{"id":618,"date":"2019-06-18T20:54:25","date_gmt":"2019-06-18T20:54:25","guid":{"rendered":"https:\/\/rankmyagent.com\/agent-resources\/?p=618"},"modified":"2019-06-19T05:01:02","modified_gmt":"2019-06-19T05:01:02","slug":"blockchains-and-the-future-of-real-estate","status":"publish","type":"post","link":"https:\/\/rankmyagent.com\/agent-resources\/blockchains-and-the-future-of-real-estate\/","title":{"rendered":"Blockchains and the Future of Real Estate"},"content":{"rendered":"\n

The rising price\nand popularity of cryptocurrencies was one of 2018\u2019s biggest stories and\nresulted in interest in crypto\u2019s underlying technology: blockchain. <\/p>\n\n\n\n

Blockchains are a\ndigital database that records the transactions and tracks assets through a decentralized\nnetwork. This technology can allow us to record transactions into a database\nowned by no central authority. Both intangible assets\u2014like copyrights and\npatents\u2014 and tangible assets\u2014like homes or cars\u2014can be recorded in this system.\n<\/p>\n\n\n\n

Blockchains will\nlikely affect every industry in the coming decade and reduce the number of\nintermediaries that both sellers and consumers have to endure. The real estate\nindustry is no different, and the applications of blockchains will not only\nmake the whole transaction process more convenient but also improve how we work\nwith contracts and title records. <\/p>\n\n\n\n

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Transactions<\/h2>\n\n\n\n

Silicon\nValley-based startup Propy<\/a>,\nknown as a \u201cglobal property store with a decentralized title registry\u201d,  made headlines last year <\/a>by facilitating a real\nestate deal for 10 acres of land through blockchains. Owing to the technology,\nthe buyer and seller started and completed the deal despite being in different\ncountries and despite never meeting in person. <\/p>\n\n\n\n

Details of the\ntransaction\u2014such as the reservation and deed\u2014were recorded on a blockchain so\nthat all the stakeholders of the deal could verify it. Documents were all\nsigned through e-signatures, and the funds and the legal needs of the deal were\nhandled through smart contracts. <\/p>\n\n\n\n

If we look a\ndecade back, it\u2019s unlikely any realtor would have thought a real estate deal\ncould be made all in front of a computer. Propy now sells various residential\nand commercial properties in the world’s most popular cities and all online\nthrough their blockchain system. And because all the information relating to\nthe deal is in one central location\u2014the blockchain\u2014it speeds up the overall\nprocess. Parts and pieces no longer go missing. <\/p>\n\n\n\n

Smart\nContracts<\/h2>\n\n\n\n

Smart contracts\nare likely the most significant blockchain application to affect real estate.\nThroughout the real estate-buying process, there are lengthy and complex legal\nprocedures that requires intermediaries like lawyers and realtors to aid the\nbuyer and seller. <\/p>\n\n\n\n

Smart contracts\nis a technology that uses blockchains to facilitate and enforce the performance\nof a contract. It allows a smooth transaction without third parties like\ntrustees or lawyers. Transactions are recorded on the blockchain and are\nirreversible. Parties cannot interfere with what was agreed upon and the\nagreement can only be changed with a new agreement. Information is also more\nsecure on the blockchain, owing to its decentralization. <\/p>\n\n\n\n

But a flaw with\nthis technology is that it can only determine the completion of a contract if\nthe task is quantitative like whether a deed was transferred or a payment was\nmade. Smart contracts cannot execute actions with qualitative tasks like\nwhether an area had been properly cleaned. <\/p>\n\n\n\n

SMARTRealty<\/a>\nis another startup that joins the worlds of real estate and blockchains. This\ncompany allows the creation of customizable and automated smart contracts for\nuse in real estate transactions. Through the power of blockchains, parties are\nnotified of breach or termination of contracts. Customization can allow\ncompliance with local statutes, and the use of SMARTRealty ranges from the\npurchase and sale of a property to rentals and much more. <\/p>\n\n\n\n

