NFT (freepik photo)
Last week, Roofstock, a digital real estate platform, enabled the sale of a $175,000 home in South Carolina using a non-fungible token (NFT), sparking debate over whether the technology improves or complicates the property-buying process.
Roofstock onChain, which is a subsidiary of Web3, listed the asset on its NFT market powered by Origin Protocol. It is sold using USDC, a stablecoin cryptocurrency.
“Instead of waiting months for underwriting, appraisals, and preparing forms to change ownership, I was able to buy a title-insured property, ready to rent with one click,” said the property’s buyer, Adam Slipkoff. But when the media raided the event, questions arose. One tweet that got a lot of attention asked who really owns the asset, and whether the token holder owns just the token or the asset as well.
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“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 Rajvan, head of Web3 initiatives at Roofstock, in an interview with MarketWatch. “People have been buying and selling property through LLCs forever, right? It’s nothing new. All we did was make it easier to sell the LLC from Person A to Person B.”
Raghavan added that the LLC’s operating agreement contains language that says the owner of the token also owns the house, so it is legally set out in the LLC’s operating agreement. But for others, the explanation only raises questions about security.
I just really would like people to understand that the transfer of real property ownership is highly regulated and you will not own what you think you own. https://t.co/H8KCFNIKUo
— Courtney Milan ???? (@courtneymilan) October 18, 2022
“What if someone steals the NFT from the blockchain?” asked Sean Scapalto, a real estate attorney in South Carolina. “I don’t know how you deal with someone knocking on your door saying they bought your NFT and the house is theirs now.”
Hacking is less of a problem when the owner of the NFT is not anonymous, Raghavan said. In the US, a person cannot own an LLC anonymously. This makes it difficult to take over ownership of a house by hacking an NFT. The owner of the house is known, and this is documented in documents linked to the token, he said.
This is in contrast to artwork on NFT, which is often held by anonymous users on the Internet. 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 metadata associated with it is linked somewhere else, in a data room like a server or cloud, and that metadata can be updated with any other information about the relevant asset, Raghavan told MarketWatch .
For real estate agents, the technology is brand new, and may raise more questions than it answers. “How does reselling this property work?” David Conroy, director of emerging technology for the National Association of Realtors, told MarketWatch in an email.
“What steps have been taken to ensure regulatory compliance, property registration and tax implications surrounding the sale of the property in this manner versus a traditional sale?” said Conroy, who added that the NAR is monitoring these technologies as they develop.
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