Blockchain can potentially resolve these 5 critical issues in the real estate industry
Here are five critical aspects that blockchain technology has the potential to improve or completely transform.
Blockchain is gaining traction in the real estate industry, which raises eyebrows regarding the justification of this technology’s use in a sector already worth more than $326 trillion.
The Blockchain is far more than a gimmick that sellers of luxury penthouses can offer their ultra-rich clients. It can assist governments, businesses, and regular people looking to buy or rent a home.
Here are five critical aspects that blockchain technology has the potential to improve or completely transform:
1. Property search process
The whole process starts with a property search, and this is where the first problems show up.
Statistics suggest that 93% of home buyers in the U.S. use an online website to find a home. These websites – primarily real estate marketplaces and platforms – connect buyers and sellers and allow prospective buyers to use filters to drill down into the specific criteria of their ideal property. All Web2 applications, though, are not without flaws.
First and foremost, the property information hosted on these websites is frequently inaccurate, outdated, or incomplete. Furthermore, data fragmentation across multiple listing platforms can lead to confusion. Blockchain technology, on the other hand, has the potential to solve these issues in many ways.
Instead of putting the same information about a property into multiple platforms by hand, agents and sellers can just put it in the blockchain database once. Second, data entered into the blockchain is irreversible and cannot be changed. Finally, future platforms might start handling tasks like listing, payment, and legal documentation.
2. Commissions and additional fees
The main winners in commercial and residential real estate transactions are the middlemen who connect buyers and sellers: brokers, real estate agents, bankers, and lawyers.
The more quickly the parties want to close the deal, the more they have to pay the mediators, which means they lose a lot of money. However, a report from Deloitte says that blockchain could soon change how real estate transactions work.
With virtual tours, direct communication between the buyer and the owner, and a complete paperwork guide, people can avoid intermediaries and save money on deals without taking any risks.
The amount of money saved will be enormous since realtors charge an average of 6% for every deal. So, if you bought a $200,000 home, you would save an extra $12,000 on the realtor’s services.
3. Financing and loan
Financing is another big issue in real estate. Buyers have to wait for days or weeks to get their mortgage approved.
Loan origination and underwriting remain manual and unstandardized. Security structuring is left up to interpretation, and avoiding asset double-pledging requires significant effort. Trading and asset servicing decisions are frequently based on out-of-date information. Finally, cross-lifecycle cash reconciliations often cause settlement delays, affecting investor cash flow.
Traditional financial institutions can benefit from blockchain’s single version of verified information, secure data sharing, immutable transaction monitoring, and real-time payment settlement. By digitizing a loan or mortgage, relevant data such as ownership rights and loan payment history can be programmed to support future servicing decisions. Smart contracts can collect and distribute payments to beneficiaries while simultaneously reporting to regulators.
Blockchain-based property platforms make it easier to buy a home while reducing the risk of fraud. The same can be said about mortgage applications. Any errors would be easy to spot with data on a digital ledger.
4. Decision-making for tenants and landlords
It only takes remembering how the housing bubble burst in 2008 to realize how important data transparency is for market stability. Investors and mortgage applicants would be scared away if banks couldn’t hide the real numbers.
What has been done cannot be undone, but if the data is accessible to all network peers and immutable, it can prevent the next crisis. People can use blockchain to check all the documentation and find the best market option for their budget.
Potential tenants may also benefit from blockchain integration. They could find out in advance if the landlord is keeping up with mortgage payments, removing a source of stress.
5. Property title management
Last but not least, blockchain has the potential to make ownership transfers simpler and faster by removing the human factor from the equation. The current system of property titles is often fragmented and difficult to manage. Bureaucratic institutions take longer to process information about ownership changes, which can cause problems in court or when selling property.
Each house or flat would have a digital title that would be stored on the blockchain. It would make it much easier to keep track of ownership. But blockchain won’t necessarily eliminate the need for documentation. On the contrary, putting technology into place will make paperwork faster and more efficient. If there is a mistake in a document, officials can always check the information on the blockchain to find it.
Keeping data in a secure location is also an excellent way to prevent fraud. Even if scammers obtain the owner’s signature and other information, they won’t complete transactions because the most critical information is still stored on the blockchain, and they have little chance of accessing it.
Prospects for the real estate industry in the age of blockchain
I won’t say that the blockchain will one day completely dominate the real estate market, eliminating the need for paperwork and various types of consultants. Everything I previously suggested should be viewed as an alternative to the traditional process.
Blockchain significantly simplifies life for those who believe in artificial intelligence rather than people. Any concerns that the technology is not trustworthy enough stem from a misunderstanding of its significance, dependability, and accessibility. However, big companies will likely solve this problem by educating clients on what they can achieve if blockchain is integrated. Adoption always begins with those whom people trust.