Marina Generalova is a cryptocurrency and fintech journalist and content creator. She writes about blockchain, cryptocurrency and investments and runs a content agency that helps fintech businesses fill their websites and social media profiles with engaging articles and visuals. Visit her Medium blog for more.
The real estate buying and selling process is well known as a complicated and slow one, but blockchain has already started to improve it. We have real cases of blockchain-based property sales in the US, Japan and France, then, legal entities in Dubai, UAE, China, the UK and several countries are also experimenting with implementing the technology.
The same as the first model of iPhone that was met with enthusiasm, but didn’t become mainstream straight away in the first year, blockchain is getting a lot of attention, but only a few people in the real estate sector understand how much it can affect their lives.
The opportunity to process a deal completely online does simplify the process and technically eliminates the requirement for intermediaries, but it doesn’t replace the true value a qualified realtor creates. Indeed, blockchain brings a lot of new opportunities for agents that are open to adapt to changes. Let’s take a closer look at how brokerages can benefit from disruptive technologies:
Blockchain-based property sales will save realtors hours
You may have heard projections that real estate agents will soon disappear as a profession because of technological progress, but I don’t think there is any real threat. It is true that blockchain will allow buyers and sellers to transfer property ownership rights without requiring the help of third parties, but bureaucracy is not the primary reason why people turn to real estate agents. Qualified advice is. In the new and fast approaching reality of blockchain-based transactions, real estate agents will spend less time on preparing paperwork and more time on actually helping buyers to find their ideal home and negotiate the best price and helping sellers prepare their home for a more profitable sale. This is a service that delivers real value for both parties, and it can’t be replaced by technology.
Digitizing a sale process will open doors to new markets
As a physical presence at the property registrar becomes obsolete, real estate agents will be able to serve their customers nationwide or even worldwide. This allows sellers to buy and sell their homes remotely, and stick to their favourite agent, no matter where he or she is located. With the current level of technology adoption, there is a real possibility to schedule virtual showing, provide consultations and possibly even plan and coordinate a pre-sale home remodelling online. Hiring remote freelance consultants is a global economic trend, and real estate won’t be an exception. Agents with a strong online presence and well-developed personal brand will benefit from this trend the most.
Tokenization opens access to real estate investments to more people
Tokenization is a process of assigning a unique token to a real estate property - in the blockchain community these tokens are called non-fungible. A unique token that cannot be destroyed or reproduced stores all information about the underlying property features and ownership rights. Lack of liquidity is probably the biggest downside to real estate investments compared to many other assets, but tokenization can eliminate the issue completely. Original tokens can be divided into several parts and then sold partially, allowing the buyers to hold shares in the estate. Several startups are already working in this direction. While joint ownership of real estate is not a new thing, blockchain has the power to transform these property shares into highly liquid securities, similar to the way futures contracts transformed the commodity market. For brokers who want to make profit from this new niche, it means stepping into a money manager’s shoes.
The market of shared vacation homes may grow due to the benefits of tokenized ownership
We have all heard about people buying shares in real estate in a popular vacation destination to own it together with other people and use it privately for a certain month or number of weeks within a year. But now there is a new and growing class of people: freelancers and digital nomads that deliberately choose to change their locations several times per year. Sharing ownership of a mansion you plan to use for one or two months will become easier with tokenized real estate. All information about the ownership will be stored in a secure and transparent token that can be resold, given as a gift or exchanged for another similar token. This eliminates the complications a traditional sale of real estate with multiple owners has, allowing nomads to buy, sell or swap shares in their vacation homes completely online, without the need to travel.
Although the gig economy is growing by on average 18.5% annually and the number of freelancers in the US may reach 7.6 million by 2020, this group of people is often overlooked by traditional real estate businesses.
Managing rental investments locally and remotely will become easier
Blockchain can be effectively used to prevent rental fraud. Currently, either landlords or their agents need to conduct credit and rental history checks on prospective tenants to ensure they are letting in a reliable tenant. Tenants, on their side, have very little information about the landlord they are signing a contract with. If previous renting history is stored on blockchain, it will immediately become transparent, which in itself is a good reason for both landlords and tenants to carry their responsibilities diligently. This will simplify the work of real estate agents and save hours of time for all parties involved in the process. Renting agents will be able to assess whether the tenant meets the landlord’s requirements prior to scheduling a viewing. Not to mention that blockchain-based rental contracts can be signed online and security deposits can be placed in escrow for the whole renting contract duration (which is a good thing for tenants, but probably not so good for landlords).
It goes without saying that all of these changes won’t happen overnight, but it will take less than a decade for them to become mainstream. Back in 2007 when the iPhone was first introduced to the market, 3.7 millions of the touchscreen devices were sold - that’s nothing compared to 93.1 million 5 years later. I use iPhone here as an example of how fast technologies can disrupt our lives.
Here, in 2019 we can already pay for property with cryptocurrency, join a tokenized real estate platform or investment fund and in selected jurisdictions close the deal 100% online - all of this became possible because of blockchain implementation. If even governments are turning to this technology, then agents, buyers and sellers need to be prepared to do the same.