Imagine this scenario: You’re looking to buy a home in Atlanta, San Francisco and Tampa, Florida — three of the nation’s most competitive housing markets.
But, those dreams could get dashed waiting for a loan to help with the mortgage as multiple all-cash offers come rumbling in, squeezing you out of the process.
This is where companies such as UpEquity could assist.
The digital mortgage startup uses its underwriting technology that includes machine learning, artificial intelligence, and algorithms to verify clients’ applications and approvals faster. It also works with buyers who have all-cash offers.
UpEquity CEO and co-founder Tim Herman and chief technology officer Andy Pruitt claim they reduce closing times of home buying from the typical industry standard of about 50 days to 18.
They also believe newer tech that will power the much-prophesied metaverse may soon cut closing times even lower.
The service comes as there already is a land rush occurring in the virtual real estate market.
Then there’s Andrew Kiguel, the CEO of Tokens.com, a Toronto-based blockchain company. In October, the company bought about 50% of the metaverse Group, one of the world’s first virtual real estate companies for $1.7 million.
One month later, Kiguel’s company spent a then-record of nearly $2.5 million to buy 116 parcels of virtual real estate in the metaverse he hopes will attract brands who want to advertise in his space.
“I feel very, very confident about this,” Kiguel told USA TODAY. “I think we’re going to see a quick appreciation and monetize renting that land and space very soon.”
Both UpEquity and Tokens.com hope that the physical and digital real estate space will boom as the metaverse takes shape. Dubbed by many as the “next internet,” the metaverse is currently defined as a growing assortment of virtual sites that provide people the option of never having to leave their home for entertainment and social activities – an evolution accelerated as COVID-19 and its variants keep us confined.
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The metaverse: Under construction
The term metaverse gained more mainstream attention in October after Facebook renamed its parent company, Meta, with an increased focus on virtual reality (VR). But much of the metaverse also remains undefined, experts believe.
“There’s still no agreed-upon definition as we’re all still trying to figure out the convergence of physical and digital worlds,” said Cathy Hackl, a tech strategist who assists companies adapting to the metaverse.
The word metaverse is “perhaps the most overused and misused term in 2021,” said Brandon Ross, Rich Greenfield, and Mark Kelley, executives at LightShed Partners, a New York-based technology and media research firm.
However, Hackl said the technology that will power the metaverses would include VR, AR (Augmented Reality), blockchain, AI, machine learning, 5G and other immersive technologies.
“It’s not just one company or one technology. It’s much broader,” Hackl said.
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UpEquity believes metaverse technology will change the foundation of real estate sooner than later.
The startup considers itself among a rising class called “Power Buyers,” by working to help get those into the homes of their choice by making all-cash offers.
With fewer properties on the market compared to 2020, more than 33% of non-first-time home buyers were making all-cash offers compared to just 6% of first-time buyers in April, according to the National Association of Realtors.
Herman and chief technology officer Andy Pruitt agree that the metaverse will go beyond just wearing a VR headset and creating an avatar. Herman believes there’s also room for use cases, such as digital lenders “challenging the legacy mortgage industry” by helping qualified people buy actual homes quicker.
They said this could range from prospective buyers taking immersive 3D tours of homes to digitally map renderings of properties without actually stepping in or seeing the property in person. They said this type of tech went from fantasy to reality as safety precautions from COVID influenced buyer behavior.
If tech in the metaverse improves, home buyers will have to decide maybe in a matter of minutes instead of hours and days whether to buy a home in a highly competitive market.
And, UpEquity believes the metaverse will remove barriers for inspecting and buying home, and whether having an all-cash offer might make or break a deal.
“This will exponentially increase the number of potential buyers for the best homes and will exacerbate the supply and demand issues we are already facing,” Herman said. “There will be more offers on every home because it will be easier to get comfortable making an offer sight-unseen. Buyers will need tools, like an all-cash offer, in order to compete in this future.”
