The use of NFTs goes far beyond digital art and collectibles. You may receive an NFT when you attend certain events (POAP); you can receive an NFT with the purchase of a blouse (Alice + Olivia); and now you can receive an NFT with the purchase of a condominium!
According to recent news, Lofty Brickell Residences Miami (“Lofty”), in collaboration with Indiewalls, a New York-based art consultancy, is launching an NFT art collection designed specifically for Lofty condo owners. Lofty is a 44-story condo tower with units ranging in price from around $560,000 to $1.7 million. Buyers of Lofty condos will receive an original NFT whose ownership will transfer to the buyer’s digital wallet upon closing. They will then be able to display the art within their units, as well as in the common areas, among a rotating exhibition of various artists.
Through this program, Lofty uses NFTs as a marketing tool to engage buyers through a unique approach to connecting art to life; and connect digital transactions to physical property. Although this program is considered the first of its kind, the application of NFTs to the real estate market is not new. In recent months, we’ve seen a variety of creative ways to use NFTs, including to buy real estate. Not just in terms of virtual real estate, but in the sale and transfer of real estate.
Transfer of real estate through the use of NFT
That’s right, real estate is being bought and sold through the use of NFT. As an example, let’s take a look at this not-so-ordinary real estate transaction for a house near Tampa, Florida. Unlike traditional real estate transactions, the ownership rights in this case were sold at auction and transferred through the sale of a limited liability company (LLC). First, the seller transferred ownership of the home to an LLC. Ownership was then automatically transferred to the auction winner through the execution of a smart contract. Well, that was easy!
While buying real estate through NFTs is trendy and exciting, it’s important not to be misled by the emphasis many place on the ease and instantaneous nature of these transactions. This type of transaction differs from a typical real estate transaction, in that it is not a real estate transaction at all. This is the sale of a business, in this case an LLC, making it a corporate transaction.
A closer look will show that the usual due diligence processes that come with buying a home, such as physical inspections, a title and survey review, an environmental study, a review of the income-generating qualities of the property and a feasibility study, were still being carried out and were in fact completed before the auction.
Additionally, due diligence must be performed regarding the LLC, such as business inventories, assets, debt, finances, contracts, intellectual property, and any outstanding legal matters. Without proper due diligence, you risk buying a property with multiple mortgages or outdated taxes or liens, among a potentially endless list of issues, including potentially costly corporate liability.
Although Propy, the creators of the real estate blockchain on which the aforementioned transaction was concluded, claims that due diligence is carried out before listing the house, under a rule called caveat emptor, the courts of New York refused to compensate buyers for defects in the home found after purchase. It is always recommended to consult an experienced real estate lawyer before committing to the purchase of real estate.
It is foreseeable that this method of real estate transfers will only grow in popularity. Last month, Utah Business announced that a $4 million home in Millcreek, Utah would be available to buyers as an NFT. NFT includes both physical and virtual art, including real estate and blueprints. Currently, a local developer, Dave Wilkes, is building the Millcreek house and explained that an LLC holds title to the property. According to Wilkes, there are already a number of potential buyers even though the house will not be completed for several months. Wilkes plans to turn the rights to the LLC into an NFT so that the buyer of the NFT owns the rights to the Millcreek house, as we saw in the Florida house example. Utah Business hasn’t indicated on what platform buyers can expect to purchase the home, but nonetheless, “Buyer beware” and consult with an experienced real estate attorney and corporate attorney to perform due diligence. about the property and the business, before placing your bid. .