Changing Real Estate With Blockchain Technology

Real Estate Business Review | Thursday, February 17, 2022

Blockchain technology has impacted the real estate industry in various ways, including offering a new means for buyers and sellers to connect.

FREMONT, CA: Given blockchain’s disturbance of financial services and subsequent widespread application across industries, it’s hard to find a segment that the technology has not influenced. Cryptocurrencies have strongly impacted payments, remittances, and foreign exchange. Initial coin offerings (ICOs) have contested stock investing, startup loans, and venture capital. Even the food supply chain business has been overturned by blockchain.

Real estate hasn’t escaped blockchain disturbance, either. Previously, transacting high-value assets such as real estate exclusively through digital channels has never been the norm. Real estate transactions are usually conducted offline, involving face-to-face engagements with various entities.

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Blockchain still opened up ways to change this. The initiation of smart contracts in blockchain platforms now enables assets such as real estate to be tokenized and traded like cryptocurrencies like bitcoin and ether.

Here are six means blockchain has changed the real estate game.

1. Platforms and Marketplaces:Real estate technology has traditionally been mainly concerned with listings and connecting buyers and sellers. But, blockchain introduces new ways to trade real estate and can allow trading platforms and online marketplaces to help real estate transactions more comprehensively. 

2.No Intermediaries:The real estate ecosystem has long included brokers, lawyers, and banks. Still, blockchain may soon escort in a shift in their roles and participation in real estate transactions. According to a report, the New platform can eventually assume functions such as listings, payments, and legal documentation. Cutting out the intermediaries will occur in buyers and sellers getting more out of their money as they save on commissions and fees aggravated by these intermediaries. This also makes the process much faster as the back-and-forth between these brokers gets cut.

3. Liquidity:Real estate has long been reviewed as an illiquid asset that takes time for sales to finish. Not with cryptocurrencies and tokens, as they can, in theory, be readily traded for fiat currencies through exchanges. Still, as tokens, real estate can be easily traded. A seller doesn’t have to hold for a buyer who can allow the whole property to get some value out of their property.

4. Fractional Ownership:Blockchain allows fractional ownership and lowers the barriers to real estate investing. Typically, investments would require significant money upfront to acquire property. Alternatively, investors could also pool their money to acquire bigger ticket properties. Through blockchain, investors simply have to access a trading app to buy and sell even fractions of tokens as they see fit.

 In addition, fractional ownership would help them avoid managing the properties themselves, such as maintenance and leasing.
Upkeep alone can add up to high costs, and dealing with tenants may be troublesome. This also affects related activities like lending, where property owners frequently have to put their properties as collateral for loans to get quick access to cash. However, relying on the terms, property owners may also continue enjoying the use of their property.

5. Decentralization: Blockchain controls trust and security as a decentralized technology. Information saved in the blockchain is available to all peers on the network, making data transparent and immutable. One just has to return to the housing bubble crash in 2008 to see how greed and the absence of clarity on the part of institutions can have catastrophic results.

 A decentralized exchange has belief built into the system. As information can be verifiable to peers, buyers and sellers can have more confidence in conducting transactions. Fraud attempts would also be lessened. 

6. Costs: The transparency of a decentralized network can also trim down costs associated with real estate transactions. Beyond the savings made by elision intermediaries’ professional fees and commissions, there are other costs, such as inspection, registration, loan, and taxes associated with real estate. These costs even differ based on the territory that has jurisdiction. Like intermediaries, these can be lowered or even removed from the equation as platforms automate these processes and make them an element of the system.

Global real estate is worth hundreds of dollars but is dominated by wealthy and large corporations. Through blockchain technology, more people may be able to access the market where transactions can be made more transparent, secure, and equitable. Real estate transactions may eventually become peer-to-peer activities, with blockchain-powered platforms doing most of the work.

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