Blockchain can potentially solve these 5 critical problems in the real estate industry

Blockchain is gaining ground in the real estate industry, raising eyebrows about the justification for this technology’s use in a sector that is already worth more than $326 trillion.

Blockchain is far more than a gimmick that sellers of luxury penthouses can offer their ultra-rich clients. It can help authorities, businesses and ordinary people who want to buy or rent a home.

Here are five critical aspects that blockchain technology has the potential to improve or completely transform:

1. Property search process

The whole process starts with a property search, and this is where the first problems appear.

Statistics indicate that 93% of US home buyers use an online site to find a home. These sites – primarily real estate marketplaces and platforms – connect buyers and sellers and allow potential buyers to use filters to narrow down the specific criteria for their ideal property. However, not all Web2 applications are without flaws.

First and foremost, the property information on these websites is often inaccurate, out of date or incomplete. Furthermore, data fragmentation across multiple listing platforms can lead to confusion. Blockchain technology, on the other hand, has the potential to solve these problems in many ways.

Instead of manually entering the same information about a property on multiple platforms, agents and sellers can only enter it into the blockchain database once. Second, data entered into the blockchain is irreversible and cannot be changed. Finally, future platforms may begin to handle tasks such as listing, payment and legal documentation.

2. Commissions and additional fees

The main winners in commercial and residential real estate transactions are the middlemen who connect buyers and sellers: brokers, real estate agents, bankers and lawyers.

The faster the parties want to close the deal, the more they have to pay the mediators, which means they lose a lot of money. However, a report by Deloitte says that blockchain could soon change how real estate transactions work.

With virtual tours, direct communication between buyer and owner, and a complete paper guide, people can cut out middlemen and save money on deals without taking any risk.

The amount of money saved will be huge since real estate agents take an average of 6% for each deal. So if you bought a $200,000 home, you would save an extra $12,000 on the real estate agent’s services.

3. Financing and loans

Financing is another major problem in real estate. Buyers have to wait days or weeks to get their mortgage approved.

Loan origination and guarantee remain manual and unstandardised. Security structuring is left up to interpretation, and avoiding double armoring of assets requires significant effort. Decisions about trading and asset servicing are often based on outdated information. Finally, cash reconciliations across the lifecycle often cause settlement delays, affecting the investor’s cash flow.

Traditional financial institutions can benefit from blockchain’s single version of verified information, secure data sharing, immutable transaction monitoring and real-time payment settlement. By digitizing a loan or mortgage, relevant data such as ownership rights and payment history can be programmed to support future servicing decisions. Smart contracts can collect and distribute payments to recipients while reporting to regulators.

Blockchain-based real estate platforms make it easier to buy a home while reducing the risk of fraud. The same can be said about mortgage applications. Any errors will be easy to detect with data on a digital ledger.

4. Decision-making for tenants and landlords

You only have to remember how the housing bubble burst in 2008 to realize how important data transparency is for market stability. Investors and mortgage applicants would be scared off if the banks couldn’t hide the real numbers.

What has been done cannot be undone, but if the data is available to all network peers and immutable, it can prevent the next crisis. People can use blockchain to check all documentation and find the best market option for their budget.

Potential tenants can also benefit from blockchain integration. They can find out in advance whether the landlord is keeping up with mortgage payments, removing a source of stress.

5. Property title administration

Last but not least, blockchain has the potential to make ownership transfers easier and faster by removing the human factor from the equation. Today’s system of property rights is often fragmented and difficult to administer. Bureaucratic institutions take longer to process information about changes of ownership, which can cause problems in court or when selling property.

Each house or apartment will have a digital title that will be stored on the blockchain. It will make it much easier to keep track of ownership. But blockchain will not necessarily eliminate the need for documentation. On the contrary, putting technology in place will make paperwork faster and more efficient. If there is an error in a document, officials can always check the information on the blockchain to find it.

Keeping data in a secure location is also an excellent way to prevent fraud. Even if fraudsters obtain the owner’s signature and other information, they will not complete transactions because the most critical information is still stored on the blockchain and they have little chance of accessing it.

Prospects for the real estate industry in the age of blockchain

I do not want to say that one day the blockchain will completely dominate the real estate market, eliminating the need for paperwork and various types of consultants. Everything I previously suggested should be seen as an alternative to the traditional process.

Blockchain significantly simplifies life for those who believe in artificial intelligence instead of humans. Any concerns that the technology is not reliable enough stem from a misunderstanding of its importance, reliability and availability. However, large companies are likely to solve this problem by educating clients about what they can achieve if blockchain is integrated. Adoption always begins with those whom people trust.