It’s been hard to implementing the blockchain as a practical tool for real estate, but it’s easy to identifying the benefits of doing so.
Let’s start with automation. Buying, selling, and investing in real estate are paperwork-intensive processes. Financials, background checks, and legal documents are inherent to nearly every real estate transaction. So why not automate it? Smart contracts and algorithms can come together to lower transaction costs, increase efficiency, and speed up property transfers.
Then there’s the matter of liquidity. Tokenizing real estate on blockchain-powered platforms opens the door to a global real estate marketplace. Investing in tokenized properties would no longer be relegated to the commercial realm. Condos, homes, and parcels of land could become revenue-producing assets for any stripe of investor.
These are some of the potential benefits of blockchain for the real estate industry. We’ll have to wait and see if it becomes reality.
Here’s what the experts have to say about the benefits of blockchain for real estate.
1. Perrin Quarshie, CEO and Founder at RealBlocks
“The ability to provide liquidity for illiquid assets. Investors of non-traded REITs, for example, are typically required to hold onto their interest for years (or incur major penalties), but the ability to trade their tokenized interest in a P2P marketplace will allow for unprecedented liquidity. I think larger funds that are struggling to get buy-in from younger investors will benefit from being able to offer more liquid investments. Additionally, an implementation of this type of technology (and other blockchain applications) shows a commitment to forward-thinking problem solving.”
2. John Kang, Co-founder and CEO of Reasi
“Financial savings. Considering today’s tech capabilities, P2P is the most efficient way to transact and blockchain its best tool. When expensive third parties are replaced with smart contracts, all remaining stakeholders improve their financial returns. For example, a mortgage lender today earns about 4-5% (or ~$10k) on the average US loan, paid by the borrower and end investor. In an ideal future, that home borrower and end investor would split that $10k through an automated blockchain mortgage.”
3. Mike Cagney, CEO and Co-founder of Figure
“Ultimately, it’s likely to be liquidity. Real estate has historically been a more local market, subject to local supply and demand as well as economic factors. Diversification has been challenging outside of commercial investments and REITs. But blockchain offers a unique opportunity to open up access to the residential markets in aggregate and at the individual unit level once the challenges of title are solved.”
4. Ali Tumbi, Founder of Global REIT
For example, today’s world usually requires buyers and sellers having to be physically present at the same time, submit cumbersome paperwork, and go through many intermediaries such as banks, lawyers, notary public, developers’ offices, etc. in order to perform a simple sale. Using blockchain technology, transactions can be conducted using a self-executing smart contract. This contract is like a digital escrow account, which only transfers money and ownership once all parameters and requirements are met, such as the submission of digitally signed and verified documentation. Once all the requirements are fulfilled according to the smart contract, the buyer’s money is instantly transferred to the seller, and in turn the new ownership is instantly reflected and recorded on the blockchain.”
5. Piper Moretti, Founder and CEO of The Crypto Realty Group
“Automation! I say this all the time – real estate agents are cat herders. Every transaction requires us to gather information from multiple sources, and disseminate that information once it's verified. Blockchain isn't the magic pill, but I imagine a point where we can have all or most of the information on any particular transaction at our fingertips, knowing that it's transparent and verified, making it easier for our clients.”
6. Mike Liddell, CEO of AssetBlock
“Overall, blockchain will bring efficiency to the real estate investment space. For investors, blockchain represents the opportunity to allow for more direct access and liquidity. For real estate professionals, there is the potential to lower the cost of capital and the ability to grow their business.”
7. Edward J. Tolchin, Principal at Offit Kurman
“The two largest benefits are trustworthiness and decreased transactional costs. These two benefits are related. We use intermediaries such as brokers, lawyers, accountants, title companies, and others to add trustworthiness. These multi-tiered professionals also add tremendous costs to transactions. Blockchain platforms will create a trustworthiness that will obviate the need for many of the intermediaries, or at least alter and decrease their contributions to a deal. The resulting cost reductions are a great benefit, and will likely drive the development of blockchain in the real estate industry.”
8. Itzik Spitzen, CTO and Co-founder of LeasePilot
“In the short-term, the real estate industry will benefit from trust. In the long-term, the biggest benefit that blockchain brings is transparency and liquidity. While landlords may not be fully onboard with data transparency just yet because they see a competitive advantage in local and private data, I believe it is an inevitable process which will result in the entire industry becoming better and more comparable to other markets, such as the stock market.”
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