How Does Blockchain Affect the Real Estate Industry?
Everywhere, blockchains are slowly transforming what we’re accustomed to on a daily basis. In real estate, this could mean that the hidden costs and operational inefficiencies will decrease, if not disappear. The blockchain technology is slowly opening opportunities for the real estate industry. All over the world, smart contracts are now starting to tokenize property assets.
With these changes, how will the blockchain technology affect the real estate industry for the better? Here are some ways.
- Reduces Fraud
Every year, millions of dollars are taken from real estate buyers because of fraud. Criminals create fake title ownership and forge documents. Rental scams are the most common fraud type in real estate. The crook copy and pastes a listing and repost it to another website. Here, he asks for security deposits and services fees upfront. The unsuspecting buyer then loses his money.
With blockchain’s proof of ownership, proof of exchange, value, and existence, this technology may just be the solution to real estate’s problems. Digital proofs are replacing paper proofs. Some companies have started integrating blockchain systems. Users can now upload land title documentation on the network which others can verify and record if needed. It is one step closer to preventing forgery. To transfer the title, you can just encrypt and prove that your buyer is the new owner of the document.
- Removes third parties
Title companies, notaries, brokers, governments, escrows, appraisers, inspectors, and lawyers. All of these people, agencies, and companies are the third parties in real estate. They exist because they have information that you don’t have any access to and often they leech off of you. With blockchain, you can have a database where anyone can record information, without any restrictions and where you don’t need any permission. Everyone has access to it thus, creating transparency.
- Increases Trust
Unlike fiat currencies, blockchains are not paper, and 100% consists of codes. As a result, you can create a program that takes your cryptocurrencies program it to escrow and let it distribute the money. Because of this trust is established between the tenant and the landlord.
Take for example; when a person rents an apartment, the landlord keeps the security deposit. This money should be returned to the tenant once the lease ends or is used to cover the damages to the property. However, a lot of cases in the court show how the trust between the owner and tenant fails.
With Bitcoin’s multi-signature, you can make use of a private key to approve a transaction where a digital currency transfers to another person. Cryptocurrencies allow the creation of programmable escrows where the tenant and landlord create a multi-signature transaction thus establishing security and trust between the parties.
Transformation doesn’t happen overnight as blockchain is still continuously growing. It will take examples from real estate companies to lead the way to blockchain integration and convince people that blockchain technology has a lot to offer and a lot of advantages if used right.