Practical Applications of Blockchain in Real Estate Explored
The fact that Blockchain is gaining popularity in the real estate sector raises queries about the rightness and applications of blockchain in real estate in a market that is now valued at more than 326 trillion dollars.
The Blockchain is much more than just a gimmick that vendors of luxury penthouses can offer their ultra-wealthy customers as a selling point for their properties. It can be of use to governments, businesses, and common people who are interested in purchasing or renting a home. After searching various sources on Internet, I have listed here five practical applications of blockchain n Real estate that can truly revolutionize the sector.
Five Practical Applications of Blockchain in Real Estate Explored
The following is a list of five essential facets that the technology underpinning blockchain could potentially enhance or entirely transform:
The Procedure for Searching for Properties
The search for available properties is the first step in the process, and it is also the point at which the first troubles arise.
According to the statistics, over 93% of home buyers in the United States begin their search for a property by visiting an online website. (1) These websites, which are largely real estate markets and platforms, connect buyers and sellers and give prospective purchasers the ability to apply filters in order to hone in on the particular characteristics of the property that best meets their needs. However, each and every one of the Web2 applications have some sort of defect.
The property information that is hosted on these websites is frequently erroneous, out of current, or incomplete. This is the single most important point. In addition, the dispersion of data over a number of different listing platforms might contribute to misunderstanding. On the other side, blockchain technology holds the possibility of resolving these challenges in a variety of different ways.
Instead of manually entering the same information about a property onto different systems, real estate brokers and sellers may just enter it into the blockchain database once, saving them time and effort. Second, any information that is added to the Blockchain is permanent and cannot be altered in any way. Last but not least, it’s possible that future platforms may begin to handle responsibilities such as listing, payment, and legal documents.
Commissions and Other Supplementary Charges
The brokers, real estate agents, bankers, and lawyers who operate as intermediaries in residential and commercial real estate transactions are the ones who come out on top as the primary beneficiaries of these types of deals.
The quicker the parties want to seal the contract, the more they will have to pay the mediators, which will result in a significant loss of financial resources for them. According to a report published by Deloitte, blockchain technology may soon be used to alter the way that real estate transactions take place. (2)
People are able to skip intermediaries and save money on deals without incurring any risks if they have access to virtual tours, direct communication between the buyer and the owner, and a comprehensive guide to the necessary documentation.
Because realtors charge a commission of 6% on every deal, on average, the amount of money that will be saved will be huge. Therefore, if you purchased a home that cost $200,000, you would save an additional $12,000 on the services provided by the realtor. (3)
Lending and Financing Options
Another significant challenge in the real estate industry is obtaining financing. The approval process for buyers’ mortgages might take anything from several days to several weeks.
The process of originating loans and underwriting them is still done manually and is not standardized. (4) The security structuring is open to interpretation, and it takes a lot of work to avoid pledging assets more than once. In the world of trading and asset servicing, decisions are routinely made on outdated information. Last but not least, cross-lifecycle cash reconciliations frequently result in settlement delays, which impact investor cash flow.
Traditional financial organizations may benefit from the unified view of verifiable information, safe data exchange, permanent monitoring procedures, and genuine payment resolution that Blockchain technology offers. When a mortgage or debt is digitized, relevant data like rights of ownership and loan credit score can be encoded to ensure new servicing choices.
This is an advantage over traditional servicing methods. Digital signatures are the tool that is utilized in order to attain this goal. Through the use of smart contracts, it is possible to concurrently collect and transfer funds to beneficiaries, as well as report on such transactions to the relevant authorities.
Platforms for real estate transactions that are powered by blockchain technology make it simpler and safer to purchase a home. The same reasoning can be applied to applications for mortgages. If the data were stored on a digital ledger, it would be simple to notice any inaccuracies.
The Process of Decision-making for Both Renters and Property Owners
To understand the significance of data openness for the maintenance of market stability, one need only consider the manner in which the housing bubble exploded in 2008. If banks were unable to conceal the true figures, potential investors and mortgage applicants would be discouraged and leave the market. (5)
What has been done cannot be undone, but if the data is visible to all network peers and immutable, it may be possible to prevent the next crisis from occurring. People can utilize blockchain technology to review all of the documentation and determine which market alternative is most suited to their financial constraints.
Integration of blockchain technology could also be beneficial to prospective renters. They have the ability to find out in advance whether or not the landlord is current with mortgage payments, which eliminates a potential source of stress for them.
Administration of Property Titles
By removing the need for human intervention from the equation, blockchain technology has the additional benefit of making ownership transfers less complicated and more expedient. The existing method of assigning property titles is frequently disorganized and challenging to administer. Because it takes more time for bureaucratic organizations to receive information about changes in ownership, this might lead to complications in the court system or when selling property.
A digital title, which would be maintained on the Blockchain, would be assigned to each individual home or apartment. It would be much more convenient to keep tabs on who owns what if that were the case. However, the use of blockchain technology won’t necessarily do away with the requirement for documentation. On the contrary, integrating technological solutions would speed up and improve the effectiveness of document processing. In the event that a document contains an error, the relevant authorities can always examine the information stored on the Blockchain to locate it.
Keeping data in a safe location is another great strategy to protect against financial crimes like fraud. Even if con artists manage to gain the owner’s signature and other information, they will not be able to complete transactions since the most important information is still stored on the Blockchain, and there is a very small probability that they will be able to access it.
Opportunities That Await the Real Estate Sector in This Age of Blockchain Technology
I won’t say that blockchain technology will one day entirely control the real estate market, thereby doing away with the necessity for paperwork and a wide variety of advisors. Everything that I mentioned earlier ought to be considered an alternative to the standard procedure.
People who put more stock in artificial intelligence than in people will find that using Blockchain greatly simplifies their lives. The relevance of the technology, its reliability, and the ease with which it may be accessed are all misunderstood, which is the root cause of any worries that the technology is not reliable enough.
On the other hand, large corporations will most likely find a solution to this issue by educating customers on the benefits that can be realized through the applications of blockchain in real estate. Trusted members of the community are always the first point of contact when adopting a child.