Blockchain technology forms the backbone of bitcoin transactions, but new reports suggest that it could pave the way for the next generation of real estate transactions too. From what experts are suggesting, it seems that there is plenty to gain in the real estate sector – from faster transactions to lowering the incidence of fraud.
Why the real estate sector needs this change
The real estate sector is prime for the application of blockchain tech, a secure tamper-proof database of transactions. With homeowners selling their home on average every 5 to 7 years, the technology has the potential to impact millions. Especially considering the fact that most people shift home as many as 11.7 times during their lifetime. So far, blockchain technology has been considered only for use in transactions involving valuable international art or other high value goods. After the pharma sector, real estate experts are now looking at the possibilities.
Of late, as sales have begun picking up again and demand is outstripping supply, homeowners and buyers are both eager to close transactions as fast as possible.
Faster, cheaper, safer
The process of selling or buying a home is long-winded due to the legal aspects, documentation and verification. Laws surrounding home inspections, utility inspections, coupled with numerous sales restrictions, slow down the time taken to close a deal and complete a transaction. The financial verification leg currently carried out through third party verification, using escrow – designed to be a safety net against fraud – can actually slow down the process. In addition it costs homeowners money. Instead, a blockchain distributed database could be leveraged to determine authenticity quickly (and minus the cost of hiring the third party) so that the ownership can be transferred immediately. The technology is something Stuart Appley, the CTO of San Francisco based commercial real estate company Shorenstein Co. sees potential in. In a report in The Wall Street Journal, he was quoted as saying that the potential is huge.
Real estate scams and fraud are rife, and time-strapped buyers and sellers circumvent safety procedures to get the deal done quickly. Forgery and fabricated documents, which top the list of modes of real estate fraud, can be avoided with a database as incorruptible as Blockchain. The digital ownership certificates generated would be unique and near impossible to replicate.
It will also make transactions and the market much more transparent if ledgers are built on blockchain. Data on lease prices of other similar properties would be much easier to find. In addition, information on prior owners and tenants, the age of the property, information on buildings nearby, and more, would be quick and easy to access.