Why Crypto Is Being Sold as a Solution for Lower Real Estate Commissions
Startup seeks to lower agent commissions from 6% to as low as 1%.
PHOTO CREDIT: Getty Images
The real estate industry is known for its volatility. One market may be on its way up as another may be crashing to the ground. While real estate professionals and investors alike are used to navigating the ever-shifting ground beneath their feet, there's a new real estate tech shake-up headed for the industry: cryptocurrency.
To get a better sense of the burgeoning relationship between real estate and decentralized protocols, I connected with co-founder Matthew Herrick at Deedcoin, an organization aiming to tokenize real estate transactions and, subsequently, reduce real estate commissions down to 1%. Our conversation touched on Deedcoin's unique solution, as well as ways in which the industry as a whole is ripe for cryptocurrency-powered progress.
How do you think cryptocurrency can help people save money on real estate agent fees?
Herrick: Institutions have grown so large over time that some have neglected innovation. Meanwhile, the public has not yet had the technology to provide competitive options without corporate support.
Through decentralized ledgers, a group of people can join together and become a formidable alternative. Deedcoin is this crowd force of the real estate industry. We tokenize commission percentages and therefore giving the public the free market choice of what those should cost.
Homeowners can pay 1% commission through the Deedcoin Network, because we solve the marketing expenditure and customer acquisition problems for agents. Property sellers can utilize 50 Deedcoin to reduce the agent commission from 6% to as low as 1%. Buyers can use 20 Deedcoin to receive 2% of the purchase price back on any home.
Why did you peg Deedcoin's initial launch price at $1.50 per token?
Herrick: Deedcoin are originally sold at launch for $1.50, but the whole idea of Deedcoin is to let the free market set the value of the solution. Using 50 Deedcoin lets buyers save 5% of their homes value.
For an average home of $240,000, this equates to $12,000 kept in an owner's pocket while still receiving the same quality service through a local agent. We divided the ideal launch budget by the amount of token for establishing a wide user base through the launch and it came incredibly close to $1.50.
How much money did you raise for your initial coin offering?
Herrick: Deedcoin has been marketing to the public for just over 90 days and has sold just short of $1 million in DEED so far.
We have been southpaw in the way we have launched our project. Many ideas are coming to the token sale with an idea on a napkin called a whitepaper. The team and I think this is a major issue with the blockchain world.
We began in early 2017 in development, filing pending patents, building a platform, and recruiting a national broker network. Because we wanted to prove the concept before asking for money, Deed was a secret to the outside world until January 2018. We felt it was important to keep things quiet while we established the solution to avoid anyone with more funding beating us to market.
As regulation increases, I wonder, is Deedcoin SEC compliant? What about Know Your Customer (KYC) and Anti-Money Laundering (AML)?
Herrick: Yes, we are SEC compliant. Compliance has been a top priority for Deedcoin since our inception.
Unlike many token sales, Deedcoin is for a large percentage of the population. To be specific, anyone who lives inside a home should own at least 50 Deedcoin to protect their equity when they go to sell.
Due to our wide user base, it was crucial to work within SEC guidelines and sell to U.S. people who are homeowners in our initial footprint. To remain compliant, we developed the concept with our own funding to launch the network, making it a usable product.
Very early in our process, we secured Thompson Bukher LLP out of Manhattan to guide us through every regulation available. We have spent so much time on the phone with attorney Tim Bukher specifically, our teams have become friends. Additionally, for our SAFT sales, we filed a 506D exemption to let the SEC know what we are doing and have a CIK number.
For AML and KYC, all users are screened on registration against the Reuters International database for various factors including watch lists and the politically exposed. The solutions are too great in this technology to let a war with regulation prevent innovation. We believe that working within the guidelines allows the industry to grow and regulation to evolve structurally to provide consumer safety with stifling innovation.