Some industries develop to the point where everyone seems to know the rules. Even if you’ve never bought a house, there’s a good chance you may have seen your parents, or your friends’ parents, go through the process.
Get preapproved for a mortgage. Find a good real estate agent. Shop around. Make an offer. Get an inspection. Close the deal. Industries where things are almost always done the same way tend to be ripe for disruption when new technologies arrive.
Real estate is no exception. And blockchain offers some tremendous advantages over the way we currently buy and sell real estate.
The global real estate market is worth $217 trillion.
With that type of money on the table, it’s just a matter of time before blockchain begins to change the way the industry operates.
In fact, it’s already happening.
Buying With Bitcoin
Just look at the $24 million mansion that recently went on sale in London. Thinking about snapping it up? There’s just one catch — the owner will only accept bitcoin as payment. That owner is Lev Loginov, co-founder of London Wall, a property investment company. And guess what? His house isn’t the only property that will be on the market in bitcoins. The company has more properties that they’ll soon be selling exclusively in the cryptocurrency.
If you think that’s just a gimmick for the ultra-wealthy, then might I direct you to a more affordable apartment in Ukraine? Because an apartment there recently became the first property to ever be bought and sold using cryptocurrency. The sale was performed by Propy, a startup that has plans to put more real estate on blockchain.
So why are people doing this? What’s so much better about using cryptocurrencies to buy your next home? Why not just use good old dollars or euros?
Cutting Out The Middlemen
Well, for one thing, you can cut out quite a few middlemen when you buy or sell real estate on blockchain. Brokers, lawyers, banks — they can all be bypassed when you use a currency like bitcoin to buy or sell real estate. That also eliminates the fees and payments that traditionally go to middlemen like escrow companies. Even losing an extra two or three percent on the price of a house when buying or selling can be extremely costly. I have to assume that someone buying a $500,000 house would be happy to keep that extra $10,000 in their pockets. They still have to buy furniture, right?
Smart Contracts Are… Smarter
And it’s all agreed upon through smart contracts that are written into the blockchain. Once the terms of the contract are executed, they remain enforced at all times. They’re also visible on the blockchain, so the terms of your agreement remain transparent. Real estate transactions aren’t fast. They’re not easy to process. Blockchain can’t eliminate local regulations on housing, but it can speed up the process of ownership transfer and verification by using smart contracts.
Even the search for a home can be made much simpler. Wouldn’t it be nice if a home had a digital identity that included a list of former owners, repairs, additions, and the cost of running the home year-round? If houses or apartments had digital identities on blockchain, all that would be at your fingertips. Is it far-fetched to imagine swiping left or right on houses to narrow down your search?
Fraud Protection
Smart contracts can also help eliminate real estate fraud. False listings, forged documents, and rental scams will all be nearly impossible when digital ownership is linked directly to a property on the blockchain. In the U.S. we have problems with more elaborate fraud and scams involving listings, but in poorer countries, the fraud is sometimes much more straightforward. Someone simply gets into a database and changes records. Now they own someone else’s land. Recording final transactions to a blockchain makes is nearly impossible to tamper with them.
Affordable Investing
One of the next revolutions that’s going to shake real estate is in the investing sector. Traditionally, you have to be extremely wealthy to invest in a new building or property. It’s simply out of reach for most people. But with bitcoin and other cryptocurrencies, you can buy fractional ownership. So investors from every tax bracket can invest and participate in deals.
And owners of commercial real estate won’t have to sit on their hands while they wait for another multi-millionaire to buy their property from them. Instead, a huge group of smaller investors could combine their power and purchase the property.
The real estate industry isn’t exactly streamlined as it is. Buying a house usually requires plenty of time spent searching, trips to the bank, long talks with realtors, and a hundred other little annoyances. But blockchain can cut through much of the red tape surrounding the home buying process. So keep an eye on those listings, because some of them might be in bitcoin before much longer.