October 5, 2022

KMCKrell

Taste the Home & Environment

Tampa condo the latest to sell as NFT as crypto real estate interest grows

Last month, real estate agent Taylor Parrino represented the buyer of a home in Gulfport that was listed as an a non-fungible token in a historic sale. Now, she’s preparing for another auction — a condominium in Tampa.

Parrino has been helping prepare a small condo in Hyde Park ahead of the April 7 auction. Bids will start at $185,000 for the 600-square-foot, one-bedroom Tampa condo, according to Propy, a real estate transaction platform that advocates for the use of blockchains.

Parrino, too, sees a future where traditional mortgages and closings will be a thing of the past. She will be one of the first real estate agents in the country to partake in both the buying and selling of a property sold as an NFT. This new niche within real estate is growing in Florida — and Tampa Bay is leading the charge — which integrates blockchain and cryptocurrency as a way to buy and sell seamlessly, she said.

Her focus right now is on marketing the technology.

“It’s primarily educational,” said Parrino, who is based in Miami with Premier Elite Realty. “So people understand what we’re doing.”

Related: A guide to crypto, NFTs and the metaverse for those hiding in a hole

Tampa realtor Andrew Daniels described blockchain as a decentralized version of the county clerk’s office. Non-fungible tokens, or NFTs, are similar to a deed, but it doesn’t replace it. In theory, NFTs are certificates of authenticity that can’t be manipulated. Every action that’s logged on the blockchain, stays on the blockchain.

A photo of a condominium at Hyde Park Place II that will be auctioned as an NFT, according to Palo Alto- based real estate platform Propy. [ Courtesy of Propy ]

The Tampa condo will have its rights stored in an NFT by converting ownership into a company that owns the property. The current owner is technically selling the company, not the house. This way allows for faster transactions and fewer costs associated with inspections and closings, according to Propy.

Real estate agents who spoke with the Tampa Bay Times described traditional real estate transactions as arduous. They said the industry is in need of a revamp. Each home sale requires plenty of documents, inspections, title searches and signatures that all add up in fees.

Propy, which is based in Silicon Valley and has operations in South Florida, assists the realtors and owners in making sure the property is ready to become an NFT so all future sales can be more efficient. Propy hosted the auctions of TechCrunch founder Michael Arrington’s apartment in Kyiv last year and the Gulfport home which sold for $654,000, or 210 ethereum, in February.

Parrino said the new owner in Gulfport, a Florida resident who was listed as the username “A.J.,” purchased the property because she was looking for a way to spend her Bitcoin. She plans to live in the home. Ownership transferred instantaneously, Parrino said.

The former owner Leslie Alessandra, the CEO of Tampa blockchain company DeFi Unlimited, said the price to transact ethereum, a type of cryptocurrency, was “significantly” cheaper than typical closing costs, to the tune of tens of thousands of dollars.

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After the Gulfport auction, which was the first U.S. property sold as an NFT, the Tampa condo would be the next in a release of about 10 properties across the country through Propy. The real estate firm chooses homes that have “collectible” attributes like unique architecture, location, artwork or historical relevance. Propy purchased the Tampa property in January for $215,000, according to county property records. The auction will be done using USDC, a cryptocurrency pegged to the U.S. dollar, and buyers need to confirm their identity before participating.

The condo is part of Hyde Park Place II, a complex at 1000 W Horatio St., and has one bedroom and one bathroom. It also has a fireplace, balcony and the building features a pool and spa, Parrino said. The condo is attractive because it’s just minutes away from downtown Tampa, she said.

“Hyde Park and Tampa are growing. We just see a lot potential there for that area,” Parrino said. “It’s just a great spot to offer something like this.”

Real estate is the next frontier in the world of blockchain, said Balaji Padmanabhan, a professor at the University of South Florida’s Muma College of Business. A real estate and crypto ecosystem is starting to form and Florida has the right ingredients for it, he said. As home prices have skyrocketed across Tampa Bay, with the median sales price soaring by 24 percent as of February, now is a ripe time to experiment with ways to buy and sell — for those who can afford to take on the risk.

Owner Leslie Alessandra checks her phone before the start of the auction of her five-bedroom, 3.5-bath Gulfport property being actioned off as the first NFT house to be sold in the U.S with a starting bid of about $650,000. An NFT is defined as a non-interchangeable unit of data stored on a blockchain, Thursday, Feb. 10, 2022 in Gulfport.
Owner Leslie Alessandra checks her phone before the start of the auction of her five-bedroom, 3.5-bath Gulfport property being actioned off as the first NFT house to be sold in the U.S with a starting bid of about $650,000. An NFT is defined as a non-interchangeable unit of data stored on a blockchain, Thursday, Feb. 10, 2022 in Gulfport. [ MARTHA ASENCIO-RHINE | Times ]

Most homes in Pinellas County sold for more than $411,000 in February, according to data from Florida Realtors. In Hillsborough, the median was $392,000. Pasco County has seen prices increase by 30 percent in a year to a median of $360,000.

Local leaders are taking notice too and are inviting innovation. Miami Mayor Francis Suarez said “the next era of business will be defined by the ways we leverage technology to our advantage and the real estate industry is no different,” at Propy’s Crypto & Real Estate Summit last week.

“We’re here in the right place at the right time,” said Daniels, the Tampa crypto-certified real estate agent. “It’s nice having grown up here and seeing the growth that we’ve been experiencing.”

