How Blockchain is Redefining the Future of Real Estate Transactions

Most people came across blockchain due to cryptocurrency. However, the blockchain potential goes beyond digital currency. With the widespread application of blockchain technology across industries, it’s hard to find a vertical that the technology hasn’t influenced. Cryptocurrency has been steadily seeping into commercialism when it comes to buying and selling tangible assets like electronic devices, software, etc.

However, it has become possible for people to purchase real estate property with digital currencies in the last few years. Blockchain and cryptocurrencies are strongly impacting payments, remittances, and foreign exchange.

In 2021, Miami beach’s most expensive penthouse was sold for $28 million, paid in cash entirely in crypto, making it the most expensive known cryptocurrency real estate transaction in the United States. More recently, in Feb 2022, TechCrunch’s founder Michael Arrington’s Kyiv NFT-backed apartment was sold in the world’s first NFT real estate auction.

1. In Notting hill district, London, a mansion was listed for $24M to be sold in Bitcoin in 2017.
2. Two condos in NYC East Street were sold for $875K million and $1.485 million through BitPay converting Bitcoin into dollars.
3. A London penthouse was listed in 2021 and was available for sale for $244M or 4300 Bitcoins.

Traditionally, real estate transactions were conducted offline, involving face-to-face engagements with vast bundles of papers, multiple parties, etc. With recent crypto-transactions, it is evident that blockchain in real estate is evolving the industry with more investors investing to diversify their portfolios.

Let’s take a look at the future of real estate transactions on the blockchain-

Tokenization of real estate property

Tokenization of real estate properties will become a new norm in the real estate sector. Tokenization is when real estate assets are converted into several virtual or digital tokens. These virtual tokens can be quickly sold on an online marketplace where the purchaser of a specific token owns that portion of the asset.

Every token represents direct ownership of an asset, and these assets range from different types of real estate properties. From shares in a company owning real estate to a piece of real estate property to a real estate investment fund, the aim of tokenization is securing real assets and also known as security tokens.

Let’s take an example:

Suppose you want to tokenize a 100,000 sq ft property worth USD 10M. If you divide the property into 100,000 shares, each share represents one sq ft of the property valued at $100. While tokenizing the money, you divide the property into square inches, and each token will be worth $0.69.

Tokenization makes the property accessible to a broader range of investors, and your tokens act as company stock. Here the token selling process is similar to crowdfunding, and the only difference is that the tokens involved are available on the blockchain. We also created a complete guide on asset tokenization on the blockchain to help you understand the total concept of tokenization.

Blockchain real estate smart contracts

Purchasing a house is a lengthy, timely, and expensive process. When you buy or sell a property, the transaction has to go through a legal process called conveyancing involving banks, agents, and lawyers. Other than this, various hidden additional expenses can dig a deep hole into your pockets for both the primary parties as they need to ensure the contract is in each of their best interests.

Blockchain offers smart contracts that cut out the go-betweens and enable the complete buying and selling process between the two parties with a neutral central coordinator. Loans and mortgages can be easily programmed into the smart contract, and multiple smart contracts can be connected to cover all aspects of the conveyancing. Executions of the code, like down payments, are autonomous, transparent, and instant, ensuring the latest updates are sent to the other party in real time.

All the accounting entries corresponding to the exchanging of digital values are automatically fed into the blockchain, making the transactions visible and immutable. The contract conditions leave no room for any interpretation present in the contract.

Automated transactions

Real estate-backed cryptocurrency provides an answer in terms of speed, reliability, and safety, reducing the risk of fraudulent transactions. Every stage of the transaction involves enhanced security blocks that simplify data transmission, reducing the time between signing preliminary sales agreements and the sale deed before the notary.

This robust architecture allows automation of real estate transactions and mitigates corruption and transparency issues that are common nowadays. In the future, blockchain will have access to the history of the property and deeds and can be consulted anytime without limit by banks, agencies, individual buyers, and sellers.

Automated transactions with cryptography and blockchain allow real-time accounting that saves ample time and money, reducing manual interventions and improving operational efficiency and procedural effectiveness.

Multiple listing services to trust

According to a survey by Statista, 99% of homebuyers between the ages of 23 and 56 used the internet to find homes in their home-buying process in the US. These websites give a diverse and comprehensive view of the property available in the area. Traditionally, real estate has been sold through a privately owned listing connecting buyers and sellers.

However, the data is often inaccurate, outdated, and incomplete. Decentralized real estate allows trading property on online trading platforms and marketplaces, providing data to various buyers and sellers simultaneously.

The benefits of blockchain for real estate services:

• Decentralized database: Instead of sellers or agents manually putting property information into multiple platforms, they can do it once into the blockchain database.
• Immutable data: Data, once submitted to blockchain, can’t be altered, preventing any manipulation or intervention of third parties and allowing more control over the data.

Currently, multiple real estate blockchain projects are emerging that use the technology to facilitate real estate and rental property transactions that you can trust.

Property management

Cryptocurrencies are becoming an increasingly popular method to pay for rent and leases. Managing real estate property on a massive scale is grossly inefficient, but blockchain data sharing features are improving operational efficiency and sustainability. It offers efficient property management, and when accurately deployed, it has the potential to:

• Streamline rental collections and payments to owners
• Provide due diligence across your portfolio

Earlier in 2021, billionaire Rick Caruso announced that his LA-based business would accept bitcoin for its residential and retail property rent payments. The properties included both luxury apartments and commercial properties, signaling a significant infiltration of cryptocurrency into the commercial real estate market.

Wrapping up!

Blockchain in real estate brings radical changes by transforming its accessibility for a broader range of people. Blockchain real estate transactions empower buyers who couldn’t afford to purchase real estate property in one payment to gain the opportunity to invest in real estate in tokens. Moreover, real estate services are becoming cheaper, transparent, and highly secure. Many blockchain development companies are indulging in developing cost-efficient solutions that incorporate blockchain decentralized ledger technology to boost peer-to-peer activity globally.