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Property sales take a long time to complete. There are a number of reasons for this, although delays are often avoidable, some are inevitable.
With so many moving parts and individuals involved in the process, it is often difficult for the buyer and seller to have a clear view of each stage and the whole process becomes a big blur.
However, huge developments are starting and are about to revolutionize the way real estate transactions take place, the protagonist in all of this is blockchain.
I’m sure many of you reading this are thinking, “What is blockchain really?”. While there is no simple answer, essentially blockchain is a super secure way to record transactions, contracts, and transfer data.
One feature that makes blockchain such a game changer is that the information it contains is not stored in one place, but is instead stored on multiple different computer systems, known as nodes. Each node has a complete copy of the ledger and each transaction proposed to be added to it. One thing to note, blockchain is a decentralized type of ledger, not the other way around.
New “blocks” of transactions can be added to the ledger and old transactions cannot be overwritten. For these reasons, the design of the blockchain is said to be virtually incorruptible, making it a perfect technology for recording financial transactions.
Blockchain uses cryptographic hash functions to verify the authenticity of a piece of data, block, that enters the chain. There are numerous companies at the forefront of blockchain technology development and greater transparency during the buying process. Some notable start-ups in the residential and investment space include Coadjute, Propy, Directly Sourced, and YourKeys.
Let’s take a look at how blockchain could affect and revolutionize the real estate industry and ultimately help real estate agents:
1. Land registers could use blockchain to transform land ownership and land registration transaction processes
In April 2019, HM Land Registry conducted the first real estate transaction using blockchain technology. The sale of a recently refurbished semi-detached house in Gillingham had previously taken 22 weeks, with all parties involved testing the time it takes to execute the sale and purchase via a blockchain prototype. It took 10 minutes. You can read more about the test here. The test ended successfully and demonstrated the exciting possibilities blockchain technology could allow, including:
– Faster real estate transactions
-More confidence in the transaction
-More security levels
– Increased transparency for the participants in the transaction
2. The tokenization of properties could greatly increase liquidity in the market
The term tokenization of assets is often associated with the blockchain. This concept is directly applicable to real estate and asset markets such as properties could be tokenized.
As mentioned above, completing a real estate transaction is often cumbersome and inefficient and involves multiple intermediaries. If properties were to be tokenized and sold to multiple buyers or investors, the purchase price could be much lower than it would be if the property were sold to a single buyer. This could open up attractive opportunities for both investors and new buyers.
Similarly, if tokenization became commonplace, property owners would have far more options when it came to selling their home.
Selling homes outright would continue to remain an option; however, tokenization would also give each property owner the ability to sell a portion of their home and keep a portion of it.
3. Less practical property transactions
It is typical for a lawyer to perform due diligence on a real estate transaction to ensure that the seller of a property actually owns it. The attorney further states that the title of the property is clear.
Blockchain is likely to significantly reduce the need for lawyers’ involvement during real estate transactions. The “shared ledger” nature of blockchain technology would ensure that the transaction was recorded in a highly secure and tamper-proof manner. Given the presence of the irrefutable digital file, no lawyer would need to check it.
These aren’t the only ways blockchain will change the real estate industry in the future. However, these are shaping up to be three of the most significant changes that are fast approaching.
All three of these aspects have the potential to dramatically change the real estate industry in the coming years and ultimately make buying property much safer and more accessible for many people in the years to come.
* Miles Jacob is the founder of Directly Sourced
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