Pruitt said Millennials, who face high hurdles to homeownership, mostly lose out because they have smaller budgets, a higher rate of rejection from lenders, and don’t have enough cash readily available.
“We want to give them a chance to make an offer without the fear of being rejected and feeling resigned they will always be renters,” Pruitt said. “We don’t think that’s right or fair with helping to stabilize communities across the country.”
The company said it has an ambitious target of reducing home purchasing to a 10-day close by next year.
Pruitt said the two-year-old startup has worked with “thousands of buyers,” and has seen a 500% year-over-year growth in revenue and transactions. The company makes money from the interest of its loans.
Pruitt anticipates UpEquity will originate more than $1 billion in mortgages in the next 12 months. That projected figure is up from $100 million in 2020.
UpEquity is currently licensed in California, Texas, Colorado, Florida, Illinois and Georgia, with plans to expand to at least a dozen more states, Pruitt said.
“The future of how to buy homes is here; it’s just not evenly distributed yet,” Pruitt said.
The UpEquity execs believe that one of the key trends for the metaverse will be the crossover from digital into the physical world.
They believe that this trend will continue and even expand as consumers embrace metaverse technologies and will force companies like UpEquity to implement it into their business model.
“We’re still figuring it out,” Pruitt said.
Hackl estimates the next 10 years will be important for critical building as “each one of these metaverses will have different roles to play.”
Scooping up virtual land space
While the Metaverse Group is physically located in Toronto, its virtual headquarters is in Decentraland in Crypto Valley (think Silicon Valley in the metaverse), a virtual website where people can play games, hang out and attend events like concerts.
He quickly mentions that luxury brands such as Gucci and Louis Vuitton already have space in the metaverse via NFTs or nonfungible tokens. NFTs work on the blockchain, where every cryptocurrency transaction is processed, verified and recorded on a public virtual ledger — similar to other cryptocurrencies such as bitcoin.
So, what would prompt Kiguel and others to bankroll so much in digital land that you technically can’t touch? He’s betting on the potential profits from the evolving digital and virtual space within the metaverse.
Kiguel said what further motivated him to buy virtual land space in Decentraland’s Fashion Street district was seeing the site host a four-day metaverse music festival that had 80 artists and attracted 50,000 virtual attendees in October.
He plans to develop the area into a virtual fashion destination for luxury brands similar to Rodeo Drive in Beverly Hills and Fifth Avenue, one of the most famous street in New York City.
Shortly after Tokens.com’s purchase, New York-based metaverse real estate company Republic Realm announced it had spent a record-breaking $4.3 million on digital land through The Sandbox, a popular virtual real estate site.
Republic Realm told the Wall Street Journal it acquired 2,500 virtual land plots throughout 19 virtual worlds, with two specific investments centered on virtual real estate, including a mall, 100 virtual residences and also a private island.
Hackl, who owns some virtual real estate in The Sandbox and other platforms including SuperWorld and Upland, said buying property in the metaverse is “a bit more of a risk than a reward.” But she said what she bought has already increased in value.
Currently, Hackl said sites like Somnium Space, another virtual land site, has parcels going for $10,000, while on the secondary market the cheapest price for space on Decentraland and Sandbox is almost $14,000.
“I see this as owning a piece of the future of the internet,” Hackl said. “Owning pieces of the internet, for some may see it a silly frivolous thing, but I take it very seriously. It is not a game to me.”
Token.com’s Kiguel estimates his metaverse portfolio is valued at 10 times more than his purchase price. He said a parcel of land in the core of a virtual downtown, with potentially lots of visitor traffic, will be invaluable.
“It’s all about the location,” Kiguel said. “The more visitors who come, the more valuable the land, and the more a retailer and advertisers will be willing to spend to reach those people.”
Kiguel believes due to its immersive nature, the metaverse can be bigger than social media, which many use to try combatting the isolation stemming from the pandemic to elevate their business profile.
“It’s the next iteration,” Kiguel said. “The metaverse will give some power and control back to its users.”