In 2017, an apartment in Ukraine was sold using the blockchain, making it the first real estate blockchain transaction. In May 2021, a homeowner attempted to sell his California home on OpenSea, but was met with a lackluster response. In February 2022, Propy facilitated the $650k sale of a four-bedroom house in Florida utilizing an NFT to transfer ownership.
Selling real estate using the blockchain isn’t an entirely new idea. But there have been very few successes. Just yesterday, October 18, 2022, an NFT property was sold by utilizing a couple of new pieces of tech to make the process even more secure.
Roofstock, a digital real estate platform, has sold a single-family home in South Carolina for $175,000 via its NFT marketplace built on Origin Protocol.
The sale was settled using USDC financed by USDC Homes. The NFT for the home will sit in a multi-sig escrow wallet until the buyer pays back their loan with interest. USDC Homes offers financing options with a loan-to-value ratio of up to 80%. The sale brings up concerns about what will happen if the NFTs are lost or stolen. – The Defiant
Two critical points set this particular transaction apart from the others.
One, they used a multi-sig escrow wallet allowing the buyer to still get a loan for the house, instead of buying the property outright. Multi-sig (Multisignature) wallets are cryptocurrency wallets that require two or more private keys to sign and send a transaction. For group-owned assets, treasuries, and escrow accounts, multi-sig wallets protect against a single person or party “running away” with the assets. Of course, multi-sig wallets are not impervious to failure. (Gnosis Safe is one of the leading providers of multi-sig wallets.)
Two, they are using a newer type of blockchain token called Soulbound Tokens, which are non-transferable and constrained to one identity. Buyers must dox (disclose) their identity to the Roofstock firm as a safeguard measure. The NFT house deed can only be transferred to a recipient who possesses the Soulbound Token associated with the property, thus preventing someone who has lost their wallet keys or had their wallet stolen from losing their property.
“I never imagined I could buy and finance a house with a simple click, rather than going through the time-consuming and cumbersome traditional settlement and mortgage process,” said Adam Slipakoff, a seasoned real estate investor and the buyer of the property, in a press release. “Instead of waiting months for underwriting, appraisals, title searches and preparing deeds, I was able to buy a fully title-insured, rent-ready property with one click.” – The Defiant
It’s a sentiment I largely agree with. In August 2022, I bought land in Arizona on the blockchain using a platform called Fabrica. I wouldn’t even know where to start if I wanted to buy land in Arizona traditionally. But the process of buying land via an NFT sale was seamless and, I imagine, exponentially easier than normal. Not to mention, now I have a piece of property that I can easily liquidate because its ownership exists entirely on the blockchain.
Real estate transactions involve a lot of middlemen, which add a lot of expenses and time to a transaction. While I’d like to believe that NFT property transactions will be the ubiquitous future, we will have a lot of friction in removing these middlemen. Unless, of course, Zillow all of a sudden implemented this technology. That would drastically speed up the timeline.
In the meantime, I think this was a fascinating use case for Soulbound Tokens, which have mostly been talked about as a means for turning driver’s licenses, birth certificates, and college degrees into NFTs.