Last week, Roofstock, a digital real estate platform, facilitated the sale of a $175,000 home in South Carolina using a non-exchangeable token, sparking debate over whether the technology makes the process easier or more difficult. buying a property.
Roofstock onChain, which is a subsidiary of the Web3 company, listed the property on the NFT market powered by the Origin Protocol (many mistakenly thought it was OpenSea.) It was traded using USDC, a stablecoin.
“Instead of waiting months for a signing, appraisal, title search and deed preparation, I was able to purchase a fully insured, ready-to-rent property with the click of a button,” said the buyer’s property. of the house, Adam Slipakoff, in a statement. .
But as word of the incident spread, questions arose. a tweet this drew a lot of attention to who actually owns the property and whether the token holder only owns the token or also owns the property.
“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,” Sanjay Raghavan, head of Web3 initiatives at Roofstock, said in an interview. with Watch Market. “People have been buying and selling property through LLCs forever, haven’t they? It is not new. All we did was facilitate the sale of this LLC from person A to 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 defined in the LLC’s operating agreement.
But for others, the explanation only raises security questions.
“What if someone steals a blockchain’s NFT?” asked Sean Scapellato, a real estate attorney in South Carolina. “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 own a house by hacking NFT. The owner is known, and this is recorded in the documents related to the land, he said.
This is in contrast to 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 somewhere else, in a data room like a server or cloud, and the metadata can be updated with any other relevant information of ownership, Raghavan told GameSpot.
For real estate agents, the 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 CNET.
“What steps are taken to ensure regulatory compliance, property registration and tax implications of selling property this way versus a traditional sale?” said Conroy, who added that NAR monitors these technologies as they develop.
Raghavan said that only those who have a verified buyer flag on their accounts can transfer the token. This flag, much like a blue tick on Twitter, lets the system know that the buyer’s identity has been verified by the business. “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 country to country in the United States and abroad, this transaction may be difficult to replicate in other jurisdictions, he added.
Legal expert Scapellato noted that even if a cryptocurrency is accepted for purchase, it does not necessarily specify what rights are conveyed as a deed does, and whether an NFT would have the same utility as deeds. .
“State property laws vary across the United States, and we have hundreds of years of case law based on conveying a deed with specific warranties and rights that match the laws of that state. . An NFT must have the same service or it is useless when matters need to be resolved,” 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 have conducted numerous analyzes of 50 states [to find out if] an LLC can be transferred from A to B without triggering a tax event, etc. Raghavan said. “In the United States, when we go to another state, we will follow that state’s law in terms of how we make those NFT sales.”
For the Roofstock and Origin Protocol teams, the house sale also served as an example of what can be done with NFTs as the underlying technology for transferring physical assets.
Origin Protocol’s Matthew Liu said technology will define the evolution of the Internet. Going forward, we will no longer refer to NFTs as NFTs, the same way we no longer refer to them as “HTML websites,” he said in an interview with GameSpot. But the underlying technology of HTML created the blogging, e-commerce and social media industries, in the same way that 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 will be a new version of the internet and NFTs will be the cornerstone of digital property. But with all major technology cycles, you see it as an initial cycle that’s supercharged, then a crash, and people build, and then a second cycle where there are real utility and use cases. And it finishes really, really powerful.