5 Ways Blockchain Technology could affect real estate agents and real estate sales in not so distant future
As a Real Estate Agent, I’m alway curious about new technological advances which could change the nature of my business. Blockchain technology is on track to revolutionizing entire industries, government processes, healthcare and communications.
Blockchain possibilities are infinite but I thought it may be interesting to explore potential application in real estate industry in the near future.
Real estate transactions are often cumbersome, complex and require many professionals involved to get the job done.
The costs are significant due to large liabilities and demand for real estate services.
With so many individuals involved in a single transaction, errors and omissions are bound to happen.
Naturally, both Consumers and Real Estate Agents would welcome a more simplified way of conducting business that would ensure more fairness and transparency as well as stronger errors insurance.
How would real estate agent jobs be simplified by the use of Blockchain technology?
Let’s begin by clarifying what is blockchain technology?
Blockchain technology, in simple terms, is a digital ledger system, similar to a notebook that contains information (transactions) shared by many computers instead of one central location.
Transactions are grouped in blocks of information which string into a self replicating system (chain).
Each blockchain is secured by using special cryptographic features, which use mathematical algorithms to mask and secure information from third parties. This system makes blockchain technology safer and more private for users.
Since blockchain shares information among all users in the transaction, contracts and other information is transparently shared among all parties.
Blockchain technology is most known by its application in digital currencies.
What are the ways real estate industry could be changed by the new technologies?
Smart real estate contracts
Every real estate agent will tell you that real estate sale documentation is complex and often confusing for the consumers.
Smart contracts would offer a technologically and ethically advanced way to process real estate transactions in the future.
Terms of real estate transactions would be translated into code which is self executing, meaning the contracts would be self authorized to complete without the need for human involvement. The parties, once agreed to terms of agreement of purchase and sale would enter a process of contractual obligation fulfilment without the need for involvement of multiple parties which need to keep an eye on the timelines and legalities.
Smart contracts can not be tempered with and they significantly reduce possibilities of errors and omissions by any involved party.
Once the Offer or Agreement terms are met the contract would self fulfill, without the need for all parties to sign, authorize or physically/digital submit documentation (such as waivers or acknowledgments ) for example.
This would ensure exceptionally efficient, streamlined and transparent way of conducting real estate business and would ensure absolute security to all parties.
Real estate agents would embrace the tokenization of real estate assets
Tokenization of real estate assets involves segmenting the ownership of real estate assets and translating them into a type of digitally represented fractional ownership.
Instead of buying entire properties Investors could buy Tokens of a condo development or commercial building for example. Kind of like buying shares in a corporation. This would offer them the ability to diversify the ownership as well as buy smaller real estate portions with lesser amount of capital invested. You could own tokens of multitude of real estate developments, and trade or keep them with great flexibility. Investors could easily verify ownership and conduct trade, without the need for involvement of various professionals.
Real estate investment opportunities would be opened up to more investors safely and transparently. Investors would also be able to diversify their real estate portfolio ownership ensuring less risk and higher returns.
Title transfer would be greatly simplified
Blockchain technology would make handling of funds and registration of properties a seamless and secure process. Instead of having individuals involved in a transaction depositing funds to the bank, real estate broker keeping them in trust accounts and then lawyers making adjustments on closing before issuing balances, the entire process could be automatically executed upon contract completion.
After each transaction step, the blockchain program would give specific instructions to handle deposits, transfers, and register properties to new owners upon closing. This would eliminate delays and potential for title fraud which is all too common in the real estate world.
Smart contracts would seamlessly and without potential for human error complete the real estate transfer of ownership in a fraction of Tim and with considerably less costs.
Automation benefits to all parties involved in a real estate transaction
Blockchain technology would create an impeccable real estate transaction experience which would boost the number of transactions as well as significantly reduce the costs. Real estate transactions are very costly, as beforehand mentioned, due to involvement of multitude of high paying parties. Automation, transparency, security and simplicity would encourage more real estate investment and open up the world of possibilities for real estate ownership.
The consumer confidence and security is at an all time low in real estate business, due to various reasons. Blockchain technology would create accurate and secure transfer of ownership greatly reducing risk and uncertainty. Consumer would experience more trust, excitement and less anxiety about the greatest purchase/sale of their life. It would be easy to invest globally without having to worry about currencies, local laws and regulations or potential for fraud.
While I strongly believe real estate will always be a people business primarily, this technology will slowly but surely become a part of all real estate transactions in the near future.
It’s difficult to say exactly when will blockchain technology completely transform the work of real estate agent and real estate business.There are many regulatory, political and technological hurdles which still stand in the way of this industry. As consumers evolve and with the coming of new, more technologically savvy generations its likely to happen within the next two decades. Will this eliminate the need for realtors? I doubt that. The reason being is that real estate sale are still very complex, emotionally charged transactions which require some degree of human involvement. Negotiations and relationship building will be difficult to replicate even with most advanced technologies.
Technological progress has the potential to enhance and simplify real estate transactions and ownership modalities, however the human element of trust, empathy and communication provided by the real estate agent will Always remain essential in the real estate business.
