Blockchain In The Real Estate Industry Guide

If you think blockchain and real estate don’t go together – think again.

Blockchain technology is now often used to process real estate ‘buy and sell’ transactions, tokenization, and property management activities like collecting rent and maintenance requests.

Digital transformation in the real estate industry is already big business, and soon, more processes currently being executed by people will also be digital using blockchain technology.

Let’s start this blockchain in the real estate industry guide with how we got here.

Real Estate Transactions in the Billions

How did the real estate industry get to where it is today with blockchain?

To answer this question, we need to examine the potential in the property industry. Buying and selling houses is big business. Statista says that in the USA, real estate activities will generate $371 billion in 2022 and are projected to grow to $412 billion by 2025. That revenue is shared by the many workers and career professionals who buy and sell homes.

Who are the experts involved in real estate transactions?

Typically, on any property deal, you will need to hire and interact with the following experts:

• Real Estate Agent
• Real Estate Valuer
• Building Inspector
• Lawyer or Conveyancer
• Mortgage Broker/Lender

These property experts don’t usually work alone either. They are part of agencies or practices that employ administrators, tech staff, and bookkeeping or accounts personnel. Property markets everywhere account for many workers, mainly when you include construction, engineering, design, etc.

A mix of digital and offline processes

In most countries, you will experience online and offline communication when you buy or sell a home. For example, you may view your house for sale on Internet sites or watch video home tours to purchase a property. Plus, much of the communication with your team of experts is digital, using email and mobile messages.

However, when negotiating the sales price and signing the sales and purchase agreement, you’ll most likely need to switch from online to in-person and paper forms. You will meet with your real estate agent or take live phone calls to discuss tactics for reaching a satisfactory agreement.

The sales and purchase agreement will be signed in person, or if you cannot be in the exact location, you can sign, scan the contract, and email it to the real estate agent. Electronic signatures are now considered legal, so this is a move toward digitalization.

Your mortgage contract and property transfer document will follow the same digital and offline formats and processes. This activity requires time and resources, which are costly. However, handling real estate transactions online reduces processing time and costs while providing better security.

We’ve come a long way from keeping deeds in a drawer

If you’re a fan of Gentleman Jack, a Netflix period drama series set in the 19th Century, you’ll recall Anne Lister walking down the street carrying the deeds to Shibden Hall, where she would keep them in a box in a drawer. We have come a long way with deed titles now secure in an online register, but in time, this practice will seem as old-fashioned as Anne Lister keeping the deeds at her home onsite in a drawer! The blockchain and how it is being used today have already revealed how most, if not all, real estate transactions will be processed in the future.

How Is Blockchain Used In Real Estate Today?

Blockchains process sales transactions. Because smart contracts eliminate intermediaries, there is less risk of fraud. Instead, software on platforms with user-friendly interfaces enables buyers, sellers, and representatives like lawyers and agents to execute the sales transaction with a smart contract.

Additionally, before a property is sold or rented, it can be listed in a decentralized database with reliable, up-to-date data and is available to buyers, landlords, and renters. This makes the process of buying, selling, or renting much quicker.

Landlords manage their rental properties or engage a property manager, who can now use a blockchain platform like ManageGo to schedule and pay maintenance, collect rent, and pay the property owners.

Blockchain Transactions

What is a blockchain transaction? Entrepreneur says it is a digital transaction held on a public ledger, i.e., a blockchain registry on a decentralized database. Therefore, it is not controlled by a central authority, with the property deed stored in an online database controlled by the state or country.

To avoid getting too technical, it’s worth knowing that blockchain transactions on the public ledger are held on and verified by a network of computers. There are many reasons why using the blockchain for various transactions makes sense.

Benefits

The benefits of using the blockchain for real estate transactions include:

• Transparency
• Error-free
• Secure
• Fast and efficient

Traditional real estate transactions can take weeks; using the blockchain can be done in minutes. There is no room for error as the process is transparent for all parties to see, and you can be sure your deeds are secure. If Anne Lister was a real person today. She would surely be an early adopter of blockchain technology for her property transactions.

Fallout

There will be challenges in the real estate industry adopting new technology. What will happen to the workers? If automation is used for some tasks instead of people, they will likely no longer be required in real estate transactions. Automation can carry out repetitive tasks in real estate, including:

• Marketing
• Listings
• Seller and buyer inquiries
• Title searches
• Escrow services
• Administration

Blockchain In Real Estate Future

The future is bright for blockchain in all things real estate, and REINZ breaks it down into four core areas, including:

• Blockchain Registry
• DeFi – decentralized finance
• Metaverse
• Cryptocurrencies

In an earlier article on PropertyTalk, we introduced the Metaverse and NFTs for virtual land purchases.

DeFi threatens mainstream regulated finance transactions, including loans and insurance. Plus, look out for blockchain as a service.

Right now, it’s hard for most non-technical people to understand blockchain and its meaning to human jobs and many transactions, such as buying or selling a house. However, key stakeholders know blockchain use must be simplified and regulated to become mainstream.

Challenges

Governance is one concern, as is how and should it be regulated. Much discussion is happening in North America and Europe on regulating digital assets like cryptocurrencies. Governments want the technology and systems regulated, and the EU has come out first with confirmation of EU cryptocurrency regulation.

Blockchain already falls under CCSS – a new IT security standard for cryptocurrency security concerns.

Plus, there will be user reluctance until there are transparent processes for dispute resolution.

Summing Up

Blockchain transactions in real estate are already in use, and eventually, they will become the standard for all real estate transactions.

The benefits of blockchain technology are too good to ignore. They include speeding up the sales and purchase process, reducing costs and resources, and providing greater transparency and security.

Plus with a Trump presidency, expect a faster uptake of blockchain and cryptocurrency use in real estate transactions.