In a changing real estate market, the advice and expertise that Inman provides is more valuable than ever. From our events to our daily coverage and how-to journalism, we’re here to help you build your business, use the right tools – and make money. Come to us personally Las Vegas at Connectand use yours Select subscription for all the information you need to make the right decisions. When the water gets choppy, trust Inman to help you navigate.
For blockchain technology to gain widespread acceptance in an industry as large as real estate, a lot has to happen first.
Blockchain asset prices are plummeting, processes remain complex, and the US government is eyeing new regulations for — and even its own alternatives to — the existing list of private cryptocurrencies.
However, some real estate professionals believe that the fall of a multitude of private tokens may only speed up the process of finding the winning products that could revolutionize the home transaction.
Teresa Grobecker of Grobecker Holland International and Kevin Cottrell of eXp Realty will join a panel at Inman Connect Las Vegas in August to talk about their company Real Estate Consortia and their work to standardize the role of blockchain in home transactions.
These two and their colleague Sheila Fejeran from eXp – all real estate practitioners and executives at Consortia – joined Inman on a video call ahead of the conference. Your answers below have been edited for length and clarity.
But first, because this is a confusing and rapidly evolving space, let’s cover a few terms.
- Blockchain — A blockchain is a shared record of something spread across a large number of computer servers. Because the process is decentralized, it is difficult for an outside actor to alter the record, for example by hacking into a single computer server. There are multiple applications of blockchain technology, including popular cryptocurrency assets and NFTs. But these are not the only possible uses of the technology.
- Non-fungible Token — An NFT is a unique digital token that exists on the blockchain. It can be designed to represent a physical or digital asset and can be bought and sold. Some properties were bought and sold through an LLC tied to a specific NFT. In these cases, when the NFT changes hands, ownership of the LLC and property also changes.
- stablecoin — Similar to a money market fund, these crypto assets are designed to allow users to conduct cryptocurrency transactions. Most stablecoins are pegged to the value of the US dollar, which means that a stablecoin should always be worth a dollar. But federal regulators have begun to question whether stablecoins are backed by sufficient reserves to protect their investors. For the past few weeks, the largest stablecoin — Tether — has been trading for a fraction of a cent less than the dollar. And a smaller one – Terra – collapsed.
- ‘Fedcoin’ — This slang term originated in the crypto community and refers to the US government’s efforts to create its own digital currency. In March, President Joe Biden signed it an executive order which urged the government to give “urgency” to research and development of a potential central bank digital currency. While not yet approved, the move is seen by some crypto enthusiasts as a threat to Bitcoin and other private blockchain assets.
Now to Inman’s discussion with consortia.
Inman: In January at Inman Connect New York, Teresa said that replacing intermediaries — like real estate agents — is one of the expressed goals of many blockchain enthusiasts. What role might consortia play in keeping the agent at the heart of a blockchain-enabled transaction?
roughneck: That was my promise to the industry in 2018 as I leapt onto the national stage. I had no idea what I was getting myself into. I didn’t even know Inman and all these things existed. I knew the publication, but events – I knew nothing about this room. In the [Real Estate Standards Organization] Phase in 2018 I said the promise is to keep the broker at the center. So when we coin an untrustworthy property mark, there needs to be a practitioner who is the steward for everyone who comes into the system to tie that property to the right person. This is because it is a relationship-based conversation.
Cottrell: If you look at history, the first time we saw this was with the internet, where people thought what Expedia was doing to travel agents was going to happen to real estate agents. And that wasn’t the case, because people realized that customers want representation. So the mere adoption of blockchain does not eliminate the need for relationships, as Teresa just described. In the Web3 world or decentralized world, they like to just wipe it clean and that’s just not practical. The expectation is that the efficiency of the blockchain will be able to take advantage of the syndicates. And if anything, we can drive the cost out of the transaction and make it much more efficient, but it doesn’t break that connection [between parties]. We can make the private blockchain available to all parties and still have the public facing parts that are needed and do it in a way that you will see wide adoption in the real estate ecosystem.
