5 Ways Blockchain Will Change Real Estate
We’ve all heard of blockchain before .... in fact, Blockchain first got traction with the very popular cryptocurrency, bitcoin. Let’s be clear here: cryptocurrency, or otherwise your familiarity with bitcoin and blockchain are not the same thing. The blockchain is the technology that creates a network for the transactions and transferring of value to occur. Essentially, blockchain is the global marketplace – a place for the transaction to occur. The cryptocurrencies are the tokens used within these networks to send value and pay for these transactions. Cryptocurrency is essentially the actual trading of value, most comparable to how we use cash today. Today, I’m going to break down 5 ways that blockchain will change the real estate industry in the next decade.
1. Real Estate Investing – Real estate investing has historically only been available to those with large sums of cash that can buy a property, especially in regards to commercial and multifamily housing. Blockchain will decentralize the process through crowdsourcing and tokenization. When you tokenize a real estate asset, the property owner can actually offer digital tokens that represent a share of their property. This allows the barrier to entry to drop & allows more people to invest in cash flowing properties.
2. Property Search Process – The real estate marketplace is built in the Ethereum blockchain. Buyers, sellers, and other agents can use the platform for free, earning rewards for contributing data and helping to maintain the marketplace. Data is encrypted and stored on a blockchain, which means that no company can control or alter it, and all of the data is controlled by the listing party.
3. Due diligence – All parties involved in the process of the transaction have digital identities. These identities can be verified through the blockchain and can help to save a tremendous amount of time and headache of rummaging through old papers to trace the steps. Real estate properties will also have a digital identity. This identity can consolidate information that a lister and a potential buyer would find useful, such as vacancy, tenant profile, financial and legal status and the financials such as monthly cash flow.
4. Smart contracts – Smart contracts have been a revolutionizing trend in the real estate industry. essentially, they digitize contracts for sale and are verified. This solution streamlines one of the most boring parts of the process: transferring of property titles while also adding some layers of security. Rather than sifting through file cabinets to find the appropriate contracts and then keeping them, it only makes sense that we would move to smart contracts, which can then be verified through the blockchain.
5. Financing and payment systems – There are a lot of intermediaries in the real estate industry. A lot. The current prices for mortgage approval for residential properties takes on average around 30 – 60 days to complete, and around 90 days for commercial properties. By putting all of the transactions on the Ethereum blockchain, all parties involved can actually view the current state of the deal in real time. For instance, let’s say that the lister accepts the buyer’s offer, the Ethereum would track this point in the transaction and all parties involved would be able to proceed swiftly and more efficiently.
Get ready for blockchain to make its way into our lives through the places we live, work and love.