There’s a new architectural NFT artwork on the market. Based on a duplex overlooking the San Gabriel Mountains in Thousand Oaks, California, the NFT is a short video by artist Kii Arens that depicts the driveway view of an unremarkable suburban home. It has a psychedelically tinted view of the mountains beyond, and the sky is soon invaded by several flying saucers. Techno music plays in the background.
The artwork is now up for auction and accepting bids via the blockchain-enabled cryptocurrency Ethereum. But it’s not just the art that’s for sale. Whoever buys the artwork also gets the house that inspired it.
This unique NFT sale is the idea of Shane Dulgeroff, a California real estate broker, who originally bought and renovated the duplex as a real estate investment. He was planning to sell it on the traditional real estate market but ditched those plans once NFTs started selling like insane hyper-hotcakes. Dulgeroff argues that this will be the world’s first house to be sold through the NFT platform.
“It’s less about the significance of the art as it is the significance of us using a platform like this to sell a home,” Dulgeroff says. “The significance that the art will carry, it’s going to be stored in your digital wallet forever as living proof that you purchased the first home ever that was done through any kind of a crypto platform directly. So that’s where the real value is.”
Real value is a debatable concept when it comes to cryptocurrency and NFTs. An NFT, or nonfungible token, is a cryptographic confirmation of the ownership of a unique digital asset. For proponents, the token stands as verifiable documentation of a one-of-a-kind asset, like owning a famous and certified painting or sculpture. For skeptics, they’re an overpriced claim to digital art, which is often freely available online and which is unlikely to retain value.
NFTs are having an undeniable moment. A piece of digital art was recently sold by the auction house Christie’s for $69 million and a cultural phenomenon was born. Everyone from Twitter’s Jack Dorsey to the NBA is getting involved. And in March, a 3D model of a house on Mars, designed by artist Krista Kim, sold for the equivalent of $500,000. But until now, no actual houses have been involved. This is partly by design. NFTs are primarily used for digital assets—the artworks and memes that investors are hoping will be more easily sellable versions of Picassos and van Goghs. Attaching a physical house to an NFT raises a simple question: Why?
Dulgeroff argues that this deal is for more than just a theoretically valuable asset. The duplex currently brings in about $60,000 in rent annually, and Dulgeroff has city-approved plans to add a third unit to the property, if the next owner desires. He says the value of the artwork and the home together could be upwards of $1 million, and whoever bids on the NFT should consider themselves a real estate investor.
And he assures potential bidders that he is a legitimate source. Though he just passed his real estate broker’s test earlier this month, the 27-year-old has been a licensed real estate agent for seven years. “I am a verifiable source to buy a home from,” he says. “I’m not like a random guy putting a home up as an NFT for sale.”
Such concerns are valid. NFT fraud and other scams have been reported as the craze builds up. Buyers should be taking precautions on any such sale. Though this house sale is a novel experiment, Dulgeroff’s real estate license renders him subject to disciplinary action by the California Department of Real Estate for any illegal dealings.
Dulgeroff, who has been dabbling in cryptocurrency for the past five years, says he got the idea for the house auction when he learned that one of his friends had started working with artists to make NFTs. “The second that I found out that he was helping people put their art on the NFT platform, I was like, ‘Dude, we are putting the first house for sale up on the platform. And we need to get it done as soon as possible, because somebody else is going to do this if we don’t,'” Dulgeroff says. Platforms for creating NFTs for physical assets are already emerging.
The two-week auction runs through April 23. There were no bids as of Wednesday.
Don’t understand what an NFT is? Still trying to wrap your head around cryptocurrency? Maybe consider sitting this one out. “This is really not a purchase for someone who’s not already in the space,” Dulgeroff says.
It’s also a real estate deal that is completely untested. Dulgeroff notes that there’s currently no law specifically covering this type of home sale, nor are there tax rules that govern how such a transaction can occur. “It really is an interesting process navigating the legal side of it, the tax side of it, the transfer side of it to make sure it’s all done correctly,” he says.
To cover some bases, the auction’s website includes documents relating to the property, including an inspection report, a map of nearby environmental hazards, and lease agreements for the two units, which are currently occupied. Dulgeroff says he briefed the tenants about the auction and says that the sale won’t change much for them. “They’re just getting a new landlord,” he says.
The sale itself, though, is certainly unconventional. “This is a learning process as we’re going,” Dulgeroff says. But he also sees it as a proof of concept and wants to develop a platform that’s specifically designed for cryptocurrency-based real estate transactions. If it works, such an approach could simplify the purchasing process, cutting out intermediaries between buyers and sellers. It’s an idea that could put real estate brokers such as Dulgeroff himself out of business.