Can blockchain reshape
the real estate industry?

There is barely any industry that was not affected by cryptocurrency

July 27, 2022

Many industries are affected by blockchain technology, including real estate, an industry which has seen many ups and downs in the last decade but is just now stabilizing. However, despite its performance, the real estate industry is currently experiencing some problems. To understand how blockchain technology can affect the conventional real estate industry, you first need to understand the underlying issues of the conventional real estate industry.

Liquidity issues

Because of buyers’ limited and expensive access to capital to fund real estate investments, only wealthy people can now invest in properties. It is interesting however to see that numerous U.S. blockchain-based real estate businesses have surfaced after the COVID-19 pandemic. Today, the potential of blockchain technology is massive, and refusing to accept this fact might pose a threat to the industry.

Slow transactions

Most transactions in the real estate industry are taken care of manually, using wire transfers. This means to complete one transaction can sometimes take days to complete. With blockchain, real estate transactions can be completed faster and with less paperwork. This is because blockchain allows for the digital transfer of assets, so there is no need for paper contracts or other physical documentation. Everything can be done electronically, which can save a lot of time.

Lack of transparency

The lack of transparency in real estate investing is the main reason why this industry is full of fraudulent activists and corrupt individuals. Transactions are often very complex and involve many different parties. With blockchain, all parties can see the status of the transaction at all times, so there is no room for error or fraud.

Accessible to a select few

Real estate investment has only been for a selected few because of the entry barriers and hidden costs involved. Baby boomers purchase the most properties, often competing with millennials for smaller, more affordable abodes. Younger generations often struggle to purchase their first property.

Conversion issues

It is difficult to convert real estate properties into cash because of the complex selling process and lack of transparency. Blockchain technology will change real estate investing with the tokenization of properties. Tokenization is converting a property into digital assets or tokens and selling them in an online marketplace or exchange. The record of the transaction exists on the blockchain.

Higher costs

One of the reasons why investing in real estate properties has become expensive, besides the current quick rise in the price of houses, is the number of intermediaries you have to go through to seal the deal. Blockchain offers a new means for buyers and sellers to connect with one another, and can be used to cut intermediaries out of the real estate transaction process, thereby reducing costs.

Blockchain can solve some of the issues

If you view the current problems affecting the real estate industry with conventional eyes and use traditional methods to try to solve them, you will never solve them completely. As the real estate industry forms a significant part of the global economy, we can’t just experiment by adopting new technologies, but implementing blockchain technology increases trust and transparency.

Transparency

Blockchain transactions are transparent and cannot be tampered with because it is based on a public ledger network. That means no selected few possess all the knowledge. This makes blockchain ideal for real estate transactions, which are often very complex and involve many different parties. With blockchain, all parties can see the status of the transaction at all times, so there is no room for error or fraud.

Since every user has full access to all the information and transactions happening on the blockchain network, no transaction can be altered or removed without anyone noticing. This builds trust among the users and helps build transparency, which is lacking in the current real estate industry.

Efficient transaction process

With blockchain, real estate transactions can be completed faster and with less paperwork. This is because blockchain allows for the digital transfer of assets, so there is no need for paper contracts or other physical documentation. Everything can be done electronically, which can save a lot of time.

Blockchain also has the ability to store building construction details, maintenance and occupancy histories and any perceived near-term capital repair items. Having this level of transparency will greatly help expedite the underwriting process.

Reducing data silos

Blockchain can offer a tamper-proof shared database that can compile information from different stakeholders in one place. This helps in reducing the data silos and provides a single point of all necessary information instead of data being scattered around different real estate agencies.

Cutting off the intermediaries

The main reason why real estate investment needs so much capital is because of the intermediary costs. When you buy a real estate property, you get overhead expenses such as brokers, real estate agents, and escrow companies. Blockchain technology can help cut off these intermediaries and keep only the seller and buyer in the transaction.

The blockchain loophole

Blockchain offers so much to the real estate industry that experts still believe we do not even envision all the advantages the technology can offer. If Blockchain can be fully implemented on a large scale, everyone will have all the information about real estate transactions, and no one will have to look for intermediaries for initiating transactions, introduction to properties or the buying process itself. If you are interested in knowing more about Blockchain and how disruptive it can be, visit the bitcoin loophole.

Blockchain technology in the real estate industry has a long way to go, and we are yet to see most of the possible applications. Yet, there are quite a few applications that seem successful, but not to the point where experts accept them and implement them in their transactional protocol. While Blockchain technology might not be able to automate every aspect of the real estate industry, it does have a significant advantage in many aspects.

Featured image: Austin Distel – Unsplash

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