In continuation of the blockchain series at TheBlockchainAcademy, this post is dedicated to blockchain technology application and potential for real estate transactions. A well-recognized trend in the real estate industry is information asymmetry related to the real estate transaction. In the last few years, the sector has turned out to be more transparent. With crisis as the major reason, the demand for information and alignment of the ethical practices and standards seems greater than ever before.
The real estate industry stakeholders recognized and talked about the need for having a central database, resulting in the establishment of stiVAD, the foundation for Real Estate Data, in 2011. Technical advancements and increasing availability of geospatial (open) data is expected to enhance transparency and decrease information asymmetry in the real estate sector in the coming years. Added value and distinctiveness is to be determined in combining knowledge of various fields and interpreting big datasets. While big data is exploring its way in the real estate, the next disruptive innovation is also knocking at the door of this industry, and that is blockchain.
The blockchain brings a complete shift from the conventional ways of doing real estate transactions. It puts authority and trusts in the distributed network instead of in powerful centralized institution. In blockchain based transactions, there is no middleman involved, including banks, governments, brokers, insurers, notaries and even cash. The blockchain takes this element of the transaction over from the professionals. It enables unique monetary data to be exchanged through a distributed ledger. The entire history of the transactions could be followed via blockchain and is accessible to public, so the transparency is there in full swing.
As predicted by bold experts, the institutions at the center of present transaction system will be vanished in just a couple of years from now. However, conservative ones state a relatively slow effect on the short term for this technology application other than payments. The reality, though, is going to be somewhere between these two points, it seems. Real estate is going to be another industry that is expected to exploit blockchain. We have spotted the three benefits of blockchain for the real estate sector.
· Complete transparency
Information asymmetry is related to the past with blockchain and a level playing field is developed. All necessary data for a transaction is saved in the data base is easily accessible for both buyer and seller involves in a real estate transaction. The relevant information regarding the prices of comparable objects is also available for everyone and not just for a few people or at a high price. The complete transaction history could then be followed via blockchain. Eventually, middlemen or due diligence will vanish when this technology is applied in the marketplace.
· Eliminating the chances for fraud
Having a complete transparent system of the real estate ownership and possibility to track down the history of the transaction of each property within the market, the risk of fraud is reduced. Every year, a huge sum of money is put into verification of ownerships, rights and the titles transfers. Blockchain makes accurate records which determine the present owner and gives evidence that he is indeed the owner. This makes it safer, easier and faster to buy and sell property.
· Accelerating the real estate process
Blockchain enables smart contract development. Using smart contracts that are based on blockchain, asset exchange could fulfill particular instructions encoded as a part of real estate transaction to be executed at once when agreed criteria are fulfilled. All the computers of the participants within the network can validate each transaction.
The property transactions can be managed on a blockchain in the same way to how payments among parties are managed using the digital currencies such as Bitcoin. Each coin presents a unique piece of land or house and exchange is just like in any other truncations using the digital currency. Seeing all the progress being going on, we expect that the blockchain based business in the real estate will not form overnight. While this technology gives certain interesting prospects for coming years, highlighting such as advanced protocol with a quite administration-based industry will take at least few years.