Blockchain real estate transactions, records, and marketplaces could radically change the way we think about property. Current systems for tracking and trading real estate are disjointed and inefficient. There’s an enormous opportunity for blockchain to standardize and secure real estate data. Land records, property listings, leases and mortgages, and government property tax offices could all benefit from a blockchain real estate revolution.
The challenge, of course, is that real estate is an enormous industry with many players including lenders, brokers, local governments, and private citizens. Changing to a blockchain-based real estate system isn’t as simple as flipping a switch. That said, various parties are experimenting with blockchain all along the real estate value chain to find ways to integrate the new technology.
Land records are the foundation of real estate. Titles and deeds make it clear who owns what property. They power everything else that happens in real estate. However, they’re highly fragmented. Each individual local jurisdiction has its own rules regarding property records. Sometimes, these records aren’t even available online.
All that is changing. Chicago’s Cook County ran a pilot project for land records starting in 2016 that digitized all information and tested blockchain solutions. South Burlington, Vermont launched a similar pilot project in January 2018. Sweden recently implemented the second phase of its transition to blockchain land registry, using smart contracts on a private blockchain to facilitate transactions. That project will save Swedish taxpayers an estimated $100 million per year when it comes to full fruition.
Once we have property records listed and secured on the blockchain, it opens a lot of doors. Now, those records can easily change hands. We can use smart contracts to manage and trade those records as well.
Right now, if you want to sell a piece of property, your best bet is to list it with a local real estate agent. Sure, you could list the property for sale by owner, but you don’t have access to the multiple listing service (MLS) that real estate agents use to search for property when they have a new buyer.
The MLS is notoriously fragmented, walled off, and difficult to understand. Transferring property listings to the blockchain would mean opening up access to all available property for anyone to review. Along with the listing, you could include any terms or conditions that would need to be met for a successful sale. In the future, shopping for a home or an office space could be as simple as visiting an e-commerce website and adding the property to your shopping cart. Smart contracts behind the scenes could handle the rest of the transaction–transferring funds in exchange for the blockchain title to the property.
Smart Contract Property Management
One of the most exciting applications of blockchain real estate is smart contract management. Currently, any real estate transaction requires mountains of paperwork and hours of coordination between the bank, broker, seller, buyer, and local government. It’s possible to imagine a world where smart contracts handle most of that burden.
Not only that, but what if smart contracts handled rental agreements, commercial real estate tenancy, and other ongoing types of real estate transactions. Smart contracts could also help brokers automate due diligence on potential buyers/lessees. Blockchain real estate could create trust between parties on a level that doesn’t currently exist.
Crowd Ownership & Investing
Another exciting idea in blockchain real estate is crowd ownership of property. With blockchain governance models, a group of people could come together to purchase property and then vote on decisions about what to do with that property. Participants would essentially own a share of the property that they could then sell at any time.
Taken a step further, real estate investment trusts (REITs) and other real estate development investment vehicles could benefit from lower overhead as a result of blockchain.
What Happens to Realtors & Brokers?
The real estate industry is slow to change, and that won’t be any different with the blockchain transition. The truth is lenders, insurers, and other parties make a lot of money off the inefficiencies and challenges of navigating the current system. Blockchain poses a serious threat to these administrative and regulatory companies.
That said, there will always be a role for realtors and brokers in real estate. Even with blockchain real estate, people will want to see the homes or offices they’re considering purchasing. They’ll still need the help of an expert in the field to navigate such a large transaction and make sure the physical asset they’re purchasing is in good shape. Even if the transaction is much simpler and quicker, buyers will always need an expert guide.
Many trends in real estate are changing at the same time. Housing prices in cities are skyrocketing. Homeownership among young people is down. Brick and mortar retail is facing a threat from online shopping. Our neighborhoods are changing around us, and blockchain real estate is poised to become part of and accelerate that change.