Daniels got his certification through Propy and plans to be a leader in real estate and blockchain in the Tampa Bay area. He’s currently working on helping a client add a QR code on a deed that would link to the blockchain where more information would be stored. He’s also in the process of setting up a consultancy agency.

“There is a big learning curve and a lot of education that’s needed to be put out there. That goes with any new technology,” Daniels said.

Bitcoin was the first application of the blockchain and “it actually worked depending on who you talk to,” said Padmanabhan from USF. Now people who invested are starting to look for ways to use the money they earned in those investments.

Related: Clearwater Beach has a new crypto-themed restaurant with ‘Dogedog’ hot dogs

NFTs began gaining attention in the art world after a Christie’s auction fetched $69 million for a digital collage last year. But skeptics still say there’s no point to NFTs if a digital image on the internet can be copied. To some, NFT ownership is merely “digital bragging rights” for an owner, Padmanabhan said. But with real estate, there’s a real, tangible asset involved that can’t be copied.

There’s also a cultural factor, Padmanabhan said, that could help drive more people to adopt the technology. Younger people expect transactions to be faster and easier. Generally speaking, they also have less trust in traditional institutions.

“If you can create a digital equivalent of that house, store it on the blockchain, then you can get all the advantages of having both the decentralization and speed,” Padmanabhan said. “Does it have to be done this way today? Ideas like this need to be tried out.”

One group of people in Tampa Bay are hoping to do just that.

Late last month, about 50 people gathered for the launch of New Wealth CoLab in Tampa. Volunteers explained how to sign up for membership through an NFT. A man in a dollar-print suit networked with other crypto enthusiasts and the former owner of the Gulfport home gave a presentation about her experience with the sale. The New Wealth CoLab is a coworking space for real estate professionals interested in cryptocurrencies and NFTs.

“We can take these houses that we’ve been selling the old-fashioned way and start experimenting. We are willing to make a little less to create that mass adoption,” said USA Portfolio Real Estate president and founder Brandon Middleton. “And to work out the kinks as a collective instead of just one.”

Middleton said he wants to create a space where local title companies, attorneys, contractors, and real-estate agents can meet and collaborate. Membership will also be sold as an NFT that could appreciate in value as the lab grows, he said.

Some guests at the open house at 4007 North Taliaferro Ave., said they were hesitant about dipping their toes in the water since it’s so new.

“Crypto is a great, well, personally I think it’s the way of the future and marrying that with real estate is also pretty interesting and intriguing,“ said a Tampa-based real estate investor Dolmar Cross. “But I would be more comfortable seeing a couple more transactions happen.”

In addition to NFT properties, people discussed borrowing against crypto assets for mortgages, fractionalizing properties, including royalties in crypto-real estate transactions and integrating escrow services and title insurance onto the blockchain. These ideas pose significant challenges at this early stage. Currently, transactions have only been done with cash and no additional financing.

A photo of a condominium at Hyde Park Place II that will be auctioned as an NFT, non-fungible token, according to Palo Alto- based real estate platform Propy.
A photo of a condominium at Hyde Park Place II that will be auctioned as an NFT, non-fungible token, according to Palo Alto- based real estate platform Propy. [ Courtesy of Propy ]

While blockchain use in real estate is far from mainstream, Pinellas County property appraiser Mike Twitty said he’s keeping an eye on it after the Gulfport auction.

The blockchain can be effective for recording documents and title changes over time, but he said if NFT homes become commonplace it could become overwhelming for local property appraiser staff to assess property values and ensure tax payments are made.

“It’ll take more resources to be able to comb through records or try to find these transactions that are occurring on the blockchain. And where do you look on the blockchain? There isn’t just one,” Twitty said.

His main concern was “fractionalization,” where property rights are split and shared. If there are 20 people with different interests in one house, he said it could over-inflate values.

“We have to pick and choose because blockchain technology doesn’t mean it’s best practices for everything,” Twitty said. “There’s a cost to put everything on the blockchain and then a cost to retrieve it.”

GLOSSARY:

Cryptocurrency is new and growing in popularity, but is a bit complex to understand. Here’s a glossary of common terms.

Blockchain: A digital ledger that records information by duplicating transaction records and sharing it on a network of computers. This process makes it “decentralized” and difficult to manipulate. It’s similar to the way Google records changes to an online Google Document, except it’s not run by any specific corporation. The coding allows for cryptocurrencies like Bitcoin to exist.

Cryptocurrency (crypto): In short, digital money. But technically, it’s a string of code encrypted to measure a unit of value. Its key feature is that it’s on the blockchain, so theoretically no authority figure like a government can create more or manipulate the value (in most cases, some countries have their own crypto).

Ethereum (ETH): It’s the second-most popular cryptocurrency after Bitcoin. While the Bitcoin blockchain was designed solely for exchanging money, Ethereum’s platform allows for more functionality, like smart contracts, which is why the seller of the Gulfport home used this crypto for the auction.

Smart contracts: When two parties, like a buyer and a seller, agree to terms that are written in code, which is then stored on the blockchain.

Non-fungible token (NFT): A digital asset that has its own code and metadata and can’t be replicated. It’s commonly used for art and other types of collectibles.

Minting: The process of taking files and putting its information on the blockchain. In order for a physical property to be minted as an NFT, the home seller and organizations like Propy would gather any documents related to the home, like a deed or title, and put the rights under a limited liability corporation. The ownership of the LLC would then be minted and exchanges can take place over the blockchain.

Fractionalization: The process of splitting and selling a percentage of ownership for an NFT.