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From the initial offer to closing the sale, the process of buying a home is probably the most complicated, complex and redundant that most consumers face. Blockchain technology could change it – eventually.
In Illinois, Cook County Recorder office officials want to clear the way. Meanwhile, technology companies are attacking all parts of the real estate transaction process with blockchain hooks and grapples.
In the last 10 years, blockchain technology has moved from experimentation to early adoption, especially by financial companies that use it to verify the aspects of transactions through "smart contracts". Now, the gospel of the blockchain is spreading in many industries, which see in it the potential for faster and more accurate data verification.
A blockchain is a decentralized database that maintains a "single source" of truth "of transactions or data – for example, a person's credit history, explains Alex Bennett, New York Symbiont's Technology Manager for Mortgage Loans .
The current property transaction process is a series of transfers of information from one party to another – the credit report to the creditor, the verification of the title to the buyer, the valuation at all, and so on Blockchain could create a single set of linked files in which all parts record their data.
Here's how it would work: property data is recorded in structures known as blocks, which are linked. houses consent to blockchain posts.The blockchain creates a single place for different parts to share private data on a single object, such as a transaction, thus establishing an agreement on the validity of the data. The blockchain process is based on mathematical algorithms that ensure the correct parts access to the block and can see who has made changes to the block.
Blockchain is attracting money and attention because it offers a very streamlined process for accessing data and ensuring that data is accurate. Since much of the real estate transaction process involves data verification, blockchain could redesign the process, experts say.
Last year, the Cook County action recorder office participated in a pilot project that explored the barriers to the adoption of blockchains and the potential gains from overcoming these barriers.
"Our main advantage is that it could reform the whole way the government develops and procures technology," says John Mirkovic, vice president for information technology and communications. "For real estate, it has the opportunity to remove people from the transaction that do not add value outside of the system, they provide value within a broken system, and if the system is adjusted, they become useless." [19659002] Title insurance is a great example. The gaps in the Illinois law allow property owners not to report valid claims against a property. This means that a potential buyer would not know a pledge or other claim against the property was pending.
Title insurance exists to protect creditors and real estate owners from such omissions.
But why, asks Mirkovic, are the omissions allowed?
"It is one of the few transactions that requires the purchase of private insurance to cover you from the public record," he says. "It is logical to fix the system."
The Illinois House Bill 5594, now in committee, would require the registration of all claims against real estate.
Mirkovic said that the prerequisite for the adoption of blockchain in his office was the flaws of the current state laws that allow data to be unregistered at the time of transactions, which would undermine the blockchain point: contain all the data available on the transaction in one place.
The main thing that the industry learned regarding the pilot with the recorder office, the entire property transaction process revolves around the buyer and seller requests, says Ragnar Lifthrasir, founder and CEO of Velox.RE, a blockchain-based real estate platform based in California. (Velox designed the pilot). If the buyer and seller agree to use a blockchain platform for their transaction, they expect the other participants in the transaction to come back online.
Overall, experts say, the adoption of blockchain will likely follow models of other technologies that are reshaping the way houses are bought and sold.
A decade ago, homebuyers learned how to apply for a mortgage online, emphasizes Debbie Hoffman, managing director of Symmetry Blockchain Advisors, an Orlando, Fla., A specialist mortgage blockchain advisory firm. Five years ago, homebuyers were introduced to digital signing of documents and now, he says, the homebuying industry is "discovering blockchain".
The direct effect for consumers is still a few years away and also depends on the wars of the industrial sector, but the end result that many predict is that all information about a house resides inside a block of data on that house, he says.
In the end, this could mean that title searches take place in minutes, not days. Also: all home improvements, permits, related loans and even construction companies that did the job could be incorporated into the data block for that property.
"Borrowers will have valid information for future purchases," says Hoffman. "And the same for individual owners: you will not need to provide your lender with your previous W-2 forms because it is in the chain, which will make storage and access to information much simpler."
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