Note, this post originally appeared on my Thought Distillery site. At the time (July of 2022), I was 78% of the way through my 168-hour real estate education course required for licensure as an Associate Broker in the state of Colorado, and just about done with my 10-week augmented and virtual reality development course with Unity. This unique combination of upskilling led to some interesting ideas, predictions, and observations. (I passed my real estate licensing exam in September!)
Did You Know?
As story has it, property rights were originally conveyed (transferred) through a bundle of sticks gathered from a property, with each stick representing a different property right. (I write “as story has it” because at this time, I am struggling to find credible sources to cite as to the validity of this history.) This Rocket Mortgage article breaks down the bundle of rights in an easily consumable format, though, if you’re interested in learning more about the different kinds of property rights.
I predict that digital/VR/AR rights will eventually become one more stick in the bundle, like mineral, air, grazing, and water rights that can either “run with the land” or be sold separately.
When the novelty of being able to purchase a digital property that one doesn’t own in real life wears off and as more and more people start participating in the metaverse, rules will emerge.
I’ve heard a couple of times in recent conversations that real-world licensure isn’t relevant or required in the metaverse. I toyed with the idea of going through real estate school for months before committing finally. It was the mom of my son’s friend saying that everyone should have this education that finally convinced me. Now that I’m in the midst of this, I 100% agree. We are all affected by real estate whether we own, lease, or borrow property, often mindlessly signing away on hundreds of pages of paperwork without really understanding what’s happening. This should be part of high school curriculum. But I digress. My point is that it is relevant. And while we might be able to buy and sell metaverse real estate now with no license and only a few clicks, I don’t believe that will remain the case.
What becomes the source of truth for property ownership in the metaverse?
NFTs and DAOs
NFTs (non-fungible tokens) and DAOs (decentralized or sometimes distributed autonomous organizations) could become much more mainstream.
In Buena Vista, Colorado where I live, there are 1837 “in-town residential housing units” (as of 2022). That number determines the STR percentage caps. Rules (for now) permit 110 licenses for out-of-county residents or corporate-owned properties, 55 for in-county residents (non-primary residence, not corporation-owned) and unlimited licenses for primary residences and a couple of zoned districts that allow for that.
From the Town page on STRs, “Existing short-term rental licenses are NON-TRANSFERRABLE with the sale of a property. Once the property ownership transfer is complete, the existing STR license is voided and the new owner must apply for a new STR license.”
I appreciate Town’s very intentional approach to managing STRs and maintaining community, especially since we happen to live next to an Airbnb.
However, these licenses have value to property owners and Town. Why not mint these licenses as NFTs (alongside the property rights mentioned above) that can be sold/transferred with the property? A smart contract can be written in such a way that for each sale, Town receives a percentage of the STR license value, in perpetuity, creating a new revenue stream. A DAO could be created, populated by community members, to oversee STRs, and the DAO could also receive a portion of proceeds, helping its participants to build wealth, while also balancing community needs and paying close attention to the lack of attainable housing in our region.
Might HOAs exist as DAOS?
Will all homes of the future come with a digital twin at the time of purchase? In addition to the stash of old appliance manuals and paint cans left behind by previous owners, perhaps at closing, property owners will receive a digital toolkit including an interactive, living map of every nook and cranny, and what we can’t typically see behind walls and underneath floors. Next time there is a water stain on the ceiling, we’ll know exactly where it came from, or better yet, we’ll know before it even stains the ceiling because in real-time, we’ll get a notification that a pipe is leaking or there’s too much condensation in the HVAC system. The audit trail of inspection reports and history of repairs will be stored on a blockchain as a consolidated electronic record or report card, accessible to all future owners when they receive a deed.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
p.s. if this post was of interest, you might also consider a few related pieces I wrote: