Recently, a Florida homeowner auctioned off her house in the first NFT (non-fungible token) real estate sale in the U.S. The winning bid was for 210 Ether — the second largest cryptocurrency by market capitalization behind Bitcoin — valued at $654,309.60.
The first step involved transferring the ownership of the home to a single-asset limited liability company. The winning bidder then received an NFT recording their ownership of the LLC to the blockchain, and the seller collected 210 Ether in a digital wallet.
Propy, the blockchain startup that helped facilitate the auction, says on its website that it believes “in a world where real estate transactions are ‘self-driving’” utilizing smart contracts. In particular, Propy wants to help brokers, agents and title companies speed up closing and transform it into a paperless, remote process.
Josh Peters, owner of Stately Living and co-founder of RETSY, believes there is a practical use case for this technology:
It’s a more efficient transaction because you don’t need all of the paperwork,” he says. “It’s also a platform and technology that people — especially younger individuals — are more comfortable with. Using the blockchain is more secure too. There’s so many holes and opportunities for theft and fraud that could occur in the current process.
The Arizona Legislature passed House Bill 2417 in 2017, allowing the use of smart contracts in commerce and recognizing signatures and records secured using blockchain technology as valid electronic signatures — meaning NFT real estate sales could be soon become a reality in Arizona.
An Evolving Industry
NFT real estate technology has the potential to upset the status quo. More people are already using iBuyers for home purchases and sales, which effectively eliminates the need and associated costs for a realtor.
“It absolutely will reshape real estate as we know it,” Peters notes.
"We’re seeing major corporations that have shifted the fundamentals behind how real estate is transacted. Now, more than ever, realtors need to understand that disruption may occur. Smarter realtors are adding more value to the equation in representation whether they’re becoming experts in a particular zip code or a specific type of real estate."
However, because of the volatility of cryptocurrency, its value at the date of closing may be greater than its value when cashed-in, which means that aside from the normal swings in real estate value, there would be an additional variable in the price of home sales. Furthermore, as crypto sales become more prevalent, they may attract government attention with the intent to regulate and/or impose taxes.
On March 9, 2022, President Biden signed an executive order to study cryptocurrencies and blockchain technology, calling for the exploration of a U.S. Central Bank Digital Currency - a digital form of the dollar.
For those of us who are not millennials, the thought of selling our principal asset in the “ether” may be daunting, but we should come to grips with a changing world in which technology increasingly drives progress.