BY
MARCO QUIROZ-GUTIERREZ
February 12, 2022 5:17 PM EST from foutune.com
In what could be one of the first home sales using non-fungible tokens, or NFTs, a Florida woman bought a five-bedroom, three-and-half-bath house near Tampa in an online auction on Thursday.
“We truly feel that we made history, both for the real estate industry and for the crypto community,” said Natalia Karayaneva, the CEO and founder of Propy, which managed the online auction and transaction.
The price was 210 Ether, the equivalent of $653,000 at the time of the sale, according to Propy.
About 50 people went through the process of verifying their identities online for the auction. But in the end, there were only two bidders, each of whom had to have cryptocurrency worth at least $650,000 —the starting price—in a digital wallet.
The use of an NFT in the sale meant that the process involved was hardly ordinary. The first step involved transferring ownership of the house from the seller to a limited liability company. After the auction winner was determined, ownership of the LLC was automatically transferred to the winner and the seller received the crypto payment in her digital wallet.
Karayaneva declined to identify the buyer. The seller was Leslie Alessandra, the founder of a Tampa area–based blockchain company.
Propy charged the seller a flat fee for its services.
Other companies have experimented with combining crypto and real estate investments before. Red Swan CRE Marketplace, lets U.S.-based investors become fractional owners of commercial properties via digital tokens recorded on the blockchain. Propy itself also sold TechCrunch founder Michael Arrington’s apartment in Kiev, Ukraine last year for 96 Ether, about $93,000 at the time.
Karayaneva told Fortune that Propy’s legal team came up with the LLC maneuver so the ownership transfer could be instantaneous. The usual due diligence processes that come with buying a home, like completing an inspection, obtaining a title report, and conducting a title search, were done by Propy before the auction, Karayaneva said. People who signed up for the auction were invited to visit the home and review the documents before it took place to make sure they wanted to buy it, she said.
“The only bureaucratic process that we had during the auction was a five-minute process of going through the KYC verification where the bidders had to provide their names and their ID and connect their wallet,” Karayaneva told Fortune, referring to “know your customer” rules.
Some people offered higher bids on the house than the ultimate winner. But they were not through the online auction and its unusual NFT process. The seller was required to go through with the auction as designed, unless there were no bidders, said Karayaneva.
Although the house sold for about $653,000 on Thursday, by Friday the value of the underlying Ether was down to about $613,000 because of a decline in its price.
Propy’s goal, though its NFT auction, is ultimately to appeal to the crypto-savvy or young homebuyers who are fed up with the cumbersome process of purchasing a house. Karayaneva said the company is selling a house in Tampa as an NFT in March, followed by other listings like a condo in Chicago and a single-family home in San Francisco. Unlike the sale this week, the next transaction will use a cryptocurrency called USDC, which unlike Ether, is pegged to the price of the U.S. dollar, she said.
To expand the potential pool of buyers, Karayaneva said in the future Propy also plans to allow buyers to take out mortgages through its technology in USDC, a so-called stablecoin whose price is always on par with the U.S. dollar. As it is, buyers must pay up front in full, without a mortgage, significantly limiting the number of bidders.