Late last year, a Ukrainian apartment became the first piece of real estate to be , the decentralized ledger that powers the world’s cryptocurrencies. TechCrunch co-founder Michael Arrington bought the property from a developer in Ukraine for $60,000 in a deal that was facilitated entirely via smart contracts, an element of the Ethereum blockchain.
Propy, the real estate startup that facilitated the transaction, is among many upcoming companies in the real estate industry that symbolize the changing tides within the industry. And for an industry that has long been viewed as slow to innovate, the real estate industry is beginning to feel the disruptive effects of the blockchain.
The was first actualized about a decade ago as the support structure behind the first cryptocurrency, bitcoin. As a decentralized ledger, the blockchain works by keeping a tamper-proof record of all transactions within its network, making it virtually impossible to compromise.
The tamper-proof and decentralized aspects of the blockchain have made the technology a dear to industries outside of fintech. Blockchain technologies are increasingly being utilized to cut costs, prevent fraud, improve efficiency, and boost the experience for homebuyers in the real estate industry, which consequently helps chart the future for real estate.
Here are a few ways detailing how the disruption is coming to real estate.
1.) Efficient transactions
Real estate transactions are painstakingly slow, even when they don’t have to be. A typical transaction will usually involve bureaucratic processes by respective governments, multiple brokers and third parties, and lots of paperwork that effectively sum up a bad experience for homebuyers and renters.
Blockchain technologies have the capacity to many times over. By implementing a blockchain-powered distributed database to store and manage titles, leases, and other legal documents, middlemen and third parties become redundant, which helps speed up the process of verification.
2.) Cheaper and transparent processes
Without the middlemen, real estate transactions suddenly become cheaper. By bypassing lawyers, escrow companies, banks, and other traditional institutions, homebuyers and renters can save on fees and payments that typically go to these players.
Additionally, since every transaction is recorded on the tamper-proof ledger, . Once a contract is executed, it remains visible on the network, making it difficult for any party to renege on terms and conditions set in the contract.
Transparency and efficiency also become standard for property searches, another huge headache for homebuyers, renters, landlords, and property owners. The typical procedure for buying or renting a , for instance, would include finding rental rates, location, property features, capital values, and other data that may not be available without paying a fee.
Additionally, such data may be highly fragmented, inaccurate or incomplete, which brings down the level of trust and transparency. With the blockchain, all relevant data regarding that one storage unit or lot may be stored on the network, freely accessible by brokers and clients. Plus, information such ownership history, location and address, the age of the unit, and other relevant details can be easily associated with the property on the blockchain.
3.) Easy access to data for intelligent decision-making
Along with transparency and cost-efficiency, the blockchain will enable access to tons of data, enabling quicker, . With more players coming in, the blockchain will be a repository of data and information, enabling organizations to use such data for artificial intelligence and deep learning, data mining, and other analytical techniques. The information from these analyses can then be used to predict patterns, detect fraud, and improve compliance for organizations within the real estate industry.
Additionally, such data will be more secure in a blockchain-powered database as opposed to bank vaults and traditional government institutions. The blockchain could be used to store deeds, ownership records, approvals, surveys, and other relevant documents, possible disrupting many allied industries.
The opportunities presented by the blockchain for the real estate industry are endless and almost impossible to describe in one short editorial. Still, there are many hurdles to overcome before the blockchain can become a standard feature of the real estate industry.
There’s need for more education to understand what the blockchain really is, not just within the industry, but everywhere where there’s potential for a blockchain disruption.
Real estate companies also need to identify opportunities to collaborate and facilitate developments in this area, which might be challenging because of existing regulations, land and property infrastructure, and payment systems.
But, if the Ukrainian, blockchain-powered property sale is anything to go by, the future might be closer than we think.