Have you ever heard of the concept of blockchain in real estate before? Real estate blockchain technology is transforming the world’s most significant asset class. It is changing how properties are managed, bought, and sold. Real estate enterprises and professionals actively grasp blockchain real estate solutions. They are doing this to improve property sales and streamline payments. Plus, this is also helpful in increasing accessibility to investment opportunities.
By integrating this technology, real estate can have plenty of benefits. We will explain some of those benefits in this blog.
Blockchain in Real Estate
Real estate is the largest asset class globally. Real estate professionals and commercial enterprises are acknowledging the impact of blockchain technology. They recognise its effects on optimising commercial and retail property sales. It makes payments easy. Plus, it also increases access to investment opportunities and real estate funds – Beni Avni, Owner of New York Gates.
A lot of people don’t know what blockchain technology is. Well, it is a shared, immutable ledger. It facilitates the tracking and recording of assets and transactions. Blockchain technology enables the secure sharing of information in a respective business. Now, we will discuss how blockchain technology benefits the real estate industry.
How Blockchain Benefits Real Estate
In this, we’re diving into some of the benefits the real estate industry gets because of the blockchain wave.
No Intermediaries
Brokers, banks, and lawyers have long been part of the real estate ecosystem. However, blockchains may soon shift their roles in real estate transactions. New platforms can gradually assume functions like payments, listings, and legal documentation. Cutting out the intermediaries will lead to buyers and sellers getting more out of their money. By doing so, they will save on commissions and fees charged by these intermediaries. It also makes the procedure way quicker. It is because the back-and-forth between these middlemen gets cut.
Fractional Ownership
By enabling fractional ownership, blockchain also lowers the barriers to real estate investing. Investments would need a lot of money upfront to acquire property. Conversely, investors could also pool their wealth to acquire bigger-ticket properties. Because of blockchain, investors simply have to access a trading app to purchase and sell even fractions of tokens as they see fit, says Dan Close, Founder and CEO at We Purchase Houses in Kentucky .
Fractional ownership would help manage properties like maintenance and leasing. Applications can add up to considerable costs. Plus, dealing with tenants may be a troublesome effort. Moreover, it also affects related activities like lending. In lending, property owners usually have to put their properties as collateral for loans. They do this to get quick access to cash. Depending on the terms and conditions, property owners may also proceed to enjoy the use of their property.
Decentralisation Technology
Blockchain commands trust and security as a decentralised technology. Data stored in the blockchain is accessible to all peers on the network. It makes data immutable and transparent. You need to go back to the housing bubble crash of 2008 to look at the damage. You will see how greed and the lack of transparency of institutions can have disastrous consequences.
A decentralised exchange has trust built into the system. It is because peers can verify information. Therefore, buyers and sellers can have more confidence when doing transactions. Also, in this way, Fraud attempts would be lessened. Plus, smart contracts would have more applicability beyond the technology itself, says Nimrod Vromen, Author of Prompting Happiness: A guide to prompting a life worth living .
Lessen Costs
The transparency related to a decentralised network can also lessen costs related to real estate transactions. Along with savings made by cutting out intermediaries’ fees, there are other costs. For instance, inspections, registration, and loan fees. There are also taxes associated with real estate. These costs even differ depending on the territory that has jurisdiction. For example, you can lessen or even eliminate them from the equation. It is because platforms automate these procedures and make them part of the system.
Streamlined-Transactions
The days are gone when there was endless paperwork and convoluted procedures. With blockchain, real estate transactions are streamlined to the next level. Now, it is time for digital agreements and smart contracts. It is time for the execution of transactions to be automated once predefined terms are met. It means that buyers and sellers do not need to go through lengthy negotiation processes. Also, they can skip cumbersome paperwork, allowing swift and seamless property transfers.
Transparency in Transactions
Transparency is a cornerstone of blockchain technology. The transactions recorded on the blockchain are transparent and immutable. It creates an auditable trail of ownership and transaction history. This transparency leads to trust in the real estate market. It does so because buyers can verify the property records without depending on intermediaries. Furthermore, blockchain’s decentralised nature decreases the risk of fraudulent activities. It is because the ledger is maintained by a network of nodes instead of a single centralised authority.
Challenges To Overcome
The benefits that blockchain technology offers to the real estate industry are remarkable. However, some elements hold it back from being widely adopted. Some of those key challenges include.
Regulatory and Legal Hurdles
Real estate transactions are subject to complicated legal and regulatory requirements. These requirements vary from one jurisdiction to another. Blockchain technology needs legal frameworks that accommodate smart contracts and digital property records, highlights Daniel Cabrera, Owner and Founder of Fire Damage House Purchaser.
Cost to Transition from Traditional Systems
Transitioning paper-based systems to blockchain-based solutions can be challenging and costly. Property records generally have decades of history. Therefore, migrating them to a blockchain system is difficult for the faint of cake.
Security Concerns
Real estate transactions generally involve sensitive financial and personal information. Therefore, security is paramount. Blockchain should be completely secure due to its cryptographic principles. It should be safe from fraud and double-spending. In reality, there are still risks related to hacking and vulnerabilities in smart contracts. Plus, there is the potential for fraudulent activities. These concerns must be addressed to attain the real estate industry’s trust.
Resistance to Change
The real estate industry is popular for being traditional. Hence, it is also known for resistance to change. Convincing stakeholders to adopt new technologies and procedures can be slow and challenging. Particularly those stakeholders who financially benefit from the current cumbersome procedures.
Lack of Expertise
Blockchain technology needs a specialised design, implementation, and maintenance skill set. Finding professionals with real estate and blockchain expertise can be difficult and costly. Adopting blockchain technology in real estate is not only hindered by complexity. These facets play a role in its slower adoption. Industry stakeholders must work together to get the best out of blockchain technology. They must work to adapt to new regulatory frameworks. This adaptation will ensure the technology’s responsible and secure implementation. Brian Bosscher, owner and founder of Condo Control.
Conclusion
The real estate sector can benefit from incorporating blockchain technology. These benefits include transparency and security. It also provides efficiency in changing how real estate transactions are conducted. Using blockchain can entice more users and enhance trust. Plus, it can also streamline processes and position brokerages.
As the regulatory frameworks evolve, the future of blockchain in real estate looks promising. It will pave the way for a more efficient, inclusive and trusted industry. Indeed, there are challenges in this integration that professionals are working on. Soon, you will see the successful integration of blockchain technology into real estate globally.
