Since the advent of the Internet, humanity has been making great strides in creating vivid and immersive digital experiences.
And after decades of virtual interaction, the potential for future growth is massive. In fact, the “real world” investment in digital worlds has an even heftier price tag now that serious capital is connected to the digital version of one of life’s most important purchases: virtual real estate.
As a real estate agent, you may be wondering what this new industry means for you. Should I invest? Should I pivot my business? Should I be concerned?!
And to those questions, we say: Read on.
Think of this guide as your handy companion for the basics of virtual real estate, unpacking the similarities and differences to your physical world, and how you should proceed in light of the metaverse.
Before we define virtual real estate, let’s take a quick step back and review some key terms that will serve as building blocks as we discuss this topic.
And speaking of blocks…let’s talk blockchain first.
A blockchain is a distributed, decentralized database. It’s the new digital way of storing the information that makes our physical world go round, particularly through the use of digital ledgers.
Each block contains one piece of an information “puzzle,” if you will. Blockchain’s decentralization means its information is not stored on just one server. Access can be made either public or private and is given to only designated users. Its transactional record-keeping is highly secure and much more accurate than the traditional system of hard-copy ledgers.
Blockchain technology has paved the way not only for better financial record-keeping, but new digital forms of currency itself.
The relative newness of digital currency like bitcoin means significantly higher levels of volatility and risk than the US dollar. But early adopters who invested in these newer forms of currency (and held the course!) are now seeing massive rewards for their perseverance.
Like any currency, crypto’s value and exchange rate will vary. But cryptocurrency is essential to engaging in many forms of digital trade and commerce including, you guessed it: virtual real estate.
Virtual real estate, like its name suggests, is the practice of buying and selling digital property in digital communities called metaverses. (The term “metaverse” can actually be used to refer to any space or world that exists virtually.)
If you’re racking your brain to remember why you’ve been hearing so much about the metaverse recently, don’t forget—one of the biggest names in tech, let alone social media, recently renamed Facebook as Meta. The rebrand choice predicted (and continues to fuel) the hype around the metaverse and the growing demand for immersive digital experiences, particularly among younger audiences.
Metaverse real estate sales reached $500 million in 2021.
In metaverses, people can come and go, interacting and engaging with virtual real estate via avatars. If you’ve ever played video games like the Sims or Second Life, you’ve used one of these digital personas to complete actions in a digital world—also known as a metaverse.
Metaverses are often categorized as “fictional universes.” And while in some respects this may be true, the financial capital and social potential backing the metaverse is more significant than ever—and as we’ll see, virtual real estate is ultimately anything but “fictional.”
Now that we’ve covered the very basics of real estate in the metaverse, let’s break it down even further into the various elements you need to know in order to understand its greater impact—and where you as a real estate agent might fit in.
Any journalist will tell you that breaking down a news topic starts with the key W’s—and an H—who, what, where, why and how (we’ll leave when out for this one, since we’re all aware this is happening now 😉).
Let’s tackle these questions one by one to find out how virtual real estate compares to traditional or “physical” real estate.
As previously mentioned, virtual real estate is made up of digital properties.
These properties can be houses, apartments, and other buildings that exist online only. The plot of land itself is digital and while technically the virtual world is “infinite,” digital property—and the community it is part of—exists in a digitally-defined space.
As of today, a handful of key players rule the metaverse landscape, including brands, investors and even Snoop Dogg (and his new neighbor). If someone wants to visit your property via their avatar, they do have to be a member of the digital community where your property exists.
Now let’s talk about the transactional element of virtual real estate.
Most digital communities have their own form of cryptocurrency. Now, because cryptocurrency is a recognized form of currency, this means that individuals are investing real-world dollars in their digital property. What’s more, digital property in some locations is valued at similar rates to physical property.
This is proof of the ever-increasing societal power and potential of the digital world to impact our real lives, including the worldwide economy and the consumer marketplace.
As you’re already well-aware, in traditional real estate, closings take place in-person via signing physical contracts. A tangible piece of paper defines a person’s ownership of the home.
For digital property, a contract still exists. But its “location” is—you guessed it!—digital.
A digital ledger contains an ownership ID or proof of ownership of the digital land parcel, much like a physical deed would. And much like other important investments outside the metaverses, individuals need to provide proof of address and a valid ID before purchasing and owning digital land or property.
You’ve likely guessed this one, but just in case we’ll say it again: digital property exists in a virtual world.
