Blockchain technology is revolutionizing many industries, including real estate. Until a few years, it was almost unheard of that someone would enter into transactions involving high-value assets through digital channels. Most real estate transactions were traditionally performed as face-to-face or physical engagements.
In relation to this, blockchain technology has given rise to new solutions by introducing smart contracts. Real estate assets can now be tokenized and traded like Bitcoin, Ethereum, and other cryptocurrencies.
These are a few ways blockchain technology is transforming the real estate industry:
- Introducing Real Estate to Trading Platforms and Marketplaces
Real estate technology has always been concerned with connecting sellers with buyers and listings. However, blockchain introduces new ways of trading real estate. The tech has enabled online marketplaces and trading platforms to support high-value asset transactions, such as real estate comprehensively.
For instance, ATLANT has used blockchain technology for developing a platform that facilitates rental property and real estate transactions. Real property can now be traded in the same way as stocks on trading exchanges. You can now carry out transactions online. You can also tokenize assets and essentially handle them like stock sales.
You can liquidate the assets by selling the tokens through a blockchain exchange. The collected tokens can be sold for fiat currency with the buyers getting a percentage stake of the real estate.
- Removing Intermediaries
Brokers and banks have been an integral part of the real estate ecosystem for a long time. With that said, blockchain technology may soon bring about a shift in their participation and roles in asset transactions as per a report by Deloitte. Eventually, new platforms would assume functions performed by these intermediaries, such as legal documentation, listings, and payments.
Buyers and sellers would be able to keep a greater share of profits by cutting out the intermediaries. They would save on fees and commissions charged. In addition, the process will become much quicker as the role of middlemen gets cut.
- Enhanced Liquidity
Real estate has never been categorized as liquid. This was because of the time taken for a sale to conclude. This is not the case with tokens and cryptocurrencies. In theory, they can be traded through exchanges for fiat currencies.
Blockchain allows real estate assets to be readily traded as tokens. Sellers no longer need to wait for buyers to afford the entire property for getting some value from their property. They can now sell the property in a manner similar to shares of a company.
- Fractional Ownership Lowers Barriers to Investing
A major problem with real estate investing was that many people did not have a lumpsum amount to purchase the entire property. This barrier to investing has been mitigated by fractional ownership. Investments usually required significant money for acquiring property. Alternatively, buyers had to find other similar-minded investors to pool their money for purchasing big-ticket properties.
Blockchain allows investors access to real estate investing using a trading app. They can even purchase and sell fractions of tokens as they like. In addition, fractional ownership helps them avoid managing properties on their own. For instance, owners don’t need to worry about leasing or maintenance. Anyone who has invested in physical real estate knows that the upkeep of these assets can result in significant costs.
It can get troublesome dealing with tenants, renewing leases, and paying for maintenance. Blockchain transactions don’t prevent property owners from continuing the use and enjoyment of their property. They can put up their property as collateral for getting loans and easy access to cash.
- Trust through Decentralization
Blockchain is essentially a decentralized technology and commands trust and security. Information stored in the blockchain can be accessed by all network peers. This makes data immutable and transparent. Greed and lack of transparency on part of institutions can have catastrophic consequences as seen by the 2008 housing bubble crash.
Decentralized exchanges are trustworthy because of enhanced transparency. Information is verifiable to all peers. This allows buyers and sellers more confidence in carrying out transactions. Fraud attempts are also fewer with blockchain technology. Vermont and Arizona have already passed legislation to make smart contracts admissible records. This has allowed them to possess enforceability beyond the technology.
- Trimming of Costs
A decentralized network has transparency which can bring down costs associated with real estate. You can cut down on registration fees, inspections cost, taxes, and loan fees. This is in addition to the savings made through cutting out intermediary commissions and professional fees. Global real estate has a trillion-dollar worth.
Moreover, it is largely controlled by wealthy corporations. Blockchain technology has made it possible for small-time players and individuals to invest. Eventually, real estate transactions may become peer-to-peer with blockchain-powered platforms performing the most work.
Consult with a Reputable Real Estate Attorney for Your Property Transactions
Exciting developments are happening in the world of real estate investing with the introduction of blockchain and other digital technologies. It’s prudent to consult with a knowledgeable property lawyer if you are confused or concerned about certain aspects.
The legal team at Davis, Bingham, Hudson & Buckner, P.C. has decades of combined experience in handling all matters related to real estate. Schedule your free and confidential consultation with us today. Call (334) 821-1908 or write to us online.