OpenSea Lists Real Estate NFT For 15,000 ETH / $27 Million
Commercial real estate company Okada & Co. made international headlines this week when it listed a seven-story building in Manhattan's Flatiron District for 15,000 ETH, or approximately $27 million (view OpenSea NFT listing). The building is located at 109-111 West 24th Street, New York, New York and it boasts 46,299 square feet of office and retail space. The building is prime New York City real estate, steps away from the world famous Madison Square Park, The Highline, and the Flatiron District. The real estate NFT listing generated strong attention from around the world.
The OpenSea real estate NFT gives the purchaser exclusive rights to acquire the building, all its uses rights, and related deed covenants. Real estate NFT transactions need to comply with current laws and regulations, so much of the work still needs to be done off-chain. Due to the nature of real estate sales, the sale of the real estate NFT does not warrant the completion of the real estate transaction.
Okada describes the NFT as a “ticket” to transfer the deed to the property. After the NFT is purchased, the money will be held in escrow. The money will stay in escrow until the standard real estate transfer process is complete.
"It's blowing up. I've done things that went a little viral but this went, like — I got calls from Norway, people reached out from Korea."
- Chris Okada, CEO of Okada & Co in an interview with The Defiant
The property was minted with the OpenSea Shared Storefront Ethereum contract and it is listed on OpenSea as part of the Chris Okada collection. The property made full use of OpenSea's NFT metadata. It listed the following properties on-chain:
The OpenSea real estate NFT listing ends on June 30, 2022. As of today, the highest offer for the building is 0.277 WETH (approximately $518) by OpenSea user SlowDime.
Earlier in 2022 a Tampa home was sold as a real estate NFT for approximately $650,000, making it the first home in the United States to sell as a real estate NFT. San Francisco based Propy facilitated the real estate NFT transaction.
Source: Heckler Realty Group
The Spanish-inspired house in Tampa has four bedrooms and two and a half bathrooms, a bright blue door, large oculus window and an iron dinner bell in front. Current owner Leslie Alessandra, a local real estate investor and founder of Tampa Bay blockchain company DeFi Unlimited, said she chose to list the home as a real estate NFT to showcase the use of the evolving technology.
"You're essentially just selling a company [as an NFT] and a company owns that house"
- Christopher Vasilakis, a local Tampa real estate and virtual-reality expert.
As part of the home buying process, the sale needs to be recorded with the county to transfer ownership rights. The off-chain real estate transaction can take days to weeks to complete. In order for the transaction to work as a real estate NFT, a legal entity needs to be established and the property ownership is transferred to the company. The NFT sale then is completed by transferring ownership of the company.
Propy made world headlines in June 2021 when it sold Tech Crunch founder Michael Arrington's Kviv apartment as the world's first real estate NFT for nearly five times the starting bid. Since then, Propy went on to launch a real estate NFT auction platform for more real estate NFTs.
“I'm thrilled with the results of the auction and the work our partners and our team did to bring this project to fruition. It's a major milestone in leveraging the promise of blockchain technology and non-fungible tokens (NFT) to achieve self-driving real estate transactions."
– Natalia Karayaneva, CEO of Propy
The auction winner became the owner of the real estate NFT, which gave them the rights to the LLC. Arrington signed legal papers for the real estate NFT to transfer ownership to all future buyers. Propy developed the smart contracts and the legal framework.
Propy is backed by blockchain investor Tim Draper, and has helped thousands of agents and homebuyers make offers and complete over $1bn worth of transactions via their easy-to-use and secure online and on-chain platform.
Last year United Wholesale Mortgage, the second-largest mortgage lender in the US, completed the first-ever cryptocurrency mortgage payment transaction.
"We're proud to be the first mortgage lender to successfully pilot this technology and further demonstrate that we're innovating for the long term. As we said last quarter, we were going to look into accepting cryptocurrency and test it to see if it's a faster, easier and cheaper solution and thanks to our innovative technology team members, the transactions were successful."
- Mat Ishbia, President and CEO of UWM.
Many cryptocurrency holders have generated large profits from holding their cryptocurrencies over the past several years. More recently, various lending institutions have created ways for cryptocurrency holders to unlock additional value by offering mortgages collateralized by cryptocurrencies. Cryptocurrency holders can now use their holdings as collateral to get a loan to buy a house or apartment.
Current cryptocurrency mortgages require the loans to be over-collateralized. For example, a cryptocurrency bank may offer a $500,000 loan only if the borrower puts down at least $500,000 of cryptocurrency as collateral. The bank then has the cryptocurrency and property as collateral if the property buyer stops making payments on the mortgage.
Most standard home purchases do not require over-collateralized loans. In fact, most US home purchases are completed with less than 15% down payment as equity. Cryptocurrency mortgages require higher collateral because the prices are volatile relative to fiat currencies.
The adoption of cryptocurrencies in real estate is still relatively new - less than one year old. In the coming years we expect more companies to embrace blockchain technologies to facilitate real estate NFTs and cryptocurrency loans. Over time lenders will likely become more comfortable with cryptocurrencies, and lending terms will likely ease.
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