Although the number of industries that experts claim will be made secure by the immutability of the
blockchain seems to increase on a near-daily basis, one of the sectors that doesn’t appear to be
attracted to the technology yet is the real estate industry.
Every year, millions of homes are bought and sold, with the typical homeowner selling their home every
5 to 7 years. Despite the size of the market, the fact that it is the biggest investment most people will
make in their lifetime and the fact that it is a process that almost every person has to go through at
some stage in their life, the real estate industry has been surprisingly resistant to technological advances
that could improve the speed and security of transactions, thereby expediting the process for both
buyers and sellers. This article will consider the potential that blockchain technology could have on the
real estate industry, by bringing a level of transparency and security never before seen in the industry.
Blockchain Enhancing Speed of Real Estate Transactions
As house prices recover from the financial crash, demand has reached heights not seen since 2007 and
as a result prices are rising fast. With both parties to transaction trying to finalise transactions as soon as
possible, they are finding that the red tape of the real estate industry often results in quick deals
becoming long, drawn-out transactions. This is often as a result of government regulations, including
home inspections, sale restrictions and intermediary issues.
Although blockchain technology won’t result in you being able to skip the home inspections, it does
have the potential to greatly speed up the interaction with intermediaries, especially in relation to
financial verification. At present most parties to a property transaction use escrow and title companies
in order to provide third-party verification and establish trust between them. However, these
verifications cost time and money. However, by putting real estate transactions on the blockchain, the
establishment of trust through third parties is unnecessary, with the distributed ledger being sufficient
to prove authenticity
Reducing Real Estate Fraud with Blockchain
Due to the large of money involved in real estate, there is always a risk of fraud to any party involved in
the transaction. Millions of dollars per year are lost as a result of real estate fraud, with advances in
computer technology making it easier to forge documents and advertise fake properties in order to
defraud others. The technology is such that documents can even forge notary stamps and signatures.
One of the most common fraudulent transactions is rental scams, where the scammer copies a genuine
listing from one website and lists it on another posing as the agent for the property. Once an interested
party contacts the scammer, they will be asked to make a security deposit or pay a services charge, or to
make a transfer as proof as available funds. Once the money is transferred it is unlikely that the
defrauded victim will hear from their ‘agent’ or see their money again.
However, with blockchain technology offering an immutable and transparent ledger, with ownership
evidence by digital certificates that are almost impossible to duplicate and the identity of the sender and
recipient of funds logged, it would effectively remove the possibility of carrying out these scams. These
digital signatures would be directly linked to a single property, meaning that selling or advertising
properties by scammers would be almost impossible.
Key Transparency Advantage of Blockchain in Property
Almost every purchaser of real estate requires a mortgage, which generally tends to be the slowest
process of the transaction as the banks pore over your documents, requesting additional documents at
every turn. However, by utilising blockchain, the identity of the individuals involved in the transaction
would be provided online, with the mortgage process and transfer of property seamlessly occurring
through the same platform. In terms of identification, the buyer’s credit history and income would be
instantly verifiable and transparent, avoiding the need for intermediaries to verify the accuracy of the
information. For sellers, the block chain would include all of the relevant details on their home, including
the list of previous owners, the list of repairs and refurbishments complete or required and the
projected costs to run the home.
Although it’s not going to happen overnight, there are a number of innovations in the pipeline and once
the most innovative estate agent firms embrace the technology and its advantages become clearer, it is
likely that there will be more and more converts in quick succession. Once it becomes mainstream, it will
allow people to not have to worry about the stress of buying their home but solely rely on the stress of
moving into it!