You’d be hard-pressed to find an industry that has not been influenced by technology. Cryptocurrencies have made a strong impact on payments, ICOs are challenging stock investing and even real estate is being disrupted by the use of blockchain technology.
From the way property owners receive rent payments to the way blockchain can provide an incontrovertible chain of ownership visible in the public domain, blockchain makes it much more difficult to copy, change or tamper with digital information.
“Blockchain can facilitate the investment and sale of real estate to create additional transparency, security and liquidity in the market,” explains Jeffrey Bergman of Camber Creek.
Indeed, the days where real estate transactions are closed in person may gradually be replaced by the introduction of smart contracts in blockchain platforms. According to Inc.com, “if decentralized databases and distributed ledgers were to become mainstream it could dramatically reduce the potential for fraud and enable us to access much more data on individual properties and homeowners.”
Tech executive Kevin Hobbs explains further, saying, “Literally everything can be tokenized, including ownership interests in real estate property.”
For example, leasehold interest in real estate property can be tokenized by implementing time-stamped records such as deeds and parcel numbers, and surveys can be embedded into tokens so that chains of title are secure and records are readily available. Furthermore, tokens can be programmed to automatically generate deeds upon a real estate transfer between two parties, and tokens can be transferred 24/7, circumventing closing costs.
“If you have taken out a mortgage before, you are probably aware of what a tedious process it can be. The average mortgage application is hundreds of pages long and there are so many steps involved in taking out a loan,” adds Kevin Hobbs.
Hobbs goes on to explain, “With a long list of middlemen such as realtors, lawyers, and bankers involved in every loan, the mortgage industry also has a strong potential for blockchain disruption.”
The rating agency Moody’s, for example, estimates that up to $1 billion of annual cost-savings are possible by implementing blockchain-based mortgage applications. The technology will result in buyers and sellers getting more out of their money as they save on commissions and fees charged by those middlemen. It can also make the process much quicker.
Traditionally it has been difficult for real estate companies to verify all important property details before leasing. By making it possible to store all building data, such as repair records or floor plans in a digital and secure place, blockchain makes it easier for buyers to do research on property details.
Some real estate professionals are worried that tech disruption will end their professional roles as agents, brokers and other titles in the space. However, even with the support of growing trends, it is unlikely that “do it yourself” real estate transactions will eradicate these roles. The truth is, embracing blockchain and other new technologies can unlock untapped real estate investment opportunities. In fact, there could be new offerings that take place once blockchain is in place.
Vanessa Saunders, CEO of Global Property Systems, has already adopted blockchain and notes, “Blockchain and cryptocurrency are ushering in an era of widespread transformational change and it behooves us all to better understand it.”
It’s hard to predict what the real estate landscape will look like five or ten years from now, but it is possible that all buildings, transactions and everything in between will be managed based on data and technology. In simplifying the real estate industry with smart contracts and blockchain technology, it could very well profit in ways it never has before.