Blockchain Applications in the World of Real Estate
Blockchain and cryptocurrencies have rich applications in the world of commercial property, land transfers, ownership records, and more. Not only can blockchain help improve the way things are done in this industry, but it can also alleviate numerous longstanding challenges that exist in this space.
Why Blockchain in Real Estate is Important
According to this report, the average homeowner will sell his or her personal home every 6 years or so, and the average person moves residences an average of about 11 times during their lifetime. These facts mean that developments in the real estate space have a real impact on everyday people, and any change or improvement in the way things are done in this market can lead to substantial savings and benefits for private individuals at the end of the day.
Developments in the real estate market have an even more pronounced impact on private consumers because buying a home is often the single biggest financial investment that most people make during in their lifetimes. With blockchain, there is finally a piece of technology that is up to the task of revamping outdated systems and practices that have been in use in this market for way, way too long.
In general, the benefits that blockchain can deliver to users and agents at different points across the real estate spectrum are as follows:
– Improvements in the property search process
– Expediting leases thanks to faster and better due diligence
– Enabling smarter decision-making every step of the way
– Transparent and cheaper title management
– Enabling better and more efficient handling of financials and payments
Let’s look at a few of these in more detail.
Improving and Expediting the Property Search Process
Real estate transactions have always been cumbersome and complicated. Restrictions and costs placed on transactions and transfers related to real estate slow the process down even further, and point of sale mandates, utility and home inspections, and various sales restrictions can cause a home’s sale to slow down significantly even when both parties are keen to seal the deal.
Blockchain can improve the speed at which the financial verification element of the sales process occurs. Most buyers and sellers make use of escrow and title companies for third-party verification in order to save themselves from fraud, but the cost of doing so can be substantial – often as high as 1-2 percent of the total value of the property. It also adds extra time to the process.
Blockchain can remove the middleman (in this case, escrow companies) using a distributed database to prove authenticity, allowing homeowners to legitimately transfer ownership immediately without the need to pay for third-party verification.
Real estate fraud costs unwitting buyers millions of dollars each year. It is a fact aggravated by buyers or sellers who want to make a quick deal and are consequently willing to forego safety measures. Duping a buyer into thinking that someone who isn’t the actual owner of a specific property is, in fact, the owner is a serious problem, and advances in technology have made the duplicating of things such as notary stamps, grant deeds, and signatures easier than it ever was before.
By creating unalterable digital ownership certificates of properties, blockchain would make forged ownership documents and false listings a thing of the past. These certificates would be impossible to replicate and would be directly linked to one property in the system, making selling or advertising properties that someone doesn’t own almost impossible.
Blockchain can be used to create digital IDs for real estate assets as well as for people themselves to make the transfer of ownership seamless and much faster than it is today. While blockchain is still somewhat in its infancy, failsafe technologies are under development and can make buying or selling a house safer, more transparent, and quicker than it is today.
Storing Property Data
Every real estate transaction goes through what is called a multiple listing service (MLS). This service tracks what agents represent which clients, contract details, listing agreements, appraisals, and more. The MLS, however, is notoriously fragmented. The information contained therein is decentralized and restricted, making access difficult for people who are not real estate professionals. It’s often out-of-date as well, which hampers an agent’s ability to make comparisons and spot trends.
Blockchain technology can be used to overcome these barriers within the MLS. By providing a way to securely share data, the blockchain makes a shared, nationwide database possible, one that offers real-time access to property information straight from the source and enables a more holistic view of deals, assets, and financials as a whole. It also opens more opportunities for collaboration among players in the real estate industry.
Tracking title records is another challenging aspect of the real estate buying/selling process. However, we are seeing change slowly take place. In 2016, Cook County, Illinois began the nation’s first to experiment with blockchain technology for tracking and transferring property titles. In such a system, whenever someone buys property, they will receive a digital token and the traditional paper deed. The accompanying documentation of the token transfer is used as proof of ownership. Eventually, tokens could become the standard and take the place of paper deeds altogether.
Blockchain can provide a central title database for the entire country to securely store and instantly access historical title records, allowing for the streamlining of title transfer in property sales.
Payments and Transactions
Finally, something many people are a little more familiar with when it comes to blockchain applications: The efficiency and the security of transactions. Blockchain’s built-in fraud-proof and trustless protocols mean each user has a unique identity on the blockchain, and consumer financial information can be shared securely with other parties during transactions. One person can send funds to another person, with the funds being secure until the transaction is formally completed.
In summary, blockchain can streamline the real estate market by enabling people to securely and efficiently share data and money without the time and regulatory delays currently overburdening every aspect of the buy and sell process. It can help make information more accessible, it can cut out middlemen, and it can reduce the risk of fraud and theft. A more secure, speedier, trusted process for buying and selling property is good for everyone involved.
Projects Working in this Space
Rentberry targets landlords and tenants and makes it easier to rent properties. Using smart contracts, security deposits can be secured, and deductions can be made fairly based on predetermined agreements. Rentberry also provides services for the easy submission of maintenance requests, tenant and landlord screening, and services provision by third parties such as plumbers and handymen.
Atlant is another real estate-based blockchain project. This project aims to legally verify and then tokenize the value of properties, even in area measurements. For example, the value of one token can be equated to one square foot of property. In this way, property can be owned by multiple owners, making it easier to sell and parcel chunks of real estate off. Furthermore, rather than spending a great deal to invest in a particular piece of land or property, one person could invest smaller chunks, much like stocks or crypto assets – only as much as they want.
Finally, we have Relex. This project recently closed $155 million in funding to advance blockchain applications in the real estate space. What the project essentially aims to do is solve many of the problems outlined above, such as slow and costly verification procedures, fraud, and information asymmetries with the trustless, tamper-proof, and high efficiency of the blockchain.