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Digital Journal: what is the current state of the real estate market?
Jeff Berman: I would like to reformulate the question as "what is the current state of the real estate market compared to vis technology"? The real estate sector has been historically slow in adapting and adopting new technologies, but there has been a dynamic change in the way the real estate community looks and sees real estate technology.
Just a few years ago, owners, developers, brokers – many of the major stakeholders in space – did not accept the idea that technology could be implemented in their businesses in a positive way. Whether they were "if it's not broken, why fix it" or simply they were not aware of the tools that came on the market, technology was not seen as a priority. But in the last few years, the industry has woken up and we are starting to see stakeholders from across the industry embrace the cretech vigorously. "Tech" (as generalization / capture everything) is no longer a "beauty to have" but quickly becomes a "need to have".
DJ: how was this market interrupted by digital technology?
Berman: I will give a practical and real example. Most real estate transactions, especially those in which a lender is involved, require an assessment. The traditional way of procuring and performing an evaluation is decidedly analog. An expert visits the property of the subject, takes photographs, scribbles a few notes and searches for compositions with the typical output being a long relationship with an evaluation justification. And it has been done this way for decades. Two entrepreneurs working in one of New York's most successful valuation companies thought "there must be a better way to do it."
They created Bowery Valuations – the world's first licensed valuation company. Bowery has created a mobile-first natural language evaluation platform that allows an expert to do his or her job in one third of the time, while creating a previously unavailable set of data. Camber Creek drove its seed round and since then Bowery has continued to gain traction and market share. Bowery's platform is just one example of how the real estate market is upset by digital technology and we are witnessing equally exciting technological transformations in all areas of real estate.
DJ: How important is the blockchain for companies?
Berman: I'm glad you expressed the question as "how important it is to be." There is a lot of hype about Blockchain currently spurred largely by the crypto currencies. But inside, blockchain is simply a publicly available digital ledger that contains transactional records in chronological order. In the short term, I see the blockchain potentially used for smart contracts, payments and supply chain management with great effect. In the long run, we will see … because while blockchain could very well become the transformative element for a wide range of companies, I would like to warn of patience before jumping on the bandwagon.
We at Camber Creek are actively looking for a range of opportunities in space and are regularly engaged with the owners and real estate operators of our network to monitor the feasibility of various blockchain solutions.
DJ: how can blockchain affect real estate?
Berman: The Blockchain protocol can be used by the real estate sector in various ways: the blockchain-enabled smart contracts could allow the closing of a real estate transaction without free brokerage by company or lawyer title. Making payments and transactions easier is another exciting opportunity. That said, real estate stakeholders have traditionally relied on market opacity to create alpha.
The idea of the universal ledger – enabled by Blockchain – has the potential to cause a seismic shift on the culture of the real estate industry by creating unrestricted access to all types of information.
DJ: what are the current weaknesses in the real estate market that blockchain can face?
Berman: There are a number of applications in which Blockchain could strengthen areas of the CRE market that are weak. Negligence and fraud come to mind – particularly with regard to land tenure registers / securities and mortgages. These problems are more acute in some developing countries where real estate frauds are more common and we could see the blockchain have a positive short-term impact in those environments.
Human error could become a thing of the past and the Blockchain ledger would make fraud more difficult as anyone could verify who owns the record of a property. Smart contracts can also address a number of weaknesses in the transaction process by "default" rules based on rules / logic for execution, in order to eliminate the need to involve third parties. And this could help speed up the transaction process by saving time and money.
DJ: Tokens are necessary for this?
Berman: A token is essentially a unit of value – the "proof" of ownership of something about the property similar to blockchain or an information. A good example of the real world is when Cook County (in Illinois) conducted a blockchain experiment in 2016, where it issued a digital token and a paper act for homeowners.
The idea was that the transfer of tokens was proof of a change of ownership and that eventually the tokens could become the standard that would then form the basis of a national property register in which the history of ownership of a given property could be proven by the token transactions passed. So are tokens useful? Yes. Needed? Maybe not. There is at least one platform – IBM Fabric – that does not use a token-based system.
DJ: What are the benefits for businesses and consumers?
Berman: We have already discussed transparency and security. Another advantage is liquidity. Think about how stocks were traded before electronic trading platforms became ubiquitous. You would call a broker that would call a market maker who would call the trading floor where the stock would be traded.
Now you can buy shares on your mobile device. Blockchain potentially offers the real estate industry a level of liquidity that could make it possible to trade small slots of specific properties in an impossible way today.
DJ: Are other types of digital technology planned to destroy the real estate industry?
Berman: Absolutely. The real estate sector is a real white space for technological interruptions. The awareness that the traditional way of doing business is outdated is helping to promote the development of everything from IoT products for buildings (such as Latch) to applications that open previously closed markets (such as TaskEasy) to platforms for managing property information commercial and residential (such as VTS and Nestio, respectively). The set of opportunities is practically unlimited and we at Camber Creek are excited about the future.
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