Blockchain in Real Estate
Real Estate is a $217 trillion global industry that can be transformed to even to greater heights through implementation of Blockchain in Real Estate industry. We all have to live somewhere, and the population continues to increase, and we live in a more borderless world, the industry will involve more and more transactions annually.
The real estate industry has been undergoing a digital transformation. While historically a “pen and pencil” industry— often relying on inefficient and old-fashioned methods for doing business and keeping records — technology has begun to help reshape the expanding global market. Blockchain technology, especially, is feeding into this transformation.The decentralized-record-keeping technology, which is designed to instil trust in the authenticity of digital transactions, could be used to create efficient solutions for both commercial and residential real estate — from buying property to conducting due diligence to enabling crowd-sourced investments, and more.
Why blockchain technology could benefit the real estate industry?
Blockchain technology offers a form of shared record-keeping which is designed to be difficult to tamper with. Blockchain technology operates through decentralized peer-to-peer platforms, building resilience against the spread of corrupted information and boosting resistance to fraud.
Blockchain technology can solve the following challenges which come across in the Real Estate Industry:-
- Better Trust and transparency: Blockchain technology offers a verifiable and censorship-resistant option for sharing information.
- Reducing siloed databases: Real estate processes would benefit from secure and tamper-resistant shared databases that compile data and documents from various different stakeholders in one place.
- Making transaction processes more efficient: Most real estate transactions are still conducted through wire transfers and require costly verification processes that can take days to complete. Blockchain-based transactions could enable a streamlined process which delivers quickly and reduces costs.
- Limiting the use of intermediaries: Many intermediaries — from brokers to escrow companies — could be rendered obsolete by blockchain-based approaches, as records could be stored, verified, and transferred using blockchain technology. Removing the need for intermediaries could dramatically reduce costs and save time.
Areas of real estate being transformed by blockchain technology
Who owns what property? What is the chain of custody for this title? Blockchain would improve traceability through transparency and availability of immutable data sources. This would make title investigations much easier for those in the real estate business. The result? Expedited closings and lowered risk for error during title transfers.
Tokenized Real Estate Platforms
Tokenizing real estate assets make purchasing property with digital currency investments. The tokens still can be liquidated or exchanged for other cryptocurrencies or buyers can receive in crypto and keep it as an investment. It would be the equivalent of accepting valuable stock for your property opening up the potential for more gains on your investment.
Tokenizing platforms specific to real estate could consolidate all transactions and processes, eliminating closing costs and broker fees. The transactions could be completed in a day rather than over the course of several weeks via several different platforms. Tokenization can support the exchange of real assets.
Real estate paperwork authentication often requires a notary. Buyer and seller sign an agreement and then the transaction can be recorded on the smart contract, and this agreement then receives designated a hash. The buyer then can obtain the address of the smart contract to send the funds to the correct blockchain-based locale. Notarization can now happen on-chain as the seller goes to the notary with the smart contract address and sign the final document without the presence of the buyer. The notary is then able to use their private key to mark the deal executed on the blockchain. In the future, as governments accept blockchain transactions as trustless, the notary can be eliminated from the process.
Property History Traceable via Blockchain
Property history databases are never up-to-date and are certainly not transparent in their origins or motives. Using blockchain to track the history of repairs and issues property experiences can later help sellers improve the resale value or make buyers aware of the property’s troubled past. A home inspection would also be either unnecessary or a less involved task. Home inspectors could contribute to databases to make sure property issues are part of the immutable records. This would help buyers feel more confident in their purchases knowing the full history of the property.
Tenant Screening and Leasing Process
Manual pen and paper tenant screening is still a common practice in the real estate industry. Landlords do not have a centralized hub to verify tenants through immutable data stores detailing rental history. Landlords have to conduct background checks with only the information provided to them by the tenant. Renter fraud is a common woe for property owners who have no tried and true way to screen tenants. Instead, they are forced to conduct credit and rental history checks themselves. If landlords and tenants could use blockchain to complete all rental-associated tasks on a p2p network, this could help standardize pre-authenticated on-chain renter and landlord profiles with immutable histories and reputation scores to help tenants avoid slum lords, and landlords prevent rent dodgers. P2P rental networks could also help renters crowdsource deposits to reduce the need to hold their own funds in a smart contract for a year or more.
Smart contracts aren’t just used for buyer-seller or renter-landlord interactions. They can also be used to help real estate companies better manage their resources and fund distribution. It is common for multiple agents to be working on a single listing creating commission distribution hiccups. For multi-broker listings, everyone gets paid a percentage of the commission as described in paper commission-splitting agreements. Smart contracts can easily automate this process and companies can avoid the associated overhead that is involved in figuring out who gets what, how and when. Brokers and agents benefit from automated commission splitting as they will no longer have to wait for their funds, they can receive payment the same day the deal is closed.
The real estate industry is notorious for lagging in new technology adoption. Hopefully, decentralization will be the exception to the rule. If the real estate industry chooses to integrate blockchain technologies to improve and pare down payment, escrow, and title, there could be millions in cost savings. Cybersecurity that is a major pain-point for the real estate industry as it exists currently could finally be resolved. There could be a reduction in fraud, better financial privacy, faster transactions, and unprecedented client trust. With so much to gain it is only a matter of time before distributed ledger technology and decentralized platforms redesign the real estate industry.