Do I need an appraisal before buying land in the Metaverse?

When buying real estate, one of the biggest concerns for anyone involved in the transaction is “Will this property be appraised?” Because the real estate industry has so many checks and balances, rules and regulations, it’s important that a neutral third party assesses properties so that values ​​don’t get too inflated.

But what about the metaverse? Right now, a lot of people are wondering if virtual real estate will be appraised, including real world appraisers. Since Metaverse transactions are essentially cash transactions and there are no banks that rely on appraisers to assure them that the bet they make on a property or borrower will be profitable, there are has far fewer players involved in a given virtual real estate transaction. .

Image source: Getty Images.

Determining property values ​​in the metaverse

You don’t need (and aren’t likely to find) an evaluator for the Metaverse, but that doesn’t mean you should ignore the factors that make a Metaverse property worthwhile. While you can access real estate from a mainstream metaverse platform for under $ 20,000, you can also spend a million dollars if you want to. Every dollar that you invest in the Metaverse needs to be carefully considered, as it is a highly speculative world, where the risk of your investment being zero is very, very real.

So far, the biggest metaverse transaction to date has been the sale of land to The sandbox at Republic Realm, a company that aims to commercially develop Metaverse properties. Property at the origin of Atari SA, the 24×24 package sold for the equivalent of $ 4.3 million – Republic Realm basically bought a town-sized piece of The Sandbox. The company has considered comparable sales as a component of its valuation, but it is quite low-key about the actual metrics involved.

However, another trading company, Metaverse Group, recently acquired a total of $ 2.43 million worth of properties in Decentraland with development in mind. In an interview with Business Insider, CEO Lorne Sugarman gave some details on how his company determined the value of the property it acquired.

“We are looking at pricing using OpenSea and other markets. We are looking at the location. We’re looking at what we think foot traffic can be, what we think we can get as a return. We look at all the traditional metrics you would see in the real world and determine the right price. ”

Take into account the intended use and the holding time

Since you’re unlikely to be able to get a formal assessment in the Metaverse, you’ll have to do a lot of legwork on your own. Like Republic Realm and Metaverse Group, you should definitely consider other properties nearby and how similar or different they are to the property you want to buy. This is exactly what real estate appraisers do; they find similar properties nearby (and the closer they are, the better), then add and subtract significant differences, like the patio on yours or the second bathroom on the comparable property.

However, since the Metaverse isn’t a place you’re going to live as much as it is a place you’re going to do things, it’s also important to consider what you want to use it for. Some people are buying metaverse bundles for development and eventual rental to real-world retailers, for example, while others are looking to develop venues for events such as virtual concerts, where ticket sales are a part. of the income stream. Even more, however, just want a small piece of the Metaverse to be called their own and turn into their personal playground.

And just like in the real world, a property with commercial potential is going to be valued considerably higher than a property strictly for funs (and there is nothing wrong with funsies). While you should keep in mind that you will be exposed to a longer retention time for commercial virtual real estate, a shorter retention time is possible for the plots that you are going to resell to the general public, which still is. another valuation factor. Whenever you tie up money in an investment, the question arises of what you could have done with it otherwise, like buying bonds or stocks in REITs (real estate investment trusts), for example.

Right now, you can’t get a good rater in the Metaverse, but you can learn a lot about which platform you want to buy on, look at sales trends in the neighborhoods you want to buy, and form a group. fairly educated. guess how the market will go from your observations. And with virtual real estate, that’s all we’re doing right now … it’s a whole new untested frontier.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

About Troy McMiller

Check Also

Raine Capital LLC buys 1, sells

Raine Capital LLC recently filed its 13F report for the first quarter of 2022, which …