The real estate industry is booming, valued at $43.4 trillion worldwide. However, the traditional process of buying and selling property remains slow and cumbersome. But now, blockchain technology and NFTs are transforming the way we trade real estate. With the immense potential for buyers and sellers, NFTs offer a revolutionary new way to transact value.
In this article, we’ll explore the basics of NFTs for real estate, including how they work, the benefits they offer, and how you can get started.
What are NFTs?
Non-Fungible Tokens (NFTs) are revolutionizing the way we think about asset ownership. These cryptographic tokens, built on the blockchain, are unique and cannot be exchanged for other tokens, making them a one-of-a-kind investment opportunity. NFTs offer secure and verifiable ownership rights over an asset, making it easy to transfer from one person to another. And with their immutability, you can be sure that all transactions related to an asset will remain true and transparent at all times. But have you ever wondered if real estate can become an NFT? Yes, it can!
What are NFTs for real estate?
Because of their characteristics NFTs are ideal for representing valuable tangible assets from the real world including real estate. This idea is groundbreaking because it allows the property to be tokenized and represented as an asset on the blockchain the most secure and decentralized ledger to date. This means that buyers can purchase a physical property in the form of an NFT taking advantage of all the characteristics the digital assets have to offer such as transparency, fast transactions, and storing data on an immutable ledger. By doing so, sellers and buyers can transact properties worldwide without going through a traditional transaction process. All they need to do is to pass a KYC (know-your-customers) form that verifies that the potential buyer is eligible to buy the property in this region and participate in the sale.
TIP: the process of transforming real estate into an NFT is called: Tokenization
Furthermore, NFT properties simplify international transactions and facilitate liquidity, allowing owners to quickly move their digital cryptocurrency or stablecoins without bank hassles or delays.
NFT homes give buyers peace of mind knowing they have full control over what they own. With these characteristics making them attractive to buyers and sellers in the real estate industry, NFTs are becoming an increasingly popular way to trade property. Millennials, in particular, are finding NFTs an ideal option when purchasing their first home.
But real estate is not the only asset from the real world which could be tokenized. Everything from metals like gold and silver, corporate debt, insurance policies, salaries and invoices, consumer goods, credit notes, or royalties could become a tokenized asset and take advantage of the benefits blockchain technology brings.
TIP: Tokenizing assets from the real world are called Real World Assets: RWA
Why now?
- • Real estate behaves as a digital asset. Ownership is a digital record. The physical part is immovable and impossible to steal. E-recording is adopted in all states, 80% of counties.
- • Web3 is becoming mainstream. NFTs developed consumer trust in ownership on blockchain. Also, 10% of first-home buyers used crypto for a down payment in 2021.
- • Millennials represent 60% of homebuyers. GenZ is already in the workforce.
- • RWA (real-world assets) is becoming a trend. Real estate as a stable $300T asset class is demanded for risk-adjusted returns in DeFi.
What are the benefits of NFTing a property?
Tokenizing a property provides various advantages to everyone involved in the process. Let’s explore in-depth what these benefits are.
Benefits for buyers and sellers:
All documents are stored on the blockchain – By storing the ownership documents on chain, buyers and sellers can rest assured that all transactions are secure and transparent. Not only does this provide immutable records of who owns what property and when it was purchased, but it also allows for quicker verification processes by eliminating unnecessary paperwork. Additionally, buyers have more visibility into the purchase process with access to detailed information about each transaction. Finally, smart contracts can be used to automate the payment process and facilitate faster settlements in real estate deals.
The process is safe and transparent – Blockchain-based storage of real estate data is the best way to ensure trustless transfers. The transaction data is accurate, secure, and immutable and the process is simplified – there’s no need for paperwork or costly fees associated with traditional transactions – everything could be found on chain with just a couple of clicks.
The process is fast – The process of transferring property takes around 30 minutes which is extremely fast compared to the traditional process where the transaction could take up to 2 weeks depending on the banks and where they are located. However, with crypto the payment is more instant – once the buyer and seller agree on the deal, all the buyer has to do is send the cryptocurrency amount from their digital wallet to the seller’s digital wallet. The transaction is validated within 5-30 minutes (depending on network transaction volume) and the funds are received.
