Is it too soon to mention blockchain and real estate in the same sentence? No. Digital transformation in the real estate industry is already big business, and soon a lot of the processes currently executed by people will also be digital using blockchain technology.
There is a big future for blockchain in the real estate industry, and we’ve got some information on where it will pop up so all homeowners, property investors and those working in real estate can stay informed. Plus, it’s not all about what may happen sometime later as blockchain is already being used for real estate transactions, i.e. buying and selling property, so let’s start this blockchain in the real estate industry guide with how we got here.
How did the real estate industry get to where it is today with blockchain?
There Is A Lot Of Money In Real Estate Activities
To answer this question, we need to look at the potential in the property industry. Buying and selling houses is big business. Statista says in the USA, real estate activities will generate $371 billion in 2022, projected to grow to $412 billion by 2025. That revenue is shared by the many workers and career professionals buying and selling homes.
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 a high percentage of workers, mainly when you include construction, engineering, design, etc.
A mix of digital and offline processes
In most countries, when you buy or sell a home, you will experience a mix of online and offline communication—for example, viewing your house for sale on Internet sites or watching video home tours if you’re looking 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 form. You will either meet with your real estate agent or take live phone calls to discuss tactics to get a satisfactory agreement.
The sales and purchase agreement will be signed in person, or if you’re not in the exact location, you’ll sign, scan the contract and email it to the real estate agent. Electronic signatures are now considered legal, so that’s a move to digitalization.
For your mortgage contract and the actual property transfer document, you’ll experience much the same mix of digital and offline formats and processes. All of this activity takes time and resources, which are costly. However, handling real estate transactions online is not only reducing the processing time. It’s also reducing the cost 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 was going to keep them in a box in a drawer. We have come a long way with deeds titles now secure in an online register, but in time this practice will seem as old-fashioned as Anne Lister keeping the deeds to 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?
Using a blockchain for real estate transactions is happening right now, so let’s find out how it works. Investopedia explains how blockchain technology has changed property transactions for the better.
Remember that list of experts needed in real estate transactions? Lawyers, estate agents and so on, well, with blockchain transactions, you can do away with these intermediaries.
What is a blockchain transaction? Entrepreneur says a blockchain transaction is a digital transaction held on a public ledger, i.e. 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. Not to get too technical, it’s worth knowing that blockchain transactions on the public ledger are held on and verified by a network of computers. Many reasons are using the blockchain for various transactions makes sense.
The benefits of using the blockchain for real estate transactions include:
- 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. 🙂
There will be challenges in the real estate industry adopting new technology. What will happen to the workers? If automation is used for some of the tasks instead of people, likely, they will no longer be required in real estate transactions. Automation can carry out repetitive tasks in real estate, including:
- Seller, Buyer inquiries
- Title searches
- Escrow services
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
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 get their heads around blockchain and what it means to human jobs and many transactions like buying or selling a house. However, key stakeholders know blockchain use must be simplified and regulated for it to become mainstream.
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 have come out first with confirmation of EU cryptocurrencies regulation.
Blockchain already falls under CCSS – a new IT security standard for cryptocurrencies for security concerns.
Plus, there will be user reluctance until there are clear processes for dispute resolution.
Blockchain transactions in real estate are in use now, and in time, they will become the standard for all real estate transactions. The benefits of blockchain technology are too good to ignore, including speeding up the sales purchase process and reducing costs and resources while providing greater transparency and security.