Role of blockchain technology in real estate

Platforms and Marketplaces

Real estate technology has mostly been concerned with listing and connecting buyers and sellers. However, the blockchain introduces new ways to trade real estate and can enable trading platforms and online marketplaces to support real estate transactions more comprehensively.

No Intermediaries

Brokers, lawyers, and banks have long been part of the real estate ecosystem. However, blockchain may soon usher in a shift in their roles and participation in real estate transactions. New platforms can eventually assume functions such as listings, payments, and legal documentation. Cutting out the intermediaries will result in buyers and sellers getting more out of their money as they save on commissions and fees charged by these intermediaries. This also makes the process much quicker as the back-and-forth between these middlemen gets cut.

Liquidity

Real estate has long been considered an illiquid asset since it takes time for sales to conclude. This isn’t the case with cryptocurrencies and tokens since they can readily be traded for fiat currencies through exchanges. However, as tokens, real estate can be readily traded. A seller doesn’t have to wait for a buyer who can afford the whole property in order to get some value out of their property.

Fractional Ownership

By allowing fractional ownership, the blockchain also lowers the barriers to real estate investing. Typically, investments would require significant money upfront in order to acquire property. Alternatively, investors with could also pool their money to acquire bigger ticket properties. Through the blockchain, investors would simply have to access a trading app to buy and sell even fractions of tokens as they see fit. In addition, fractional ownership would also help them avoid managing the properties themselves such as maintenance and leasing.

Upkeep alone can add up to significant costs and dealing with tenants may be a troublesome effort. This also affects related activities such as lending where property owners often have to put their properties as collateral for loans in order to get quick access to cash. Depending on the terms, property owners may also continue enjoying use of their property.

Decentralization

Blockchain commands trust and security being a decentralized technology. Information stored in the blockchain is accessible to all peers on the network making data transparent and immutable. One only has to go back to the housing bubble crash a decade ago to see how greed and the lack of transparency in the part of institutions can have catastrophic consequences. A decentralized exchange has trust built into the system. Since information can be verifiable to peers, buyers and sellers can have more confidence in conducting transactions. Fraud attempts would also be lessened.

Costs

This transparency can also trim down all associated costs with real estate transactions. Beyond the savings in cutting out intermediaries’ professional fees and commissions, there are other costs such as inspections costs, registration fees, loan fees, and taxes associated with real estate. These costs even vary depending on the territory that has jurisdiction. Like intermediaries,these can be eliminated from the equation as platforms automate these processes and make them part of the system.

Towards True Peer-to-Peer

Through the blockchain, more people will be able to access the market where transactions can now be made more transparent, secure, and equitable. Real estate transactions may soon become truly peer-to-peer activities with blockchain-powered platforms doing most of the work.