A First for U.S. Real Estate
This year, the California real estate tech company Propy directed the first U.S. real estate NFT auction. The asset was a four-bedroom, 2-and-a-half bath house in Gulfport, on the western coast of central Florida. The Spanish-style building looks like many other Florida homes (readers may view a picture of the actual home by Josh Rojas for Spectrum Bay News 9 of Tampa). It sold for about $655K — which translates to about 210 Ethereum (ether) coins.
The key parties to the transaction were:
- Leslie A., the seller. Founder of DeFi Limited and a real estate investor.
- Amanda J., the buyer. The new owner received a non-fungible token (NFT) encompassing the house title. This is a unique unit of data, etched on the blockchain as indelible proof of ownership.
- A company named Never Forget to HODL LLC, which had been created to transfer the property rights.
What’s “never forget to HODL” about? Depending on who you ask, HODL is either a legendary typo made in a chat forum by a frazzled crypto owner, or the acronym for “hold on for dear life.” In any case, it’s well-known slang in the cryptocurrency world.
Why They Did It
The transaction took place to demonstrate a use case for blockchain real estate.
“It’s like having that first computer that was connected to the internet,” said the seller to Tampa’s News 9 reporter.
In other words, it’s exciting to become the first to create a real estate company that is “tokenized” for sale. And there’s an element of trendsetting in the deal. People will only become interested in blockchain real estate deals once the early adopters have shown that the concept really works.
Once the holding company was “minted” into an NFT, the property rights became tokenized, and the NFT could be sold at an auction. And so it was.
How the Auction Went
There were two bidders, but Amanda J. snagged the NFT. The bidders had to submit their full names and means of identification to participate, so that the title transfer could be verified.
The seller made a profit, having originally paid $250,000 for the house. Yet the NFT home reportedly wasn’t valued above the current comparable houses in the surrounding area.
Though bidding occurred in dollar amounts, the payment was Ethereum — the usual cryptocurrency of choice for NFTs.
What We Learned
Reports of the transaction quoted the seller as explaining that NFTs could make real estate transactions instant (like Venmo, explained the seller). Title searches would be simplified as well. Over time, every claim against tokenized property would be etched on the blockchain.
Would fluctuations in the value of cryptocurrency complicate such proposals? Possibly, although the value of money itself — not to mention mortgage interest rates — is also a moving target. So, on some level, a crypto transaction’s speed could decrease risk.
When ownership documents are tokenized, the parties can effect instant conveyances, and the currency is international.
What Comes Next
Propy wants to keeping minting — in the Tampa area, and across the country.
As for cryptocurrency transactions more generally, Propy notes that buyers can borrow against their crypto, and compete with all-cash buyers. Crypto can always be exchanged into cash to close a deal — making the seller’s experience feel like a traditional, all-cash deal.
Propy — and other U.S. blockchain real estate firms, like Vesta Equity — are getting ready for a future that makes blockchain a key part of home sales. Preposterous, right? Let’s see. According to Housing Wire, a Compass agent has already called the NFT “a great marketing tool.”
Supporting References
Bernadette Berdychowski for the Tampa Bay Times (AP): NFT House Sells for $654k in Historic Auction (Feb. 11, 2022).
Josh Rojas for Spectrum Bay News 9 (Tampa): Gulfport Home First in Nation Sold as NFT; Buyer Pays $655,000 in Cryptocurrency (updated Feb. 10, 2022).
Bob D’Angelo, Cox Media Group National Content Desk / Fox 13 Memphis: Florida Home First in U.S. Sold as NFT; Buyer Pays $654K in Cryptocurrency (Feb. 12, 2022).
The Journal Record (AP): Home to Be Sold in Novel NFT Deal (Feb. 10, 2022).
Lucy Harley-McKeown for The Block: Vesta Equity Launches Real Estate-Backed NFT Platform on Algorand (Feb. 15, 2022).
Joe Budelli for Propy.com: Agents Ramping Up Their Crypto and Blockchain Knowledge in Real Estate (Jan. 26, 2022).
Photo credit: Valentina Rossoni, via Pexels.