Blockchain technology continues to gain popularity. The trending news about blockchain technology, however, has not been focused on the digital currency it supports, like Bitcoin or Ethereum.
This new technology’s utility for streamlining business processes has gained momentum. This has made it a topic around boardrooms as of late.
From finance to marketing, blockchain technology is set to disrupt a number of industries. One industry in particular is real estate, changing how investments are made.
The very nature of its decentralized aim may be the catalyst for modern and efficient real estate dealings. This will be facilitated via smart contracts. However, fully understanding the utility and benefits is still up for debate.
“I believe that people have not yet begun to fully understand, or to trust, what cryptocurrency is, let alone try to understand what the blockchain is, and how it can help the real estate industry,” Mark Bloom, CEO of NetWorth Realty said. “Education is the biggest roadblock.”
To move some of the blockchain technology roadblocks, let’s take a deeper look at what smart contracts are, and how they will disrupt the real estate industry.
What Are Smart Contracts Exactly?
Smart contracts are supported by blockchain-based protocols, often created on the Ethereum blockchain. They are essentially self-executing contracts. When a smart contract is created, it is added as a “block” to the “chain,” secured, verified, and enforced.
The negotiation is between buyer and seller with no intermediaries. The agreement between the two parties is written into code and only those parties have access to the details of the agreement.
Details of the contract can’t be changed without both parties knowing. Once the agreement is met in full, blockchain-protocols initiate payments automatically. Essentially all transactions are transparent, secured, traceable, and irreversible.
Smart contract benefits are pretty clear, but how will this disrupt the real estate industry and property investments? Here are four reasons why:
- No More Middlemen
Who’s involved in traditional real estate contract negotiation, writing, and management? Lawyers, financial institutions, brokers, state and federal governments, and other entities are all involved.
These are called middlemen, and smart contracts can do away with all of them. “Smart contract platforms can take over functions usually done by intermediaries like banks, escrow services, and even legal services,” Roger Aitken of Forbes said.
Real estate managers can utilize smart contracts to fulfill real estate ventures with only the buyer and seller involved. This could put a portion of the money that goes into middlemen pockets into the real estate agents pocket instead.
Not to mention buyers and sellers can cut costs as well. It could be as high as two to three percent savings.
- Faster Real Estate Transactions
Have you ever bought a home or investment property? The process can be painstakingly slow due to a number of regulatory snags, and slow government processing.
However, smart contracts based by blockchain technology can change that. Transactions can speed up considerably by making a variety of real estate processes more efficient. For instance, verification of identity, funds, etc., and the search for properties in general could become quite speedy.
The blockchain-based protocols store and secure information faster, and can be recalled at lightning speed. Payments sent via blockchain technology is also streamlined. Once terms of a smart contract are met, money is delivered automatically.
- Affordable Real Estate Investing
Smart contracts and the blockchain are reshaping the investing landscape. Now everyone can invest in property by cutting the red tape for real estate investors and property sellers.
For example, you can utilize smart contracts to purchase a number of fixer upper real estate properties at a lower cost, and with less insight into your tax bracket. This could also open up the global property investment space to more people as well.
- Fraud Protection
Fraud is a serious issue in the real estate industry. In fact, the FBI found that almost $1 billion was stolen or nearly stolen from real estate transactions in 2017. Real estate fraud is another form of cyber-crime hackers are using to pad their pockets.
Due to the higher security the blockchain provides, smart contracts and their enforced transactions are nearly impenetrable to real estate fraud. Only the parties involved in the smart contract agreement have access via encrypted keys.
This is certainly of importance for any industry as data theft and leaks become a monthly occurrence for companies large and small.
Leverage Smart Contracts in Your Next Real Estate Investments
The current state of contractual agreements certainly has added costs via middlemen. The utility of blockchain technology can change that, especially in the real estate industry. What is to come? It is hard to tell, but many companies are beginning to see the value in the blockchain and smart contracts.
