The World’s First
Real Estate NFT

TechCrunch Founder, Michael Arrington’s Kyiv Apartment sold in world’s first NFT Real Estate Auction!

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About the Sale

Prime Kyiv Location

The apartment, which was the first property to be sold using blockchain technology back in 2017, was owned by Michael Arrington, founder of TechCrunch and Arrington XRP Capital. Arrington decided to sell the apartment (located in Kyiv, Ukraine) as an NFT to further showcase the power of blockchain technology to innovate the real estate industry.

Michael Arrington

@arrington

“I’m very excited to have bought the first real-estate NFT from Michael Arrington with Propy,”

says new owner, Devon Bernard.

“This historic property will be the first of many, as crypto evolves the real estate industry.”

WSJ, 2017:
An Entire Real Estate Deal Takes Place Online, Using Cryptocurrency Technology

About the NFT

An NFT Art Piece on a wall as well as a printed cyberpunk picture also was included with the sale.

This unique collectible NFT included:

      1. Access to ownership transferred paperwork.
      2. The apartment picture.
      3. A unique digital art NFT by a popular Kyiv graffiti artist, Chizz (a physical painting of the digital artwork is painted on a wall of the apartment).


Chizz is a leading street art and mural artist of Ukraine. His clients include Pepsi, Lays, M17 the Contemporary Art Center, Ukrainian Premier League, Silpo & more.He has also sold NFTs on Foundation. His current works may be seen on instagram.

Blockchain startup Propy plans first-ever auction of a real apartment as a collectible NFT

TechCrunch Founder’s Apartment to Be Sold as NFT

How it worked

In order to sell the apartment as an NFT, the process operated slightly differently than a traditional real estate sale. The ownership of the property was actually held and recorded in Ukraine as a US LLC. The auction winner became the owner of the NFT that gives the rights to the LLC, with Arrington signing proprietary-developed legal papers for NFTs to transfer ownership to all future buyers. Propy developed the smart contracts, the legal framework that is suitable for the US market and will soon launch a real estate NFT auction platform for the upcoming NFTs. Thus agents and consumers can choose between Propy Offers solution to make normal offers, and NFT auction to make public offers. For this particular auction Propy partnered with the Seen Haus to conduct the bidding and Helio Lending to secure financing to future real estate NFT owners.


An exciting new use case to further revolutionize the industry

NFTs Work For Digital Art. They Also Work Perfectly For Real Estate.

“I am excited about how NFTs in the virtual world are going to be applied to real estate in the physical world. I suspect that people will soon be able to buy a building, buy the air rights and buy the virtual rights of any physical space. The future is awesome.”

Tim Draper
Investor

FAQs

If you are interested in learning more about the Propy NFT auction sale, please look through our FAQ below. It has the answers to the most common questions. Also, be sure to sign up to receive updates on the NFT auction, by submitting your email address here

This first NFT sale is important as the first transaction because it’s based on US legislation and will unlock future NFT sales representing properties in the US.

Yes, it is. The registry has a record of the owner, which is an LLC, owned by Michael Arrington since 2017. It is also recorded in the blockchain. When NFT is sold the Ukranian Registry will still have the same LLC as the owner. But the owner of the LLC will be different. The new owner will have to declare the LLC change, which Propy will assist.

There are no property taxes for this size of the property in Ukraine. Propy will collect utility bills and LLC maintenance payments annually (total ~ $500) and pay the bills on behalf of the owner in case the owner will purely hold the property. In case the owner will rent the property out, Propy will connect the owner to a prominent local property management company. In case the owner will occupy the dwelling, the owner will pay utility bills on their own and will only pay LLC maintenance fees to Propy annually.

In the current legal environment, title deeds cannot be directly represented by a token, but legal entities can. The apartment is owned by a Delaware Limited Liability Company (LLC). The LLC is “tokenized into” a specific NFT and made available for purchase.

Each sale of an NFT will effect a complete, self-contained transfer of rights to acquire full membership in the LLC, which owns the property.

The apartment is located in Ukraine and according to local law, the property qualifies for tax exemption. The traders of the NFT will not have to pay more taxes than they would pay if they transferred property ownership or LLC ownership rights without an NFT. The taxes involved are for capital gains or losses in accordance with the laws of the NFT trader's country of residency and/or citizenship, the portion of property taxes, and SPV administrative expenses.

Delaware, United States

Selling the NFT is the same as selling one’s rights to be registered as the owner of the SPV holding legal title to the underlying property. The new NFT Owner is required to provide their real name and other personal information to execute the transfer of ownership.

NFT trading can be done on the Propy Platform and other NFT platforms. Property ownership is not dependent on Propy’s operations. The LLC will continue to exist even if Propy is ever liquidated. The LLC owner has the ability to fully control the LLC and the underlying property. The NFT owner has the right to demand the passage of ownership rights even in the absence of Propy. This right is enforceable in Delaware court.

A refund policy will be introduced after the completion of the first NFT sale. There is no refund policy technically integrated into the NFT of the Ukrainian property.

You can sell the apartment in both the traditional way and via an NFT. If you’d like to sell it traditionally then Propy will help you to burn the NFT.

Yes, because the auction is being run on an NFT platform that accepts cryptocurrency.

Normal gas fees on Ethereum (we know they are high, but it’s real property and there are no additional ownership transfer fees needed to be paid by you).

No, but you will need to find a platform that can support NFT/Blockchain transactions.

Propy is committed to supporting innovative self-driving transactions that utilize the security and speed of blockchain. Selling a property as an NFT is an exciting new property-sale use-case that will initiate a wave of RE NFT sales and will make them available as collateral for crypto borrowers and investors.

Since an NFT is technically a “collectible,” an NFT property should be in high demand or unique in some way - structure, location, artwork, historical relevance, price - similar to the property that we are currently auctioning.

The finishing work will be completed by July 1st, and then the owner can move into the apartment.

You can view a live virtual tour that will be conducted on June 7th.

No, Ukraine does not have this practice. Proof of ownership will be provided to whitelisted auction candidates on June 7th.

Inspections and disclosures will be provided to whitelisted auction candidates on June 7th. This is not a common practice in Eastern European countries.

The appraising process works differently in Ukraine. We estimate the property price to be between $43,000 to $57,000 USD. Access to comparables will be provided to whitelisted auction candidates on June 7th.

Once the transaction is completed, our Property Management Firm of the Developer of the building will work with you to provide the keys and help you move in.

The apartment will not be furnished. Furniture is available for purchase via Propy upon an additional payment of $30k.

No. Still, the LLC should report to IRS all foreign owners. This process will be administered by Propy.

The LLC must pay a yearly franchise tax of $300 to the state of Delaware. No income taxes are levied on the LLC by the state of Delaware. Also, if the LLC is not engaged in business in the USA, there are no income taxes owed to the US government. However, a tax form must be filed by the LLC for reporting purposes if the LLC has a foreign owner. Propy will connect the owner to the US accountants who will do the filing.
The LLC will have to pay property taxes in the country where the property is located. In this case of the first ever real estate NFT, yearly property taxes are due to the government of Ukraine.

Propy is LLC administrator and will connect the owner with US accountants who will file the reports. The required funds will be for covering annual fees and taxes in US in amount of up to $1,000 per year (Delaware franchise tax - $300, CPA, mailing address in US and Registered agent fees - $700). Propy will help with fund transfers, so no LLC bank account is needed.

In addition to selling the property by simply selling the NFT, the owner of the NFT has the full rights to transfer legal title of the property from the LLC to whomever he/she wants.

Watch the video to learn more

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