Blockchain Ledger Technology and the Future of Real Estate Transactions

Implementing new technology in the real estate and mortgage industries has been a relatively slow process when compared to other industries. In recent years, however, things have started to change with the move toward online listings coupled with mobile technology that is speeding up the home-purchase process.

Yet, even with this there is still so much opportunity for disruption in the real estate industry specifically.

One of the key components of that is Blockchain technology. When people hear Blockchain, they automatically think of cryptocurrencies, primarily Bitcoin. This isn’t a discussion about cryptocurrencies, however, this is about what is known as distributed ledger technology. Essentially, Blockchain ledger technology allows for a secure method for carrying out transactions and contracts. It is often referred to as a digital way to keep records and verify those records because of the way it is built (blocked chunks of data that are encoded). And not only that, this kind of technology has the capability of securely sharing data across massive networks, which makes real estate transactions the problem and solution to solve.

When it comes to the real estate industry specifically, Blockchain could alleviate a lot of the defragmentation that takes place within the MLS system. Let’s face it, with so many agents and listings managed within the MLS structure, the ability to share up-to-date information has become a real problem, especially when you consider how the modern consumer expects their purchases to be. As a matter of fact, the structures and systems created to manage real estate transactions need to be rebuilt, or replaced, to continue to deliver a transparent, seamless and secure process that the customers of today expect.

Moreover, the complex network of the real estate transaction process includes such parties as a seller, seller’s listing agent, buyer, buyer’s agent, broker, buyer’s lender, escrow officer, title officer, appraiser, insurance agent, inspector and notary. That includes, but isn’t limited to:

• loan application;
• purchase contract;
• deed;
• title;
• disclosures; and
• closing documents.

With so many stakeholders, paperwork and processes taking place throughout, it is no wonder things can get bogged down or impossible to manage.

Blockchain could solve that problem by centralizing all of the real estate data and making it secure, accessible and scalable. Instances have included managing virtual land and facilitating fractional ownership. Thus, Blockchain could take the current convoluted process and become an application for Blockchain. That would absolutely change the game.

Another way Blockchain could enhance the real estate industry is by turning real estate assets into a digital “token” of sorts.

A new startup is doing just that. It is called Harbor, and it is a compliance platform for “tokenizing” private securities, such as real estate rights into a digital token on a Blockchain. In other words, the company’s “Regulated Token” takes a real estate asset and transforms it into a digital representation. This allows for the sale of such an asset to happen much quicker than it has traditionally.

Forbes breaks it down this way:

Harbor aims to take hard-to-trade assets like real estate and private equity and use Blockchain technology to turn them into tokenized securities that comply with SEC regulations. For example, let’s say an investor group wants to create a private real estate investment trust (REIT)—a company that owns income-generating real estate. In launching their business, “95% of what they do remains the same as it was,” CEO Josh Stein says. “They find a property, form an investment thesis, run an analysis and do marketing.” The difference comes in how regulatory information is stored and securitized.

So, the technology is out there. It is up to today’s real estate companies to invest in the future in order for them to be better prepared to serve the modern buyer in the ways they expect to be served. By partnering with startups like Harbor, I believe many real estate and mortgage companies can use Blockchain to solve much of the fragmentation in real estate transactions that plagued the industry for years.

Not only that, transparency will increase among all the stakeholders in a real estate transaction if all of the data is readily available and up-to-date.

The bottom line is that the MLS system is likely approaching a point of becoming obsolete. It is up to the forward-thinking real estate companies to realize this and replace such an outdated platform with what technology is currently available.

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