• Mon. Nov 28th, 2022

A $175,000 house sold via an NFT. People have questions.

ByWillie M. Evans

Oct 29, 2022

By Anushree Dave

Will NFTs make buying a home easier or complicate the process?

Last week, Roofstock, a digital real estate platform, facilitated the sale of a $175,000 home in South Carolina using a non-fungible token, sparking debate about whether technology makes the process easier or harder. buying a property.

Roofstock onChain, which is the company’s Web3 subsidiary, listed the property on its Origin Protocol-powered NFT Marketplace (many mistakenly thought it was OpenSea.) It sold using the USDC, a stablecoin.

“Instead of waiting months for underwriting, valuations, title searches and deed preparation, I was able to buy a fully insured, ready-to-let property with the click of a button,” said the home buyer. property, Adam Slipakoff, in a statement. .

But as news of the event spread, questions emerged. A tweet that got a lot of attention asked who actually owns the property and whether the token holder only owns the token or owns the property as well.

“For the property itself, the title is an LLC, and all we’ve done with the NFT here is that the NFT represents the sole ownership of that LLC,” said Sanjay Raghavan, head of initiatives. Web3 at Roofstock, in an interview. with MarketWatch. “People have always bought and sold properties through LLCs, right? It’s nothing new. All we’ve done is facilitate the sale of that LLC from person A to a person B.”

Raghavan added that the LLC’s operating agreement contains language indicating that the owner of the token is also the owner of the house, so it is legally established in the LLC’s operating agreement.

But for others, the explanation only raises questions of security.

“What if someone steals a blockchain’s NFT?” asked Sean Scapellato, a South Carolina real estate attorney. “I don’t know how you handle someone knocking on your door saying they bought your NFT and the house is theirs now.”

Hacks are less of a problem when the owner of the NFT is not anonymous, Raghavan said. In the United States, a person cannot own an LLC anonymously. This makes it more difficult to take possession of a house by hacking the NFT. The owner is known, and this is recorded in documents linked to the token, he said.

This contrasts with NFT art, which is often held by anonymous users online. Hacking and transferring ownership is easier when the original owner is unknown.

The NFT is also the only thing stored on the blockchain itself, while the metadata associated with it is linked elsewhere, in a data room like a server or cloud, and the metadata can be updated with any other relevant ownership information, Raghavan told MarketWatch.

For real estate agents, technology is brand new and may raise more questions than it answers. “How does the resale of this property work? said David Conroy, director of emerging technologies for the National Association of Realtors, in an email to MarketWatch.

“What steps have been taken to ensure regulatory compliance, property registration and tax implications of selling the property in this manner versus a traditional sale?” said Conroy, who added that the NAR monitors these technologies as they develop.

Raghavan said only those who have a verified buyer flag on their accounts can get the token transferred. This flag, much like a blue tick on Twitter, lets the system know that the buyer’s identity has been verified by the company. “Without this, if you try to transfer this token, or try to buy it on an NFT market, the transaction will fail.”

The team worked with legal and tax experts to bring the property into compliance with the law, Raghavan said. But with laws and regulations varying from place to place in the United States and abroad, this transaction could be difficult to replicate in other jurisdictions, he added.

Legal expert Scapellato pointed out that even if a cryptocurrency is accepted for purchase, it does not necessarily specify which rights are conveyed as a deed does, and whether an NFT would have the same utility as deeds does. .

“State property laws differ across the United States, and we have hundreds of years of case law based on conveyance of a deed with specific warranties and rights that align with the laws of this state. An NFT should have the same utility or it is useless when issues need to be litigated,” he said.

For the Roofstock team, the South Carolina transaction serves as a case study of what can be done, with the right research, elsewhere in the future. “We performed multiple analyzes of 50 states [to find out if] an LLC can be transferred from A to B without triggering a tax event, et cetera,” Raghavan said. “In the United States, when we go to the next state, we will comply with the law of that state on this, how we do these NFT sales.

For the Roofstock and Origin Protocol teams, the sale of the house also served as an example of what can be done with NFTs as the underlying technology to transfer physical assets.

Matthew Liu of Origin Protocol said technology will define the evolution of the internet. Going forward, we will no longer refer to NFTs as NFTs, in the same way that we no longer refer to them as “HTML web pages,” he said in an interview with MarketWatch. But the underlying technology of HTML created the blogging, e-commerce and social media industries, the same way NFTs will change industries in the future, he said.

“We’re going to see a world in five years, in 10 years, that’s radically different,” Liu said. “There’s going to be a new version of the internet, and NFTs are going to be like the cornerstone of digital property. people build, and then like a graduate where there are real utility and use cases in. And it ends up being really, really powerful.

-Anushree Dave

 

(END) Dow Jones Newswire

10/29/22 1411ET

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