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Utah Business

This Millcreek home is the first in the state to be sold via NFT, and it’s the largest NFT real estate transaction in the US to date.

You could own the NFT for this $4 million Millcreek home

The last few years have been a time of dramatic change in real estate markets. Suddenly sellers have been receiving hundreds of offers overnight, and buyers are having to get creative to win bidding wars. One of the most significant changes in real estate is the recent rise of blockchain technology. The number of buyers paying in cryptocurrency is steadily rising, and now, for the first time, a Utah home is available for buyers to purchase as an NFT.

Dave Wilkes, a local developer, is currently constructing the luxury custom home in Millcreek. Buyers interested in purchasing the $4 million home can exchange cryptocurrency for ownership of the property’s NFT.

“Everything about the house—real estate property, the design of the house, the plans, the architecture, you know, all of the work that’s gone into the home, will be included in the NFT transaction with the buyer,” says Wilkes. 

The NFT will also include both physical and virtual art. The buyer who owns the token will have control of the property, a 8,500 square foot mid-century modern home with a pool house, spa, saltwater pool, sauna, and rooftop deck. 

In a traditional real estate transaction, buyers purchase the physical property, and the county recorder’s office records that the buyer owns the title for that home and piece of the piece of land. In order to make this virtual transaction work, Wilkes says they have to create an LLC to simplify the transfer of ownership for the home.

“Right now, there is an entity that holds title to the property. And that LLC will remain on the title, and we will essentially tokenize the equity for that entity…So the person in possession of the NFT is essentially in control of the property,” explains Wilkes. 

After purchasing the NFT, if the buyer chooses to resell later, Wilkes says, “The transaction’s digital at that point, and [the home] can be resold without going back through the title process. The digital transaction is just like an NFT that you want to buy and resell today. You can essentially buy the token for the house and resell it at a certain point in the future digitally.”

Just as the purchase of all NFTs is managed through a smart contract, purchase and ownership of the Millcreek home will be managed through a smart contract on the Ethereum network. Smart contracts are a type of on-chain technology, meaning they occur on a blockchain and are reflected publicly. Smart contracts allow for quicker and more transparent real estate transactions that don’t require involvement from a third party like a title company, potentially cutting closing costs for both buyers and sellers. 

While construction of the home won’t be completed for a few more months, Wilkes says there are already a number of potential buyers. 

“This is an exciting area of real estate because of so many different facets. Stakeholders involved in real estate are moving into a new world of on-chain title insurance,” says Wilkes, who is passionate about this kind of transaction becoming the new normal. “I think this will be the first of many, many homes that are sold as what we call a smart contract that manages the property moving forward in perpetuity. All elements involved in real estate transaction could, should, and most likely will exist on-chain in the future.”

As many home buyers are priced out of the market, finding ways to make homeownership more affordable is essential. According to Wilkes, the use of blockchain technology in real estate could make it easier for buyers to enter the housing market as fractional owners of properties.

“I definitely think as we look forward into the future that there will be many, many different types of ownership structures for housing,” Wilkes says. “I think the way that these next generations are going to own and occupy homes is going to be very different than what’s been done over the last 100 years.”

Wilkes cites the rising popularity of companies like vacation-rental company, Pacaso, which allows fractional ownership of luxury homes, as evidence that homeownership of the future may not look the same as it once did. 

“Maybe you don’t want to just rent a home in one place,” Wilkes says, “Maybe you want to have flexibility, the ability to travel, and the ability to still have access to the property and participate in the appreciation and the rental incomes associated with those homes. We’re beginning to see homeownership transition from historical norms to new and innovative approaches, and that ties the technology of cryptocurrency.”

While not the first property to be sold in the US as an NFT, the Millcreek house is the first NFT real estate transaction in Utah, and Wilkes anticipates that there will be more to come. “We have a whole pipeline of homes, and we are working toward innovative ownership structures that will include rental, rent to own, lease to own, fractional ownership, and a variety of others.”

As blockchain technology makes decentralized finance ubiquitous in the real estate world, Wilkes believes it has the potential to improve the industry in countless ways.

“Decentralized finance is really rewriting the foundation of how money moves and finance works, not only in the US but around the globe. And this is really an exciting time to see the impact of that,” says Wilkes. “There’s no question that it will continue to change everything about decentralized finance, how transactions are done, how money is, and what happens in our world.”

Note from the editor: A previous version of the story mistakenly identified the square footage of the Millcreek house at 1000 square feet. It has been updated to represent 8500 square feet, the accurate number.