One use of the blockchain you mentioned is hosting a public database of housing listings and transactions. Describe a competitor to MLSs? And how far are we from seeing it happen?
roughneck: There is no intention to disrupt the MLS world. I think even when we first started there was a lot of fear. I’ve been asked this question for the last four years since I entered the organized real estate industry. People see a platform where data is shared and the closest thing we can analogize that to is MLS. The MLS, I say, is the backbone of the financial markets, on a global scale. The reason American real estate is so stable is because of the way the data is collected and stored in the MLS. Consortia have no interest in replicating this system. People from the MLS world have come up to me and said, “Teresa, consult us on how we would rebuild this on blockchain.” It’s inefficient at best. The other side of this is the sales and service side of the MLS. We have no intention of going there, so Consortia complements the type of data available on the housing market and puts it together in one place.
Fejeran: As she described, Consortia is not destined to take over MLS or real estate agents or any part of the industry. Consortia are designed to help store data in a more efficient, effective, and consistent manner to store accurate information that all parties involved with the information know is true, verified, appropriate, privately held, which is appropriate, and publicly available be done, which is appropriate.
How much of Consortia’s business is a data repository versus an educational resource for agents and others about the blockchain?
roughneck: Blockchain as a technology opens so many doors and suddenly we practitioners are dealing with things that we had never had on the radar before. So now we need to understand the convergence of SEC laws. We need to know the US Treasury Department’s financial crimes department, their division. This applies to anti-money laundering laws and know-your-customer rules. Now we have to say, here is someone’s crypto wallet. Oh, by the way, where is this money coming from? Does it come from the dark web and the Silk Road? Or are they legitimate funds from someone’s legitimate wallet? We need to know, are we selling real estate or are we selling an SEC-regulated security? For me as a practitioner, especially as a broker, it means understanding the convergence of all these laws. I just want to make sure all my friends aren’t wearing orange jumpsuits. It’s really important for everyone to say, “OK, those are the laws – that’s how I stay on my lane and don’t get in trouble.”
In the past few months, the prices of most crypto assets, including NFTs, have fallen sharply. Do you think this will affect the timeline for further adoption of blockchain technology in real estate? Do you think it resets it?
roughneck: Forward, indeed, and in one quick clip. And the idea here is that crypto is merely a testing ground for a fedcoin to be launched. And when this project started, it was very conspiracy theory. But the government has since announced that they are working on Fedcoin. Additionally, in recent months, the SEC has announced that it will regulate stablecoins. You would examine them, right? And immediately after that, stablecoins start crashing. From there everything starts to unravel as far as the validity of crypto is concerned. And that’s actually a beautiful thing. That the SEC and the federal government are really cracking down is good for the consumer. That they are rinsing that out is good for the consumer. It’s also encouraging what will become fedcoin and what will become the winner or two in the actual stablecoin space. So I think everything is moving faster from here in legitimate, legal ways.
Cottrell: I think there is a lot of confusion when people try to equate blockchain with crypto. And it becomes clear that blockchain is the infrastructure. It’s the ledger, if you will; it is immutable. That will be the infrastructure that moves forward. We could lose 90 percent of crypto projects. It should remind you of 1999. So much went away in 1999 and 2001 [in the internet infrastructure]. I assume the same will happen with crypto.
Inman Connect Las Vegas launches here in just over a month. Can you give our readers a little taste of what you plan to discuss on stage?
roughneck: As a continuation of the previous question, it’s probably important to say that fedcoin or stablecoin, those winners, are 100 percent revealed, all our transactions run on blockchain. So it doesn’t matter if you like blockchain or hate it – it’s really irrelevant. It’s about are you ready for this? We as practitioners must be ready. We have to adapt. We have to continue our education and then be there for our customers.
Cottrell: There is a lack of understanding of the regulatory framework, especially in real estate. There’s a lot of vague talk around fractionation, NFT home sales and all that, so we’re going to cover that too so people understand where the market is headed.
Fejeran: The interesting thing is that [a number of influential agents I work with] are hungry for it. They don’t understand it, but they are hungry for it. And they’re hungry for a new application that Consortia is going to make – to take a look at the metaverse since you mentioned it – just something we’re going to integrate. We won’t go into that yet. But just keep your ears open. That comes in the future.
Email Daniel Houston