Real Estate NFTs: How It Began

NFT FOR SALE

Propy Inc.

June 9th: I’m in a hotel room in NYC: I’m staring nervously at the screen of my little rose gold-colored computer. Fortunately, the wifi works well, which is always a stranger in a hotel. An irrevocable online auction will begin in an hour. In all honesty, I have no idea what’s going to happen.

It all started back in April of this year when I wrote an article sharing the idea that real estate is the perfect asset to convert into a non-fungible token (NFT). This resulted in a life changing collaboration with other innovative personalities who united to create something transformative.

I argued at the time that a property was the perfect candidate for an NFT because it already had behaves like a digital good in many waysS. NFTing one offers numerous advantages, such as immediate processing and a simplified overall transaction process – exactly what young people who grew up with smartphones want. Real estate transactions are lengthy, tedious and archaic. I was hoping to show that it is possible to change.

We have already seen a new generation of homebuyers looking for other solutions that go beyond the status quo. Unusual to the costly and lengthy process of buying a home with its reliance on outdated methods of doing business and multiple middlemen, they demand a transparent “one-click” process that is fast, efficient and reflective of the times they live in. They’d rather not buy a home than get into a hideous lawsuit.

After the article was published, I received many inquiries from real estate investors, brokers, homebuyers, venture capitalists, and programmers how to get involved. I was convinced that consumers are ready for this innovation, just as they are ready to buy art on the blockchain. So I decided it was time to figure out how to do a property NFT.

We have been working on it for years, but there were still challenges that we had to solve:

  • Creating the actual NFT
  • Embedding the NFT in the US legal framework
  • The invention of the “Know Your Customer” process as most art NFT transactions are anonymous

We solved the problems of NFT creation by changing ownership from sole proprietorship to a US based legal entity. This allowed us to easily transfer ownership of the entity via NFT, which automatically transfers ownership to the property. And as an added benefit, since the company held the title, there was no need to re-register the title in the county – saving a lot of time and money.

Then we developed a protocol that transferred an asset from one wallet to another, collected personal names, and performed simple background checks – all of which ensured the integrity of the transaction.

After solving all of the challenges, we found the perfect property for NFT – a studio apartment owned by a US legal entity. It was also the first cryptocurrency property to be purchased through smart contracts in 2017. The NFT was bought by Michael Arrington, founder of TechCrunch and Arrington Capital, and included the apartment and a piece of art by famous local street artist Chizz.

After the NFT was created, we planned a 24-hour auction for June 9, 2021. While I initially feared that we would have no bidders, over 40 bids were made in the cryptocurrency Ethereum. The winner was a first-time home buyer – a Silicon Valley millennial. After a stressful 24 hours plus six 15-minute extensions, sitting in the same hotel, ordering room service not to skip a minute from the online miracle, I was relieved – it was all successful. Technology worked. People wanted this capital.

The new NFT owner loved the process – ownership transfer only took 22 minutes – a far cry from his experience of buying a home in the Bay Area, a process he found far too complicated so he never did. I found out about his experience after he kindly agreed to make a post-sale Zoom call. He shared his plans to rent the apartment as a historic apartment and told me that he was willing to pay double the price for the property.

NFT or not, Millennials and Gen Z are already buying high value assets like expensive avatars or cars online. You expect the same ease and transparency when buying real estate. However, higher levels of security and data integrity are required to circumvent wire and other forms of cyber fraud that are common in such transactions. Real estate settlement on an immutable blockchain using NFT technology could very well be the solution these new generations are demanding.

Brad Garlinghouse, CEO of Ripple, said at the Milken Institute’s 2021 global conference that settlement on blockchain is applicable to many industries, including real estate for “any transaction where someone needs to exchange trust between transactions”. [ participants].

Individuals helping consumers with the NFT of their homes could automatically pay royalties to their digital wallets. These “NFT miners” (similar to cryptocurrency miners) can receive small license fees for each future purchase as compensation for providing all data and property to make them transferable (title report, inspection reports, disclosures, etc.).

Can the NFT revolutionize the real estate industry? I say absolutely! We’re not just seeing increasing interest from younger buyers and sellers and tech-savvy crypto enthusiasts looking to diversify their portfolios.

Agents and brokers who are also interested in differentiating themselves from the competition learn and get actively involved in the crypto / NFT / blockchain area. This is what Mauricio Umansky, CEO of The Agency, shared when I asked his opinion on real estate NFTs at the recent Inman Real Estate Connect Conference: Ownership. Changes in technology are always aligned with changes in the real estate industry and at least this is a novel marketing tool to reach an audience interested in the metaverse. On the other hand, it can revolutionize our concept of real estate commodities and what customers expect from a transaction. I believe NFTs will change our industry significantly. “

Once a property becomes NFT possible, the NFT will become a collateral in the crypto world unlocking crypto-eligible mortgages, where crypto owners can participate in liquidity pools similar to decentralized peer-to-peer real estate loan marketplaces secure to the current common defi-credit protocols for cryptocurrencies. NFT, DeFi, crypto title insurance protocols and crypto valuation solutions will create a full cycle for the new age of liquid real estate. Ultimately, the concept of home ownership, like NFT art, is a social consensus.