REALTORS® will become more knowledgeable about their use and how it applies to your specific situation. So instead of losing REALTORS® all together, you’re more likely to see REALTORS® who begin to specialize in these types of transactions.

NFTs are taking the digital world by storm. But their entry into the physical world of real estate sales is happening more slowly. It may be some time before the average homebuyer is comfortable making the biggest purchase of their life in digital currency.


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