The blockchain is the foundation upon which cryptocurrency rests, but it can be used for far more than validating the transactions of Bitcoin or Ethereum. The blockchain can be applied to practically any industry, and the proposed applications of it have intrigued both professionals and tech enthusiasts alike. One of the more traditional industries that seems poised for disruption is real estate, but what exactly are industry leaders seeing in blockchain, and what possible roadblocks are keeping it from being adopted into the mainstream?
Smart Contracts, Fraud Prevention
A main goal of the blockchain is to provide a secure place for people to organize and store their data. What makes this technology appealing to mortgage lenders and escrow companies is its ability to keep troves of data safe from hackers while simultaneously improving the user experience. Considering the amount of paperwork involved in even the simplest of real estate transactions, smart contracts can make it easier to facilitate the exchange of raw, commercial, and residential land. From leasing documents to international real estate purchases, start-ups have already started implementing the technology to improve communication and limit liability for all parties. Mortgage wire fraud has plagued the industry for quite some time, and smart contracts appear to be one of the best ways to prevent it.
Sweden recently adopted a blockchain-based platform to register land, creating a private ledger that only verified participants can access (e.g., bank officials, property owners, etc). These select trusted parties will be responsible for altering and verifying the information, making it a fully transparent process. Registering land in Sweden may take up to six months under the traditional process, but the blockchain can make it possible to do in mere days while virtually eliminating the risk of fraud or mistakes. This new system could purportedly save the Sweden government 100 million euros every year.
Streamlining Property Management
From setting up utilities to determining the parameters of rental agreements, smart contracts make it easier to streamline the more repetitive agreements in property management. Essentially, the blockchain can automate many of the landlord’s tasks, including the payment of service charges. Smart contracts can make it easier to communicate with tenants, organize repairs and maintenance, and validate payments. When it comes time to sell the property, owners can easily upload and update information in the multiple listing service or MLS. The blockchain makes it simple to share data in real time, creating less confusion and more opportunities for businesses.
Efficient Title Records
Most title information is located offline, which can make it difficult and time-consuming to uncover the truth behind an owner’s claim to the property. One county in Illinois is attempting to rectify this process by experimenting with digital tokens in order to transfer and trace the life of a property’s title. When a piece of property changes hands, the buyer receives both a digital token and an official paper deed. This token leads back to one central database where all records can be stored and maintained in the same system. This can not only increase the confidence a buyer feels when they take control of a property, but it also eliminates certain administrative expenses to verify each new piece of data.
Rate of Adoption and Barriers to Entry
There’s little doubt that the blockchain will start to slowly make its way into the industry over time, but we may not see any wide-scale changes just yet. For now, start-ups and early adopters will continue to experiment with how it can be used to streamline the many dated components of the industry. In some cases, perception might be the greatest hurdle to overcome. However, if the benefits become apparent to the majority and the ease of implementation can cater to even the moderately tech literate business owner, don’t be surprised to see this traditional industry take on a new look.