Wed, 16 Mar 2022

Experience Buying Residential Real Estate Without a Buyer's Agent

In response to https://twitter.com/faraz_r_khan/status/1452057985501437952

I think buyers without agents are pretty rare. In Portland, a listing agent refused to present my initial offer to the seller, despite a legal obligation to do so, because it wasn't on the customary form created by the local Realtor association. I ended up buying a license for the forms, plus a license for the software to complete the forms. I resubmitted the offer, and the rest of the closing process went smoothly. The seller's agent had to a little extra work that a buyer's agent might typically do, being present for the inspection and appraisal. The sale price was about 9% below the asking price. I don't know if the listing agent reduced his commission, about $13k that was saved by not paying a buyer's agent commission.

I made an offer on another property without a buyer's agent, contingent on me being able to see it, and the listing agent refused to schedule time to show me the property. That one received multiple offers above asking so she didn't feel obliged to deal with an unusual situation, I guess.

The second property I bought without a buyer's agent was in Chicago. The seller was a real estate agent. He was fine using the purchase agreement form created by an Illinois lawywers association, which is publicly available. I believe the Chicago Realtors association has their own forms as well that aren't available to non-Realtors/lawyers. In Chicago, buyers and sellers typically use lawyers in addition to real estate agents, but close through escrow at a title company. I didn't bother hiring a lawyer for this transaction. (The lawyer we used on the purchase of our primary residence was about $800.)

I haven't sold a property without an agent, but if you have time to do showings/open houses, I don't see any reason not to. The buyer will likely have an agent, and the agent will probably expect the customary commission from you. I know someone who came to an agreement with a buyer's agent for a 1% commission.

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Wed, 12 Jan 2022

A Proposal for NFTs with Actual Property Rights

I'd like to propose a project that makes use of the technology behind NFTs while solving real problems: digital concert tickets

As of early 2022, none of the popular NFT projects provide any actual property rights. The only right associated with each token is the right to transfer the token to someone else. This includes projects like the Bored Apes Yacht Club, where the cost of membership in the yacht club is comparable to lifetime membership at an actual yacht club; you get the exclusivity without access to an actual yacht club.

There are applications where being able to verify and trade property rights in unique assets could potentially be done at lower cost through the technology introduced with blockchains. I've previously argued that efficient replacements for rights licensing organizations like ASCAP and BMI, real estate title search/insurance companies, and ownership or shareholder tracking like MERS or ProxyVote are areas that could be fruitful for exploration.

Any of these would be large a undertaking so I'll propose a more tractable problem in concert ticket NFTs.

Concert tickets have characteristics and associated problems that make them well-suited for being represented as NFTs. They are

Here's how concert tickets as NFTs would work.

  1. The venue (or venue's agent) selects a network on which the tickets will be issued
  2. The venue owner issues one Entrance Ticket as an NFT for each seat at the venue for an upcoming concert
  3. The venue owner either sets prices for each Entrance Ticket or auctions the tickets
  4. The Entrance Ticket is transferred to the buyer, completing the initial sale
  5. The buyer can resell the Entrance Ticket until the end of the concert
  6. On their way into the venue before the concert, the owner of the Entrance Ticket exchanges with the ticket collector their Entrance Ticket for a Seat Ticket

This solves a few problems with current ticketing solutions.

Buyers can verify that they are buying an authenticate ticket. They would verify that the issuer is the venue owner off-chain. The venue owner should publish the the public key of the issuer. They can simply publish it on their web site, or they could make use of a identity-linking mechanism like Keybase to link their public key to multiple identities such as a twitter profile, a domain in DNS that they own, and a website that they manage to provide buyers greater confidence that they are buying from the legitimate seller.

When one concertgoer wants to buy a ticket from a previous buyer in a secondary transaction, buyers can verify on-chain that the ticket they are buying was originally issued by the venue by verifying the identity of the original issuer.

This solves the problem with buyers potentially buying counterfeit tickets from third-party sellers using Craigslist, for example. It also can reduce the transaction costs associated with buying tickets on the secondary market through trusted intermediaries like Ticketmaster.

Venues, i.e. ticket issuers, also benefit by eliminating the possibility of counterfeiting tickets. Apart from the costs of mediating disputes when two people show up with the same ticket in the form of a bar code or two people claim the same seat number based on a printed ticket or screenshot, there will be a greater demand for tickets from buyers who know that they can resell their tickets. Therefore some of the benefit should accrue to ticket issuers in the form of higher initial ticket sale prices.

Up above, I described how Entrance Tickets are exchanged for Seat Tickets at the door. This solves the double-spend problem. A ticket holder could share their private key with another person, allowing two people to prove ownership of the same ticket if ticket ownership is simply checked at the door.

This may be minor problem, but since the tickets need to be checked at the door anyway, we can have the ticket collector and ticket holder perform a trade on-chain at the door.

The ticket holder transfers their Entrance Ticket for a Seat Ticket. The Seat Ticket is issued for the same seat at the same venue for the same duration, but is not valid for entering the venue. Now, a second holder of the private key can no longer enter the venue, but the ticket holder can still ensure show the usher which seat they own for the show.

A note about implementation:
At the moment, transaction costs on the popular networks for trading NFTs would make secondary sales and my proposed Entrance-Ticket-for-Seat-Ticket transactions cost prohibitive so there's work to be done. There are nascent NFT projects on the stellar and ripple networks, where transaction settlement time and costs are low. It may be worth exploring funding options from the Stellar Enterprise Fund or Ripple's Creator Fund.

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The state is that great fiction by which everyone tries to live at the expense of everyone else. - Frederic Bastiat