COLUMBIA — An Atlanta investor bought a house in southeast Columbia with a single click instead of signing papers, in another sign of the ways digital tools could change everyday life.
The Atlanta home investor, Adam Slipakoff, bought the house at 149 Cottage Lake Way on a digital market this summer. Instead of a paper contract, his purchase agreement is stored in the digital cloud, and his payment was made via transfer of cryptocurrency.
In effect, Slipakoff was buying a digital certificate that represented ownership of the house from Roofstock, a national company that buys and sells homes in local market with the backing in part of small investors.
“It’s simply a receipt, and that receipt is unalterable,” Slipakoff said.
Slipakoff and two Roofstock leaders were in Columbia on Oct. 21 to note what they called a precedent-setting sale that they said represents the future of real estate deals.
The purchase of the three-bedroom, 2½-bath home off Garners Ferry Road was a first for both the selling company and South Carolina.
Experts in blockchain and real estate say that the new tools could revolutionize parts of the transaction, but other parts of the deal such as home loans might look basically the same for years to come.
The purchase shows how digital tools such as cryptocurrency and nonfungible tokens, commonly known as NFTs, can have real-world uses instead of just being digital curiosities, said Sanjay Raghavan, head of web3 initiatives at Roofstock.
“When we look at it we see the potential for how it can change the world,” Raghavan said.
Raghavan of Roofstock compared the standard homebuying process, with piles of papers to be signed, to finding things through the Yellow Pages.
Computers made such searches much easier, and that can happen to real estate transactions, he said.
Samuel Simons, a data analyst who works in crypto, believes that cutting into the paperwork of contracts will be an area where digital realm will be seen as having a huge advantage over the current system.
Simons and his father, Robert A. Simons, director of the School of Urban Affairs at Cleveland State University in Ohio, are the authors of a research paper on real estate transactions using digital tools such as blockchain data.
Consumers are likely to look at the ease of buying items online and want to have the same speed of a transaction when buying a house, rather than waiting 30 days to close and signing mountains of papers, Samuel Simons said.
“They’re going to start thinking about how we can make this purchasing and selling and financing process a lot more streamlined,” he said.
The classic finance companies are likely to feel pressure to provide a quicker process as consumers become more comfortable with digital transactions, Robert Simons said.
Slipakoff did not finance the purchase by turning to a bank. Instead, he paired his down payment with money borrowed from a digital pool of capital, essentially borrowing from a group of individual online investors rather than a single bank.
With $175,000 raised, Slipakoff simply pressed a button. His dollars were converted into a stable online cryptocurrency — one that has a steady value in relation to the dollar and does not fluctuate in price — and that was transferred to Roofstock, the seller.
“It’s dramatically different,” Slipakoff said.
The world of cryptocurrency does offer such loan options, but banks and other mainstream lenders have huge built-in advantages for homebuying, Samuel Simons said.
Mortgage lenders are set up to serve homebuyers, offering loans with relatively little money up front for 30-year periods, he said. A blockchain loan between individuals is going to be for a one or a few years, not 30, he said.
Banks and other lenders also have the capital from deposits that make such sizable loans possible.
“Banks are good at one thing and that’s lending money for houses,” he siad.
When Slipakoff made the purchase, he actually bought a nonfungible token that essentially acts as a digital deed to the house, making him the owner of a company that owns the home. The sale was complete without stacks of paper and signatures around a table.
It does comply with all the legal practices of a traditional sale, said Geoff Thompson, chief blockchain officer at Roofstock.
Appraisals and inspections were done in the usual way, and taxes will be paid as any with other transaction, he said.
If a future buyer of the house wishes, the home can be bought traditionally and its digital token deleted.
Such tokens as the digital certificate for a real-life item are secure, because the data is stored in millions of computers and cannot be modified, at least not without leaving a trace, Samuel Simons said.
It’s also out there for anyone to check on digitally, so it’s publicly visible, he said.
Lawyers, real estate agents and local governments all are going to have to adapt to this new technology, said William Kleindienst, a senior counsel at the Charleston office of the Gordon & Rees law firm who has studied crypto and NFT’s.
He notes that crypto is a quite new, invented in 2008, so there still are many questions to be answered. One example: South Carolina law currently does not define crypto officially as a currency in the same way as a dollar for the purposes of contracts, he said.
That stance that might have to change as such deals become more normal, Kleindienst said.
It’s also still a requirement for an attorney to be involved in a property sale, as was the case in this precedent-setting purchase.
Local governments are comfortable with established practices, such as getting paper signatures on a sales transaction, a requirement for many counties, Kleindienst said, so changing that will be challenging.
“It’s an uphill battle to fight that fight,” he said.
A classic part of a home purchase, checking the property’s title for liens and other issues, will have to take on a digital component, he said. Companies will have to check the online world for digital title documents just as they do at the courthouse.
Kleindienst agrees that a strong blockchain can be a reliable place to digitally store a contract, where it can be seen publicly and is protected from hacking.
There are fraud risks to be watched for, just as with any new technology, Kleindienst said: Bad actors can try to use digital transactions just as phones and emails can be used to commit wire fraud.
Despite those concerns, the technology seems poised to bring sweeping change to classic real estate transactions, just as computers have in so much of our world, he said.
Columbia Mayor Daniel Rickenmann, who attended a news conference about the deal, emphasized he’s still figuring out digital tools such as Bitcoin. But he wanted to show that Columbia can be on the cutting edge of such changes.
“It’s that transfer from the digital world into the real world where you can touch real dirt,” Rickenmann said.