Benefits for real estate agents:
Are there any benefits for turning a property into an NFT for real estate agents? Of course, there are:
Innovative ways to transfer homeownership – Real estate agents should always be searching for new innovative solutions that will add value to their clients. By using NFTed properties realtors can provide another layer of security and transparency to their clients and documents. Sharing experience and knowledge of this process can establish them as top agents amongst younger clients.
Gain greater trust from clients – One of the most important things when transacting real estate is trust and this is what the process has to offer. Through the use of blockchain technology, all transaction records are stored securely on the blockchain for easy access and complete transparency. This helps agents to gain greater trust from their clients as they can be sure that no one is tampering with or manipulating any data.
Simplify property transfers – By tokenizing a property, agents can significantly simplify the process of transferring ownership rights over an asset. Gone are the days of tedious paperwork and costly fees associated with traditional transactions; now you can quickly transfer ownership rights with just a few clicks.
Open up new opportunities – Tokenizing a property unlocks many new opportunities such as international investments that were previously too difficult or expensive to pursue. Additionally, it expands agents’ market reach by allowing buyers and sellers to connect and transact with one another regardless of location or border.
How to NFT a property?
We already explained what is a tokenized property and what are the benefits for everyone involved. Now is the time to go through each step of the process of NFTing a property. Propy developed the smart contracts, the legal framework that is suitable for the US market, and launched a real estate NFT marketplace.
Framework – To ensure legal compliance with property ownership and transactions in the United States, a real property NFT must adhere to the regulatory framework.
LLC – To streamline your property ownership transfer process, consider switching from individual ownership to a legal entity like an LLC. This enables you to easily transfer ownership via NFT, effectively transferring the property ownership to whoever owns the LLC. By holding the property title through the LLC, you also save time and money by avoiding the need for another title recording and transferring ownership instantly.
KYC process – То еnsure a seamless and secure property transaction process potential buyers must complete a KYC (Know Your Customer) protocol prior to making an offer to verify their identities. Due to restrictions on property ownership in certain countries, it’s crucial to authenticate a potential buyer’s personal information. Our team has developed a streamlined background check system that guarantees the transaction’s integrity and safeguards against fraud.
Mint the property – To finalize the process, Propy mints the property on the blockchain and sets up the sale. This ensures the security and transparency of the transaction while offering potential buyers the chance to acquire the property.
Why NFTed properties are the future?
Millennials and Gen Zs are increasingly looking to invest in real estate, and NFTs provide a perfect opportunity for them. They are no strangers to the world of cryptocurrency and blockchain technology, so security is always an important factor when buying a property. The use of smart contracts prevents any manipulation or tampering with data, ensuring that every transaction is secure. Most of them have never paid with cash so providing a new way of buying and selling a property with digital money is closer to them than the traditional process.
The record of the purchase is placed on the immutable blockchain and provides access to the legal documents signifying ownership. This reduces costs for the buyers and makes the purchasing process quick, simply by letting them buy a property in a few minutes.
By NFT property, the new generation can purchase assets around the globe without just a few clicks. This provides them access to lucrative international markets they may not have been able to access otherwise. Most of them work from home and are digital nomads that look for simple and fast ways to invest in real estate.
Crypto adoption and easiness of a transaction
The interest in real estate from the crypto community is driven by the common desire to transact easily on-chain using cryptocurrency. A crypto holder most likely will invest a small percentage of their returns into any tangible real-world asset if the process is crypto-friendly and simple. This is exactly what the NFT-enabled sales process offers.
How Propy sold NFTs?
The World’s First Real Estate NFT
A studio condominium in Kyiv, Ukraine happened to be the first tokenized property in the world. It was also the first cryptocurrency property purchased via smart contracts back in 2017 by Michael Arrington, founder of TechCrunch and Arrington Capital.
Propy sold the NFT in a 24-hour sale on June 9th, 2021. After six 15-minute extensions and over 40 offers, the property was ultimately sold for 36ETH.
