Estimated reading time: 3 minute(s)
Blockchain technology could revolutionize real estate by streamlining transactions, heightening transparency, and increasing efficiency across the board.
As more people and industries become aware of blockchain technology, it presents new opportunities to increase the speed, safety, and reliability of business transactions. Within the real estate industry, it could open new channels for communication, make online trading platforms more responsive to investors, and create novel models for buying and selling properties.
Blockchain technology is still improving as the real estate industry determines how best to apply it, but since the first property sale over blockchain occurred just last month, it won’t be long before firms all over the world adopt blockchain as a best practice. Here are just a few of the ways that blockchain could improve residential and commercial sales:
Until now, real estate has been classified as an illiquid asset since it takes time for transactions to go through. But on the blockchain, money can be transferred instantaneously between parties, without the processing time of today’s bank or app transfers.
In fact, you don’t even need to trade in fiat currency — real estate can also be turned into “tokens” and traded, giving investors unprecedented liquidity and investment options.
Blockchain’s increased liquidity presents new investment models that weren’t possible before due to practical restrictions. Instead of parting with an entire property, sellers could turn homes into “tokens” on the blockchain and sell fractional stakes.
For example, instead of taking out a reverse mortgage, homeowners strapped for cash could sell a fraction of their property to a friend. On a commercial level, would-be investors could buy shares in properties anywhere in the world, with no minimum cash requirement. Some predictions suggest that this phenomenon could extend to rental properties, letting tenants buy stakes in apartments and then pay the remainder in rent as they can afford it.
Of course, blockchain alone can’t make these scenarios possible — we’d still have to shift our legal frameworks for property ownership to allow the purchase of “equity” in a home. But once that transition occurs, it could enable a completely new way of thinking about investment and ownership.
Blockchain platforms offer real estate professionals unparalleled transparency into the financial history of a property, buyer, or seller. Because any authorized user of a blockchain database can access every block of data, everyone involved would have equal access to relevant information about a property — and about each other.
The best application of blockchain’s incorruptible ledger is drastically reducing the risk of fraud. Shady sellers could no longer mislead would-be buyers about the repair or sale history on a property. Likewise, sellers or landlords could request credit histories or criminal records, ensuring the legitimacy of an offer. Neither party would need to rely on a lawyer’s information during a transaction — they could simply confirm the information themselves.
Perhaps most importantly, blockchain technology can dramatically lower the incidental costs of doing business. Blockchain’s incorruptible, completely transparent ledger negates the need for escrow, since buyers and sellers would no longer need a trusted third party to transfer assets. This streamlined process could eventually take over certain legal and administrative functions, reducing costs, speeding up the purchase process, and enabling more direct sales.
Blockchain technology is still evolving, but in the coming years, it could make real estate as simple as selling stocks. Investors and real estate professionals should keep a close eye on this technology and adopt it where possible to position themselves at the forefront of the industry.