Home Finance How Blockchain is Disrupting the Real Estate Market

How Blockchain is Disrupting the Real Estate Market

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In a nutshell, blockchain technology is a way to exchange transaction data in encoded and indelible ‘blocks’ of information that stack irreversibly on a ‘chain.’ This secure digital ledger is then sent to everyone that’s involved in the transaction, ensuring transparency and immutability. Blockchain was first introduced to the world as the tech behind cryptocurrencies like Bitcoin — a safe and efficient way to bypass the world’s traditional banking systems. And now, its benefits are being realized in the world of high-stakes real estate.

In Brooklyn, New York, for instance, it’s now possible to invest in a rental building with just a few dollars if you do it via blockchain-based tokens. CNBC reveals that a website built through the Ethereum blockchain platform sells tokens that can be used to purchase fractional shares of a five-unit rental building in Brooklyn. With just a few dollars, investors will be able to reap rental income that’s proportionate to whatever fractional shares they own. And in the thriving real estate hotspot that is New York City, even the smallest shares have the possibility of significantly growing in value.

Meanwhile in Italy, a $42 million 17th century mansion called The Palazetto inside the Palazzo Albertoni Spinola was auctioned via blockchain earlier this year. We recently reported how blockchain startup Propy teamed up with Holton & Hyland, a real estate brokerage firm, for the sale of this historic property, which is a UNESCO heritage site designed by famed Italian architect Giacomo Della Porta. Propy CEO Natalia Karayaneva explains that the efficiency, transparency, and integrity offered by blockchain makes it perfect for the real estate market — a statement that many professionals in the field seem to agree with.

After all, blockchain also has the potential to make the real estate market faster and more efficient by eliminating the need for escrow companies. Title or escrow companies function as third-party verification to ensure that both buyer and seller will stick to agreements already made. This process has long been deemed necessary to reduce or eliminate the risk of fraud from either end. The problem is that such services can cost anywhere from 1 to 2% of the property value itself — not to mention the fact that dealing with escrow companies takes extra time from both parties. This is where blockchain comes in. Its far-reaching distributed database can be used to verify either buyer or seller identities in lieu of escrow or title companies, essentially making the process faster and less expensive.

A new platform called Deedcoin is taking this concept even further by integrating blockchain into existing real estate practices. Customers can now input their information into Deedcoin and use it to connect directly to a local real estate agent for just 1% commission. This is a crucial development as licensed real estate brokers and agents usually ask for way more than this amount. A feature on the difference between real estate agents and brokers by Yoreevo, details the commission that each kind of professional receives. In places like New York, it’s almost always 5-6% of the property’s total value. This means that the blockchain-based real estate platform Deedcoin can lessen the cost of acquiring an agent by 5 percentage points. This might not seem like much at first glance, but in six, seven, or eight-figure deals, even such a small percentage can translate into considerable fortune.

While the use of blockchain in real estate transactions is just at its infancy, it’s only a matter of time before we see it take over many crucial parts of current real estate processes.

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