The growing availability of geospatial data and technical innovations is making the application of blockchain real estate technology a possibility.
While one of the biggest investments that people make in their lifetimes is buying a home, there are hardly any technological advances that can expedite and secure this process for buyers, lenders, and homeowners alike. The blockchain technology in real estate can disrupt this sector, setting an unprecedented example of speed, transparency, and security. Given below are three major ways in which blockchain is set to disruptively innovate real estate.
Expediting the Process
With blockchain, it is possible to program smart contracts. Using smart contracts based on the blockchain, once the agreed criteria have been met, the process of assets exchange can follow specific instructions that are encoded as part of the transaction to be executed automatically. Every transaction is validated by all the computers of the participants in the network.
How payments between parties are handled using digital currencies like Bitcoin, property transactions could be handled on a blockchain in a similar way; every house or piece of land is like a ‘coin and exchange is like any other transaction using digital currency.
Most buyer and sellers use of a third-party verification to reduce the risk of fraud. This third-party verification comes at a cost that’s approximately 1-2% of the total value of the property. With blockchain, not only will the middlemen be effectively cut out, but also the time taken in the process will drastically reduce.
Real-estate fraud costs millions of dollars each year. And the situation is aggravated by buyers and sellers who in their haste of making a quick deal are willing to forego safety measures. The Internet and the technological advancements have made advertising of fake properties and making forge documents much easier. The blockchain effectively makes forged documents and false listings a thing of the past. It does so by offering a 100% incorruptible resource; this is where the sender and the recipient of funds are logged and the digital ownership certificates for properties are saved. These certificates are almost impossible to replicate and are directly linked to one property in the system.
With blockchain, all information necessary for a transaction is stored in the database and is accessible for both, the buyer and the seller of real estate. People create a digital ID for themselves, as the buyer or seller, as well as the real estate asset. This makes the mortgage process and transfer of ownership, seamless and faster than what it is today. Relevant prices of comparable assets, as well as the history of the property, can be followed through the blockchain. Besides, digital identities of houses would also help track the chain of ownership, the list of repairs and refurbishments, and the projected costs of owning and running the house. Therefore, once the blockchain technology is adopted within the marketplace, the need for middlemen or due diligence disappears.
The transformation of the real estate sector into a blockchain-based business will not happen overnight, the potential of the blockchain technology is definitely worthwhile.