The real estate sector may have gotten a glimpse of its potential future recently. Because in Columbia, South Carolina (USA), the real estate agent “Roofstock” has a three-bedroom house on the NFT exchange OpenSea sold. The buyer paid a good 175,000 US dollars for the home. A corresponding payment service provider processed the purchase with the USD stablecoin (USDC).
The background to the transaction is particularly exciting, because the buyer financed his house with the help of a decentralized lending marketplace. This process could even become the mainstream way of buying property and a driver of mass adoption.
Real estate financing with crypto
The lending service operating on Polygon”USDC Homes” was used to finance the property. The house purchase on OpenSea could be paid for in full directly with ETH, but as in the physical world, not everyone is able to make such sums in one fell swoop.
Users can therefore apply for a “crypto loan” on USDC Homes. The application as well as the creditworthiness of the user is checked “off-chain” by an insurer and other data providers. If successful, the user joins the USDC Homes Pool from which to borrow funds to purchase the home. Those who would rather earn a return themselves can provide cryptos for the pool, as is common on other lending platforms. This is running on the DeFi platform”Plate“.
According to USDC Homes, the advantages are obvious: Users can buy real estate with cryptos quite easily and only pay a one-time fee. The process is also much more efficient, since many middlemen and thus a long list of applications and paperwork are eliminated.
security concerns
The company Roofstock manages the properties and issues an NFT on Ethereum, which represents home ownership after purchase. Both the creditor of the loan, the debtor and the pool operator hold the access keys to a multi-signature wallet (multisig). Only when the buyer pays off the house plus interest does he have sole access to the wallet and the NFT.
Ownership can therefore only pass to the buyer with the confirmation of the creditor. So at least the creditors are homes, according to USDC adequately protected. However, the buyer bears the security risk of their digital property after full payment. But what if his wallet is hacked or otherwise compromised?
According to Sanjay Raghavan, head of Web 3.0 affairs at Roofstocks, the NFT is only transferrable to users who in turn own a non-transferrable (soulbound) NFT. Roofstock only gives this to registered members who have previously verified their identity. In the event of loss, ownership can be confirmed and a new NFT assigned. So nobody has to undress first.
Buying a house is not quite as decentralized as on well-known DeFi platforms. For buyers and brokers, however, the process is much more efficient in some places. In addition, users have a chance of a return via the pool on teller, which is otherwise reserved for the traditional financial sector.
The last question is whether users will have a real incentive to buy houses with crypto. Will mass adoption lead to crypto house purchases, or the other way around?
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