Blockchain is gaining traction in the real estate industry, which is surprising in terms of justifying the use of this technology in a sector that is already worth more than 326 trillion dollars.
Blockchain is more than just a gimmick that sellers of luxury penthouses can offer their ultra-wealthy customers. It can help governments, businesses and ordinary people looking to buy or rent a home.
Here are five important aspects that blockchain technology can improve or completely transform:
1. The process of searching for a property
The whole process begins with the search for a drug, and here the first problems appear.
The statistics indicate that 93% of US home buyers use a website to find a home. These sites – primarily real estate marketplaces and platforms – connect buyers and sellers and allow potential buyers to use filters to search for specific criteria for their ideal property. However, all Web2 applications are not without flaws.
First and foremost, the proprietary information hosted on these sites is often inaccurate, outdated, or incomplete. Furthermore, hashing data across multiple listing platforms can create confusion. On the other hand, Blockchain technology has the potential to solve these problems in many ways.
Instead of putting the same information about a property on multiple platforms manually, agents and sellers can put it into the blockchain database all at once. Second, the data entered into the blockchain is irreversible and cannot be changed. Finally, future platforms may begin to handle tasks such as listing, payment, and legal documentation.
2. Commissions and additional fees
The main winners in commercial and residential real estate transactions are the intermediaries that connect buyers and sellers: brokers, real estate agents, bankers and lawyers.
The faster the parties want to finish the transaction, the more they pay the intermediaries, which means that they lose a lot of money. However, a Report From Deloitte, blockchain could soon change the way real estate transactions work.
With virtual tours, direct communication between the buyer and owner, and a complete paper-based business guide, people can avoid middlemen and save money on deals without the risk.
The amount of money saved will be huge because realtors get paid on average 6% for each deal. So, if you buy a $200,000 home, you’ll save an extra $12,000 on Realtor services.
3. Financing and loan
Finance is another big issue in real estate. Buyers have to wait days or weeks to get approved for a mortgage.
Loan creation and underwriting still stands booklet and non-standard. The security structuring is left to interpretation, and avoiding double underwriting of assets requires significant effort. Trading and asset servicing decisions are often based on outdated information. Finally, cash settlements across the lifecycle often cause settlement delays, affecting the investor’s cash flow.
Traditional financial institutions can take advantage of the only blockchain version of verified information, share secure data, monitor immutable transactions, and settle payments in real time. By digitizing a loan or mortgage, relevant data such as equity and loan repayment history can be programmed to support future service decisions. Smart contracts can collect and distribute payments to beneficiaries while simultaneously submitting reports to regulators.
Blockchain-based real estate platforms make it easier to buy a home while lowering the risk of fraud. The same can be said for mortgage applications. It will be easy to detect any errors in the data in the digital ledger.
4. Decision making for tenants and landlords
It only takes to remember how the housing bubble burst in 2008 to realize how important data transparency is to market stability. Investors and mortgage applicants will be afraid if the banks can’t Hide real numbers.
What has been done cannot be undone, but if the data is available to all peers in the network and is immutable, it can prevent the next crisis. People can use the blockchain to verify all documents and find the best market option for their budget.
Potential tenants may also benefit from blockchain integration. They can find out ahead of time if the landlord is keeping up with mortgage payments, removing the source of stress.
5. Title Deed Management
Last but not least, blockchain has the potential to make property transfers simpler and faster by removing the human factor from the equation. The current title system is often fragmented and difficult to manage. Bureaucratic institutions take longer to process information about property changes, which can cause problems in court or when real estate is sold.
Every home or apartment will have a digital address that will be stored on the blockchain. It will make it easier to keep track of ownership. But the blockchain won’t necessarily eliminate the need for authentication. On the contrary, the application of technology will make paperwork faster and more efficient. If there is an error in the document, administrators can always check the information on the blockchain to find it.
Keeping data in a safe place is also an excellent way to prevent fraud. Even if the scammers obtain the owner’s signature and other information, they will not complete the transactions because the most important information is still stored on the blockchain, and they have little chance of accessing it.
Prospects of the real estate industry in the age of blockchain
I wouldn’t say that blockchain will one day completely dominate the real estate market, eliminating the need for paperwork and different types of consultants. Everything I suggested earlier should be seen as an alternative to the traditional process.
Blockchain technology greatly simplifies life for those who believe in artificial intelligence rather than people. Any concerns that the technology is not trustworthy enough stem from a misunderstanding of its importance, reliability, and accessibility. However, it is likely that major companies will solve this problem by educating customers about what they can achieve if the blockchain is integrated. Adoption always starts with who people trust.
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