Much like the rise of NFTs, some might find the skyrocketing popularity and prices of this so-called real estate market somewhat baffling. What is the value or appeal? Can it be called real estate? Read on for a comprehensive introduction to virtual real estate in the metaverse.

Real Estate in the “real world” refers to properties comprised of buildings, land, or structures permanently attached to parcels of land. The dimensions of these properties that you can see appear as 2D constructs on the screen of whatever device you happen to use to view them. By contrast, metaverse real estate exists as virtual spaces manifested from lines of computer code.

Virtual real estate in the metaverse is designed to be analogous to real property because the platforms that sell it have made it artificially finite. Only a few mainstream platforms like this exist on the web, selling off plots of pixels to individuals and investors.

Metaverse real estate functions like a gathering place and a market square. Properties may display content that owners charge admission to or trade as an NFT. Users can socialize and play games through their properties, and businesses can leverage digital real estate for advertising purposes.

Virtual real estate in the metaverse presents a tempting opportunity for investors, much like real-world properties. Especially in the context of widespread initial interest, excitement, and eagerness to partake in digital land ownership, it is no wonder that some are sensing ample opportunity for profit amid all this activity.

Four dominant platforms control most virtual real estate in the metaverse: Sandbox, Decentraland, Somnium Space, and Cryptovoxels. Combined, they own 268,645 parcels total, and included in their portfolios are some of the highest-priced digital properties.

The process of purchasing a parcel of virtual real estate in the metaverse mirrors that of buying an NFT. A unique code on a blockchain represents your proof of ownership, like a deed. As with NFTs, you will need to dip into the world of cryptocurrency and obtain a crypto wallet if you want to access real estate digitally.

Different platforms vary and may be limited in the types of cryptocurrencies they will accept. Once you have a wallet, you need to create an account with a platform and link it to the wallet. After that, it is only a matter of choosing a property and purchasing it, depending on what you can afford.

Like in the real world, you can buy digital land through brokers or property managers. Use caution, however, when working with third parties in the metaverse. One aspect that distinguishes digital real estate from traditional is the former’s lack of regulation. Brokers, for example, do not need licenses to transact virtual properties. Thus, it would be wise to establish each agent’s reputability before working with them.

Arguably, a thought-provoking outcome of the rise of digital real estate is the vigorous philosophical debate it has sparked. Similar to how the NFT market has come under fire for comparisons to the physical art trade, some now take exception to terming digital spaces “land” or “real estate.”

While it is unlikely that such controversies will be quelled anytime soon, the reality is that people are investing real resources, time, and energy into these bits of code. The trade-in digital land behaves in a way that is at least partly analogous to its real-world counterpart, so the phraseology will probably stick even though we cannot predict how this phenomenon will ultimately evolve.

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This trend is not entirely new, but it has rapidly expanded in recent years. Even before the pandemic began, many real estate agents used online tools to help clients sign documents. The pandemic merely cemented these trends. Instead of going away, virtual real estate transactions are sure to remain and are considered the “new norm.”

DocuSign

While many clients enjoy filling out their paperwork online, some prefer having in-person closings. DocuSign makes the execution of closing documents simple, and most people are already used to accessing DocuSign from their mobile devices. Because clients already have experience using DocuSign, transitioning to this technology is straightforward for most clients. People uncomfortable with this online technology can always give their lawyers power of attorney to sign paperwork for the transaction.

To make virtual real estate transactions easier, DocuSign has even created DocuSign Rooms for agents. The agent can group all of their listings and information in these rooms. Once someone is ready to buy or sell a property, the DocuSign Rooms can easily send out all final paperwork.

Notaries

Each state has rules about what can and cannot be performed online. On March 31, 2020, notaries in New York were officially able to start using audio and video technology for notarizing documents. Twenty-nine other states have passed permanent remote online notarization (RON) legislation other than New York, which may have been the catalyst for the virtual real estate transaction. Because of this, many clients can get documents notarized without leaving the comfort of their homes, thus the commencement of the virtual real estate transaction.

Virtual Tours

Virtual tours have been used in real estate for years. Many listing websites used video tours to increase the odds that buyers would become interested in their listings. While this was a fairly common trend before the pandemic, it was not universally adopted.

Now, buyers prioritize listings that include virtual tours. Zillow, StreetEasy, and other sites encourage virtual and 3D tours. In 2020, Zillow even released data that showed 3D tours had increased by 152 percent from 2019 to 2020.

Smart Contracts

At the forefront of the virtual real estate transaction, Smart contracts make managing contracts simple. For instance, DocuWalk uses blockchain technology to record different transactions. This technology fulfills audit requirements and ensures document security. Because of the technology, messenger services and faxes have essentially become obsolete.

By removing the physical paperwork, DocuWalk makes finishing a transaction as straightforward as possible. Each user can edit the contract and track changes. Other than blockchain signatures, the contracts can be completed with e-signatures.

In 2015, Zillow acquired a similar program known as Dotloop. Users can store, share, sign, and edit their documents through this platform. Meanwhile, DocuSign is broadly used for signing all kinds of documents.

Appraisals

Appraisals are necessary for mortgage lending, but the pandemic temporarily halted appraisals. Thankfully, appraisers found alternative ways to view properties. Today, many appraisers use a hybrid approach that takes advantage of exterior appraisals, photographs of the property’s interior, and routine interior inspections.

Mortgages

The pandemic temporarily changed the mortgage market. Because unemployment became more common during the pandemic, banks had to spend more time researching a borrower’s job history and employment status. Digitization has simplified some aspects of mortgage lending, but banks are still required to complete their due diligence.

Banks have resorted to using Freedom Mortgage and similar platforms to offer mortgages a little easier. This platform has a digital verification service known as AccountChek. Through AccountChek, banks can look at an individual’s employment information and income.

There are other platforms available as well, which in many ways support the virtual real estate transaction. For example, SnapDocs works with Encompass to speed up digital closings and other parts of the transaction. Meanwhile, Ellie Mae’s Encompass is designed for originating loans.

Meanwhile, Better and Morty are both useful for mortgage brokers and borrowers. These systems help buyers secure a loan package with the lender. Then, the platforms guide borrowers through the entire closing process. Because of how popular these digital platforms are, more innovators will likely step into the lending industry to improve virtual transactions.

To stay competitive in today’s marketplace, agents must know how to use virtual real estate transaction tools. Emerging technology continues to appear that can streamline all aspects of the transaction. Today, buyers can use virtual platforms for touring a home, originating a loan, editing documents, and signing closing papers. While the in-person touch will always remain an essential part of the real estate marketplace, virtual transactions will continue to play a significant role in upcoming years.

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