As the real estate industry continues to evolve, so too do the technologies being used within it. One of the more recent advances in technology is blockchain, which has the potential to revolutionize how real estate transactions are conducted. Blockchain technology offers a secure, transparent, and efficient way to store, transfer, and manage data related to real estate transactions.
Blockchain is a distributed ledger that can share records in a business network reliably and without any third parties interfering. Information in a blockchain database is kept in blocks that form a chain. Since no single user can unilaterally delete or alter any previous links in the chain, the data is guaranteed to be kept in chronological order. Therefore, you can use blockchain technology to create an immutable ledger to record and verify financial and other transactions such as orders, payments, and account balances. The system’s inbuilt safeguards prevent unauthorized transactions from being recorded and ensure that everyone has the same accurate information.
Advantages of Using Blockchain Technology in Real Estate
The potential applications of blockchain technology in the real estate sector are numerous, and they often cross over with those of other sectors. For instance, due to blockchains’ immutability and decentralisation, users may be able to save money, keep their information safe, and complete transactions with less hassle and delay.
Faster Closing
There is a lot of paperwork and communication involved in closing a real estate deal. The process is quite involved, requiring money transfers, contract reviews, and financial assessments. Therefore, it usually takes a long time. However, smart contracts, which are introduced by blockchain technology, can streamline many of these procedures. Each step of the negotiation process can be viewed as a separate “block” in the “code” of a contract, which can be added to one another to form a more complex chain. Once a certain point in the transaction has been reached, all involved parties will be informed that the next stage has begun.
Protection Boosted
The underlying blockchain technology is inherently safe. Due to the distributed nature of the ledger, any attempt to alter the recorded data or information can be quickly and easily detected and stopped. Those who perform due diligence and financial evaluations for potential buyers may find the decision to increase security measures particularly appealing. There are always potential weak spots to watch out for. However, the improved and secure ecosystem that could result from blockchain safety and security is worth considering.
Eliminating Intermediaries
Brokerages and individual real estate agents have historically dominated the real estate industry as intermediaries. Making introductions between buyers and sellers in exchange for a fee has long been the industry’s mainstay. Redfin reports that the typical commission for a real estate transaction is between 5% and 6%. Furthermore, this is just one area where intermediaries can drive up costs. Multiple Listing Services (MLSs) are private databases that provide real estate listings to paying subscribers (MLS). Brokers and agents must pay to use these databases. These databases and the blockchain have some obvious applications, and the technology may be able to be used to improve the accuracy and accessibility of these services.
Fractional Investment in Real Estate
Real estate investors have historically had access to large sums of capital, which they used to purchase commercial and residential properties in order to rent them out and generate a profit. Retail or small-time investors with limited resources can only participate through Real Estate Investment Trusts. Property owners could issue digital tokens (similar to how an investor would purchase
cryptocurrency) as shares in exchange for capital, making real estate investing a decentralised and tokenized process thanks to blockchain technology. Using the blockchain to keep track of transactions would attract more buyers.
Explaining the Impact of Web3 on Real Estate Transactions
The blockchain is currently undergoing an alternate future of asset ownership development. For all kinds of transactions to take place on the same platform as cryptocurrencies, this Web3 movement presents a decentralised ledger and open-source information management framework. So let’s learn more about web3 in real estate.
Efficient and Reliable
Applications developed in the Web3 universe will be efficient and trustworthy, offering maximum openness and extreme adaptability. These distributed applications (DApps) operate as smart contracts, recording transactions to produce non-fungible tokens (NFTs) that are functional and tradable on the blockchain. Payments can be made, verified, and received instantly thanks to smart contracts that define all of the terms of a transaction.
Evidence that can’t be refuted
Tokenization, which allows for the digital securitization of properties, will propel commercial real estate into the Web3 era. Underwriting can be simplified, and the need to verify the validity of title transfers is eliminated if all data pertaining to property ownership can be stored in a single location. In the future, these tokens will likely be used to facilitate the direct purchase and sale of real estate, including real estate shares, the handling of revenue streams, and the recording and authentication of property transactions. The decentralised chain can even record the underlying deed documentation for titles, providing greater assurance of ownership via an immutable transaction record and allowing on-site verification. There will be a tremendous time and paper savings.
Liquidity
Due to the decentralised nature of the blockchain, assets can be tokenized indefinitely into much more manageable chunks of ownership. Real estate ownership tokens, like cryptocurrencies, can be subdivided on their respective blockchains into smaller, fractionalized investments that still adhere to the covenants and values defined by the smart contract coding but on a more equitable basis. Automated processes ensure that all purchases are made following the owner’s predetermined criteria. Instead of filling out a mountain of paperwork, a quick purchase can be made directly over the internet.
Conclusion
The fact that blockchain technology can be used to record land titles is another one of its selling points; this is a traditionally difficult area to access because most relevant data is still stored inaccessibly in the offline world. With the added benefit of near-perfect openness, this technology has the potential to drastically shorten the time it takes to record and transfer titles.