The buyer of the property was a millennial from Silicon Valley who had never purchased a home before because he felt the process was far too difficult and lengthy. He was thrilled with how easy and speedy the process was – it only took 22 minutes to transfer full ownership. This historic sale showcases that people who purchase high-value assets such as expensive avatars or automobiles online are willing to do the same for a property, as long as the process is easy and transparent.
Our first U.S Real Estate NFTs
We chose Florida as the first state to launch our NFT sales in the United States due to its supportive stance on cryptocurrency. The inaugural U.S. NFT we sold was a beautiful Spanish-style four-bedroom house in a desirable St. Petersburg neighborhood, just a short distance from the Gulf of Mexico’s stunning white sand beaches. The owner, who is an active crypto investor, entrepreneur, and philanthropist, was thrilled to offer their property as an NFT. We were excited to test the waters of this new market and were delighted with the smooth and successful transaction – the property was sold at auction for 210ETH.
“I’ve been a traditional homeowner in the past, I’ve gone through the traditional process, and then going through this process it is like night and day! It was not only a wonderful deal that we got in this purchase but also the process as I say was just super streamlined and easy.” – Amanda Joslin, NFT buyer.
Andrew is a Real Estate Advisor, RE/MAX Alliance Group in Tampa, Florida. He is Crypto Certified Agent with Propy and believes that blockchain technology will change a lot of industries but most importantly Real Estate
TechCrunch: Propy launches NFT platform in the US, allowing real-world property to be bought as an NFT. READ MORE
Tampa Condo NFT
Our second U.S. NFT sale took place on April 12th, 2022. It was a 1-bedroom condominium, located in the Hyde Park area of Tampa (one of the city’s most desirable neighborhoods). The sale was held on the Propy Marketplace using USDC. The minimal bid was 185,000 USDC ($185,000).
The sale occurred on the new Propy Marketplace, which has been developed specifically to list and sell NFT properties. As pioneers in the real estate NFT space, we want to offer the best experience for both buyers and sellers. By launching our own NFT platform, we can ensure that real property NFTs have the special attention they deserve.
“We were able to buy this condo as an NFT because we were able to use the Propy platform and the whole team was there all the time. Any questions we had they were on it, and they were replying within minutes. It was a super cool experience.”- Gabrielle & Ryan Channell, NFT buyers.
Taylor Parrino is a real estate advisor with Premier Elite Realty in Miami, Florida. She is a Crypto Certified Agent with Propy and her background is in the financial industry. She specializes in luxury residential real estate and focuses on the latest technology and marketing trends to help expand her business.
Disney Bound NFT
The third NFT in the US was a 3-bedroom townhome in a desired neighborhood and resort-style community. It was not only a great property but also a great investment – just 10 minutes away from Walt Disney World Resort in Orlando, Florida. The property was sold via traditional sale. Propy platform allows buyers and sellers and their agents to choose the way to buy and sell homes in a way that works best for them, via traditional, with crypto and/or NFT.
In the Orlando NFT, the seller and buyer decided to complete the sale without transfer of the ownership with NFT. The transaction was executed as a traditional sale but it is still a recorded sale on blockchain and executed on Propy Platform. The LLC owner transferred ownership of the property to the new owner. The Deed was delivered to the grantee and recorded in the county in which the property is located. Propy Title & Escrow was chosen by the participants for completing the title and escrow in the transaction as well. In addition, the Deed NFT was added to the new owner’s wallet which contains the information for the transaction.
Co-Founder of Millor by Digital Partnership and Crypto Certified Agents by Propy with combined experience in Real Estate, Insurance, and financial services. Passionate about crypto and NFTs and looking to extend the benefit of transacting in the blockchain to all their clients.
Want to learn more about NFTing a property?
Our Crypto Certified Agent Course can help you do just that. In this comprehensive online course, you’ll learn the ins and outs of Web3 for real estate, how to work with crypto buyers and sellers, how to NFT a property and explain it to sellers, and how to leverage the power of blockchain technology for real estate transactions.
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