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Smart contracts\ncan automate the return of deposits for tenants and reduce conflict in\nlandlord-tenant disagreements. For a purchase or sale, smart contracts can also\nhold funds until all the necessary documents are signed and transferred. This\nultimately reduces the need for lawyers in real estate, as contracts will be\nless ambiguous and compliance with a contract is automated. Escrow accounts and\ntrustees will also have a reduced function, as funds can be held in the\nblockchain until certain transactions are completed. <\/p>\n\n\n\n

Another\napplication of smart contracts is with mortgage payments. Mortgage payments are\na quantitative action that a smart contract can consider. And if the property\ndeed is held in the blockchain as well, the smart contract can automatically\nrevert the ownership of a property to the lender if the borrower breaches the\ncontract (such as a missed mortgage payment). <\/p>\n\n\n\n

The issue with\nthis arrangement is that in reality, a property is unlikely to foreclose upon\nthe borrower breaching the mortgage contract. The lender commonly works with\nthe borrower\/homeowner to arrange a payment schedule that works for both\nparties. Foreclosures are used as a last resort.  <\/p>\n\n\n\n

Title\nRecords<\/h2>\n\n\n\n

Title records are\noften stored locally by a city or municipality. But the creation of blockchains\nhas created a new alternative for digital storage. Blockchains can create a\ndigital token to act as a land title and keep all the records within its\ndatabase or ledger. These records are securely stored and accessible both\ninstantaneously and globally. Buyers and sellers can reference the history of\nthe title blockchain to see verification\u2014eliminating the need for a lawyer to\nperform a title search.  And the enhanced\nsecurities of blockchain storage can ultimately reduce fraud and tampering. <\/p>\n\n\n\n

Because of these\nefficiencies, a Goldman Sachs 2016 study found that blockchains could result is\n$2-4 billion in savings<\/a> for title insurance\ncompanies through reduced title search costs and reduced risks among other\nblockchain benefits.  This would likely\nreduce the premiums that title insurance companies charge. <\/p>\n\n\n\n

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However, while blockchains will reduce the roles of intermediaries, the technology won\u2019t eliminate them completely. There are factors such as bankruptcy and divorce that blockchains cannot record, and this means a lawyer or bank will have to account for it. And while title insurance companies will have less labour and risk to deal with, the insurance is still needed to cover tax and nuisance liens and municipal code violations. A full blockchain takeover of the real estate industry is still far away. A few startups have their foot in the door and there will definitely be more. It’s unknown how professionals will adapt to block chains \u2014be it real estate professionals, lawyers, or insurance companies – trusted advisors will always be needed by the public and will be in demand.<\/p>\n","protected":false},"excerpt":{"rendered":"

The rising price and popularity of cryptocurrencies was one of 2018\u2019s biggest stories and resulted in interest in crypto\u2019s underlying technology: blockchain. <\/p>\n","protected":false},"author":1,"featured_media":622,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[144,72],"tags":[],"class_list":["post-618","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-learning","category-learning-centre","odd"],"_links":{"self":[{"href":"https:\/\/rankmyagent.com\/agent-resources\/wp-json\/wp\/v2\/posts\/618","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/rankmyagent.com\/agent-resources\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/rankmyagent.com\/agent-resources\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/rankmyagent.com\/agent-resources\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/rankmyagent.com\/agent-resources\/wp-json\/wp\/v2\/comments?post=618"}],"version-history":[{"count":3,"href":"https:\/\/rankmyagent.com\/agent-resources\/wp-json\/wp\/v2\/posts\/618\/revisions"}],"predecessor-version":[{"id":635,"href":"https:\/\/rankmyagent.com\/agent-resources\/wp-json\/wp\/v2\/posts\/618\/revisions\/635"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/rankmyagent.com\/agent-resources\/wp-json\/wp\/v2\/media\/622"}],"wp:attachment":[{"href":"https:\/\/rankmyagent.com\/agent-resources\/wp-json\/wp\/v2\/media?parent=618"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/rankmyagent.com\/agent-resources\/wp-json\/wp\/v2\/categories?post=618"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/rankmyagent.com\/agent-resources\/wp-json\/wp\/v2\/tags?post=618"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}