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For blockchain technology to be widely adopted in an industry as large as real estate, a lot of things have to play out first.
Blockchain asset prices are crashing, processes remain complex, and the US government is considering new regulations — and even its own alternatives to — the existing list of private cryptocurrencies.
But some real estate professionals believe that the drop in a variety of private tokens can only speed up the process of finding 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 discuss their firm Real Estate Consortia and its work to standardize the role of blockchain in home transactions.
These two and their colleague Sheila Fejeran of eXp – all real estate professionals and Consortia executives – joined Inman on a video call before the conference. Their responses below have been edited for length and clarity.
But first, because this is such a confusing and rapidly changing space, let’s cover a few terms.
- Blockchain — A blockchain is a shared record of something, distributed across a large number of computer servers. Since the process is decentralized, it is difficult for an outside actor to modify the record, for example by hacking a single computer server. There are multiple applications of blockchain technology, including popular cryptocurrency and NFT assets. But these are not the only 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 real or digital asset, and can be bought and sold. Some real estate properties were bought and sold through an LLC linked to a specific NFT. In these cases, when the NFT changes hands, so does the ownership of the LLC and the property.
- Stablecoin — Similar to a money market fund, these crypto-assets are designed to allow users to transact in cryptocurrencies. Most stablecoins are pegged to the value of the US dollar, meaning 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. In recent weeks, the largest stablecoin – Tether – has been trading for a fraction of a cent less than the dollar. And a smaller one – Terra – completely collapsed.
- “Fedcoin” — This slang term originated in the crypto community and refers to the US government’s efforts to explore the creation of its own digital currency. In March, President Joe Biden signed an executive order who asked the government to grant “urgency” to the research and development of a possible Central Bank digital currency. Although not yet approved, the move is seen by some crypto enthusiasts as a threat to Bitcoin and other private blockchain assets.
Now let’s move on to Inman’s conversation with Consortia.
Inman: in January at Inman Connect New York, Teresa said that replacing middlemen – such as real estate agents – is one of the explicit goals of many blockchain enthusiasts. What role could consortia play in keeping the agent at the center of a blockchain-assisted transaction?
Grobecker: That was my promise to the industry in 2018, to jump on 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 about the post, but the events – I didn’t know anything about this space. At [Real Estate Standards Organization] stage in 2018, I said the promise was to keep the realtor at the center of it all. So when we hit a non-fungible property token, there has to be a practitioner who is the steward of whoever enters the system, to tie that property to the right person. The reason is that it is a relationship-based conversation.
Cotrell: If you look at history, we experienced this the first time with the Internet, where people thought what Expedia was doing to travel agents was going to happen to real estate agents. And it’s not, because what people have realized is that customers want to be represented. So just bringing blockchain into it doesn’t eliminate the need for relationships, as Teresa just described. In the Web3 world, or decentralized world, they just like to clean everything up, and that’s just not practical. Blockchain efficiency is expected to leverage what Consortia provides. And if anything, we can reduce the cost of the transaction and make it much more efficient, but that doesn’t break that bond. [between parties]. We can provide the private blockchain to all parties, while retaining the necessary public parties, and do so in a way that you see wide adoption in the real estate ecosystem.
One of the blockchain uses you mentioned is to host a public database of real estate listings and transactions. Are you describing an MLS competitor? And how far are we from seeing it happen?
Grobecker: There is no intention to disrupt the world of MLS. I think even when we launched, there was a lot of fear. I’ve been asked this question for the past four years since I joined Organized Real Estate. People see a platform where data is shared and the closest thing we can draw an analogy to is MLS. The MLS, I say, is the backbone of financial markets, and globally. The reason US real estate is so stable is because of the way data is collected and stored in MLS. Consortia have no interest in replicating this system. I’ve had people come up to me from the MLS world and they’re like, “Teresa, consult with us on how we would rebuild this on the blockchain.” It’s inefficient, at best. The other side is the sell and service side of MLS. We don’t plan to go there, so that said, Consortia complements the kind of housing market data available, and puts it in one place.
Fejeran: As she described, Consortia is not intended to support MLS, nor to support real estate agents, nor to support any part of the industry. Consortia should help to be a more efficient, effective and consistent data storehouse of correct information that all parties involved in the information will know is true, verified, appropriate, privately held what what is appropriate, facing the public what is appropriate.
How much of Consortia’s business is a data storage versus an educational resource for agents and others on the blockchain?
Grobecker: Blockchain as a technology allows so many doors to open, and all of a sudden, as practitioners, we are now faced with things that have never been on our radar before. So now we need to understand the convergence of SEC laws. We need to know the financial crimes of the US Treasury Department, their department. This touches on 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 does this money come 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 now or are we selling an SEC regulated security? For me as a practitioner, especially as a broker, it’s 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 that they all say to themselves, “OK, these are the laws – this is how I stay in my lane and get out of trouble.”
Over the past few months, the prices of most crypto assets, including NFTs, have suffered a sharp decline. Do you think this will affect the adoption timeline for blockchain technology in real estate? Do you think that puts him back?
Grobecker: Forward, in fact, and at a quick clip. And the idea here is that the crypto is just a testing ground for a Fedcoin that is going to be rolled out. And when this project started, it was very conspiratorial. But the government has since announced that it is working on Fedcoin. Additionally, over the past two months, the SEC has declared that it will regulate stablecoins. They were going to investigate them, weren’t they? And immediately after, the stablecoins start crashing. From there, everything starts to unfold, until the crypto is valid. And that’s actually a beautiful thing. The SEC and the feds really cracking down is good for the consumer. Uncovering them is good for the consumer. It is also encouraging to know what will become Fedcoin and what will become the winner or two in the current stablecoin space. So I think everything goes faster from here in a legit and legal way.
Cotrell: I think there is a lot of confusion where people want to equate blockchain with crypto. And it becomes clear that the blockchain is the infrastructure. It’s the ledger, if you will; it is immutable. It will be the infrastructure that will progress. We could lose 90% of crypto projects. This should remind you of 1999. In 1999 and 2001 so many things left [in the internet infrastructure]. I expect the same to happen with crypto.
Inman Connect Las Vegas kicks off in just over a month here. Can you give our readers an overview of what you plan to discuss on stage?
Grobecker: To follow up on the previous question, it’s probably important to say that the second that Fedcoin or stablecoin, these winners are revealed, 100%, all of our transactions are on blockchain. So it doesn’t matter if you love blockchain, if you hate it, it really doesn’t matter. It’s a question of, are you ready for it? As practitioners, we have to be ready. We have to adapt. We need to educate ourselves and then be there to serve our customers.
Cotrell: There is a lack of understanding of the regulatory framework, particularly with regard to real estate. There’s a lot of frothy conversation around splitting, NFT home sales, and all that. So we’re going to touch on that as well so people understand where we expect the market to go.
Fejeran: The interesting thing is that [a number of influential agents I work with] crave it. They do not understand it, but they are hungry for it. And they’re hungry for a new app that Consortia is going to do – to get a glimpse of the metaverse, since you mentioned – just something that we’re going to integrate. We are not going to go into detail yet. But just keep your ears open. This will come in the future.
Email Daniel Houston