Bitcoin is the most well-known outcome of blockchain technology, and for some this and other cryptocurrencies will always be considered dubious investment assets. But for many others, including dozens of mainstream global banks, and governments, blockchain technology is seen as the way forward for online transactions and contracts.
Real estate represents a prime example of a sector that could be transformed by blockchain. It isn’t the only one, either. Financial, healthcare, logistics and manufacturing companies are investigating ways and investing heavily to find innovative ways to solve old problems.
At the same time, technology giants, such as IBM have created vast open-source ledgers using blockchain. Enterprise-level companies are using these platforms as innovation tools and real estate blockchain startups keep discovering new applications of this technology in the PropTech space.
Unlike traditional platforms and systems, transactions and contracts – known as smart contracts – through blockchain are more secure, faster, easier to verify and help address a number challenges in the real estate industry.
Value of blockchain for real estate
Here are three of the most important ways blockchain could transform traditional house buying.
Payments and security
Buying a house is the largest thing most people pay for. A property often represents hundreds of thousands or millions in traditional currencies, depending on the size of the house and location.
And yet the security around such a transaction is no different than paying a bill or invoice. Real estate fraud is on the rise. With the right technology and phishing techniques, fraudsters have been known to position themselves as the beneficiaries of the funds. In other words, scam people out of a lot of money, and banks aren’t always quick or willing to restore the funds to those who’ve been robbed.
Real estate fraud costs people, banks, lawyers and realtors millions every year.
With blockchain technology acting as the payments and contracts platform, everyone involved in the transaction would have a unique cryptographic identifier and verified details. It would be a lot more difficult to scam your way into a transaction and set of smart contracts that secure. Once every aspect of the contract had been executed, funds would be released. Buyers and sellers would feel more secure, and it would reduce the cost of wire transfers.
In the U.S., title deed records of properties are largely still conveyanced in a paper format. In other countries, they’ve already gradually become electronic. So confirming a purchase is a costly and time-consuming affair.
An experiment on Cook County, Illinois, using blockchain as an integral part of the conveyancing and settlement process found it reduced costs and timescales 30-40 percent. A blockchain token verified ownership while buyers waited for the slower paper process to be completed. For consumers, this real estate blockchain initiative could result in massive savings.
Title deeds also need to be insured, so with everything stored in an encrypted database, the cost of title deed insurance could save consumers between $2–4 billion, according to a Goldman Sachs report.
Multiple listing service (MLS) data
To generate enough interest in properties, realtors often list them on multiple platforms and apps. Consequently, the majority of property listings in the U.S. go through the multiple listing service (MLS).
Although this sounds convenient, this system is highly fragmented and difficult to integrate and use with other technology and tools. It also proves a time-consuming way for realtors to make comparisons and identify patterns in the local area. Joining blockchain and real estate listings could help to solve this problem.
Blockchain can be used as the way to create a shared nationwide database, giving agents with real-time information to listings and property trends. It would be more secure and easier to access and use. Developers could then build blockchain-based apps and tools to give realtors access to the data that would make their jobs easier and improve the house buying process for buyers, sellers, realtors and real estate lawyers.
Related read: How to Create a Real Estate Web Platform
Blockchain, a game changer in real estate
At the moment, the real estate sector is fragmented and still relies too much on legacy technology. Traditional ways of making the biggest transactions that most people ever make aren’t secure enough. Real estate fraud is on the rise. Blockchain represents the most innovative way to improve the security, speed and verification process for buyers and sellers.
About author: Dariya Lopukhina is a technology enthusiast and writer working for Anadea, where we leverage our 18+ years expertise in software development to harness innovative technologies like blockchain and build effective IT solutions for real estate, healthcare and other industries. Found out more about her on LinkedIn.