When Purchasing a Real Estate NFT, What Are You Really Buying?

NFT home sales may be the next step for cryptocurrency’s boom in the real estate market, but the legalities remain murky.

To use an NFT to track ownership of a property, you’d have to wrap it in a legal entity, typically something like an LLC. The NFT has to essentially convey just ownership through ownership of the U.S. entity. The problem with that is you run into tax issues, and may be trading convenience for a possibly larger tax and transfer bill.

The biggest priority [for a U.S. deal] is compliance with the U.S. Bank Secrecy act. You can’t be selling anything to anyone without knowing who they are, let alone real estate that will be traded on secondary markets.”

What’s interesting right now is it’s a case where laws haven’t caught up with the technology. Laws across the [U.S.], and state municipalities, would have to change how deeds get recorded. Right now, you go to the county clerk’s office, you don’t go to the blockchain.

The only way this is going to become normalized is when and if local land laws are amended to allow for NFTs to certify title. Which might be a great idea because it would probably ease a lot of the recording issues that happen at title companies, and possibly even make title insurance cheaper.

Buying an NFT of a property isn’t likely to mean much in the real world unless all the standard-issue paperwork, such as title transfers, is handled alongside the digital sale.

Crypto enthusiasts are eagerly eyeing the possibility of trading deeds and property titles at the touch of a button.

What you’re seeing around the industry are canaries in the coal mine. Real estate tends to lag because it’s a highly regulated industry, which isn’t a bad thing. But it doesn’t mean that it’s not going to be disrupted, because it will.