A virtual home or other building (and its plot of digital land) might exist in a “neighborhood” or community within the digital “world” where you’re transacting. Some of the biggest names of these communities include Decentraland, Sandbox, Hyperverse and Roblox.
Like physical locations, digital communities do have “prime locations” based on proximity to other high-caliber homes or highly-trafficked hotspots. These factors can significantly raise property prices. Remember Snoop Dogg’s neighbor? That individual paid a whopping $450,000 for that virtual property.
Prime locations also offer a wealth of marketing potential for top brands looking to use digital real estate to drive brand awareness and advertise in the virtual world. As of 2022, Adidas, Care Bears, Samsung and Gucci are just some of the household name brands that have purchased land plots in a metaverse.
(Sorry, not the band.) Okay, but seriously, it’s important to know who the key players of virtual real estate actually are. Let’s first break down the process of a “new build.”
Unsurprisingly, a buyer needs to purchase digital land to build their virtual real estate. This buyer or owner is the individual making decisions about the building process on their digital plot.
From there, the owner can work with an architect who specializes in digital property to facilitate the process of designing the virtual build.
Next, in lieu of the construction company who would handle the next phase of a physical home build, 3D developers or renderers are the masterminds bringing the buyer’s vision to life.
Once the virtual real estate has been built, the owner is free to digitally come and go via avatar in whatever metaverse they live in.
Check out the first sold digital NFT home, Mars House, created by artist Krista Kim which sold for more than $500,000.
If purchasing or leasing an already-existing property, individuals are free to interact within the metaverse to complete a transaction of virtual real estate.
As a real estate professional, you may be saying to yourself, “Um, excuse me?! I think we’re missing a very important key player here!” And we have to admit, it is simpler and more common to purchase virtual real estate without the aid of a real estate agent or broker. However...
As virtual real estate continues to gain momentum, and as digital property transactions grow in complexity, there is a likelihood that the market for real estate agents who specialize in the digital space will expand.
Andrew Kiguel foresaw the possibility of this need early on, after investing significantly in virtual real estate himself. He founded the Metaverse Group, a real estate company that specializes in buying and selling virtual real estate, to meet this demand. He foresees that virtual real estate agents will need to be experts in cryptocurrency and in the nuances of digital land.
Obviously, most of the reasons for purchasing virtual real estate will differ significantly from traditional homebuying. While one’s avatar can (and does) live in their digital property, their physical selves quite clearly cannot.
But because the value of virtual real estate as an industry continues to increase, the potential financial reward and return on investment is still quite promising.
One caveat here: cryptocurrency, though more stable than in previous years, is still subject to significantly more volatility than other currencies. So, like any investment, virtual real estate investments are not without risk.
And yet, as the demand for immersive digital experiences continues to increase, experts predict the desire to interact with other users in a digital or 3D space will also grow. Combined with the social kudos of owning property in a metaverse, many brands and investors are seeing this as reason enough to invest in virtual real estate.
If you’re still not sure how to feel about virtual real estate, we get it.
First, we want to reiterate the good news. Virtual real estate will not and cannot replace our need for traditional real estate.
Second, think of virtual real estate as another niche or avenue of real estate. Maybe you specialize in a particular type of home, or you primarily sell homes in a specific region. If you’re located in Southern California, the homebuyer’s market in Central Florida probably isn’t much of a threat to your market.
It’s much the same with virtual real estate. And sure, the financial investment in virtual real estate is very real. But it exists as another potential avenue for investment your prospects may be considering—not a direct competitor to their goal of owning a home in the physical world.
Now you know what this metaverse stuff is all about. Awesome. But what do you do now?
We’re glad you asked.
If blockchain bores you to tears and learning about the metaverse feels like a little too much, no sweat! It’s not for everyone.
While it certainly doesn’t hurt to keep an eye on the trending topics around virtual technology (particularly as it relates to the ways 3D and virtual reality tech will continue to enhance home tours), it’s not going to make or break your success as an agent.
On the flip side, if digital property gets your heart rate up and you know you want to learn more about the metaverse, this is just your starting point! Keep learning about virtual real estate and seek out ways to grow your virtual expertise alongside your existing skills as an agent.
Who knows? Maybe someday you’ll specialize in selling out-of-this-world property purchases. (Literally!)
Wherever in the world you’re selling, keeping your leads organized is key to closing more deals in less time. See for yourself and try Follow Up Boss free for 14-days!