US real estate platform Propy has completed the first auction of a property as a non-fungible token in a move that demonstrates how blockchain could change real estate in the future.
Held in late June, the 24-hour auction involved a token for an apartment in the Ukraine which attracted 43 bids and sold for 36 ETH (or around US$93,000), with ownership transferring in minutes.
As TechCrunch explained, Propy had previously become the first blockchain startup to effectively “smooth” the process of real estate transactions.
Using digital tools like DocuSign, it harnesses smart contracts which allow the transfer of a property ownership to execute immediately.
A smart contract is a line of code which sets conditions that must be met prior to a transaction being completed.
The method is touted as being highly secure while saving hours of paperwork, and is also aimed at creating “self driving real estate transactions”.
“The idea is to close a traditional real estate deal entirely online. Thus, the offer, signed purchase agreements with DocuSign, secure wire payments and title deeds are all taken care of. Propy claims its platforms saves 10 hours of paperwork, per transaction,” TechCrunch explained.
Real estate as an NFT
The recent auction of an apartment as a non-fungible token has seen Propy push the real estate boundaries even further.
In short, a non-fungible token (or NFT) is a digital asset that is entirely unique. The token represents a physical item and unlike Bitcoin or other digital currencies, an NFT cannot be replaced by a similar asset.
Details about ownership of an NFT are contained in a digital wallet and the information around that asset, including ownership, is permanently stored on a blockchain ledger.
In the past NFTs have been applied to assets like art, music or other collectibles and a major feature is that they certify ownership digitally.
“NFTs have set the crypto-world alight with their potential to be applied to just about anything, including a work of art by Banksy which was then burnt,” TechCrunch explained.
An interesting feature of NFTs is that they offer the potential to attach royalties to the token. Effectively this means every time the token transacts, the original owner could receive a percentage of the sale proceeds.
This was not noted as part of the Ukraine apartment NFT, but is something real estate experts, including recent AREC speaker Gary Vee have flagged as a game-changer for the future.
The Kiev apartment
The studio apartment recently auctioned as an NFT by Propy has also made blockchain history previously.
In 2017, the property was sold using blockchain technology to Michael Arrington, founder of TechCrunch and Arrington XRP Capital.
The international transaction took place entirely via smart contract on the Ethereum blockchain using cryptocurrency, and was the first-ever property sold and transferred on blockchain.
In the case of the recent NFT auction of the property in Kiev, the digital asset included:
- Access to ownership transferred paperwork
- Apartment picture
- Digital art NFT by Kiev graffiti artist, Chizz (a physical painting of the artwork is painted on one apartment wall )
The NFT that transferred real ownership of the property was auctioned over a 24-hour period with the initial listing starting at US$20,000.
The process saw the seller sign proprietary-developed legal papers for NFTs to transfer ownership to a future buyer, carry out the NFT auction, then receive payment in cryptocurrency. The auction winner became the owner within a minute, after filling out know your customer (KYC) details.
CEO of Propy, Natalia Karayaneva, said the NFT would go down in history.
“For Propy it is a major milestone in leveraging the promise of blockchain technology and non-fungible tokens (NFT) to achieve self-driving real estate transactions. Real estate as an asset class will become a part of the decentralized finance economy.”
Who is Propy?
Propy describes themselves as a leading innovator in the real estate industry, building self-driving transactions.
Their aim is to make property purchase transactions easier by bringing agents and consumers together in a secure environment.
“Propy Offers help agents and consumers win offers; and Propy Transaction Platform enables agents, consumers and title companies to easily manage all phases of a sale online,” they note.
“Purchase offers, payments and deeds are processed on the immutable blockchain.”
Worldwide, the company has assisted in over 1000 real estate transfers and says it has so far facilitated over $1 billion worth of transactions.
“Closing deals via NFT-ing property ownership can ease the life of the consumer and the agent and unlock the equity liquidity,” they state.
The company was founded by former real estate agent Natalia Karayaneva, is based in Palo Alto and is supported by by Silicon Valley leaders and the National Association of Realtors.