Blockchain Use Cases in Real Estate
Many would consider real estate their most valuable asset. In this insight , we are going to marry blockchain with some real-world use cases and implementations we are capable of here at Grey Chain. Most real estate transactions could be peer-to-peer, were it not for the many intermediaries in the space. To put this as simply as possible, in a perfect world, you as a buyer, would approach a seller with an offer and from there you two would decide on a fair price that you are both willing to transact at. However, in today’s real estate world, a transaction generally requires: lawyers, real estate agents, inspectors, insurance agents, and banks to all be involved. Many of these parties are necessary based on today’s standards and regulations. Each of them, though, does add a layer of complexity to each real estate transaction.
Given this is a system with many intermediaries, a ton of data, the use of financing, and a number of exchanges of high-value documents, there is plenty of room for the entire transaction to be streamlined or made cheaper by using blockchain technology. Our thoughts below:
I: Lower Mortgage/Financing Rates
Existing challenge: This one is very self-explanatory and probably hits home for everyone reading this.
The blockchain opportunity: There are a host of blockchain-based lending platforms that can be used as a differentiated source of financing. While diligencing the proper solution for you may take time, it can often pay off in the form of much cheaper lending terms. Blockchain enables peer-to-peer lending which typically will be lower rate, given the intermediaries who profit on spreads are cut out of the deal.
II: Improve property search process
Existing challenge: Inefficient property search process due to fragmented listings data.
The blockchain opportunity: A blockchain-based MLS would enable data to be distributed across a peer-to-peer network, providing brokers with more control over their data and increased trust. This would result in more reliable data at a lower cost, easier access to international listings, lower transaction costs, enhanced process efficiency and accuracy, and increased transparency.
III: Expedite pre-lease/deal due diligence and financial evaluation
Existing challenge: Time-consuming, paper-driven, predominantly offline due diligence and financial evaluation process.
The blockchain opportunity: Developing digital identities for properties can drive efficiency and accuracy in the due diligence process. This would streamline pre-transaction activities such as underwriting, financial evaluation, and obtaining a mortgage commitment, reducing manual errors and duplication, enhancing data security, and reducing transaction time.
IV: Leasing and Property/Cash flow management. *This is the largest ‘white space’ opportunity in the real estate world today. There are existing tools that will save time & money and streamline efficiencies. We expect that tracking lease payments on the blockchain, or even accepting payment via Bitcoin, will become a preferred method for investors looking to improve their profitability and property management.
Existing challenge: Complexity in managing ongoing lease agreements, property operations, and cash flows.
The blockchain opportunity: Smart contracts can enable easier, transparent, and efficient management of property and cash flows. This would result in legally enforceable contracts, faster reconciliation of payments, simplified property management, and instant settlement and management of cash flows.
V: Enable more well-informed decision-making
Existing challenge: Absence of rich real-time data impacts management’s decision-making capability.
The blockchain opportunity: Blockchain technology can act as the connective tissue between varied technology systems, enhancing data quality and enabling real-time recording and retrieval. This would allow for smarter and near real-time insights, improving the quality of leasing-related and property operating decisions.
VI: Transparent and relatively cheaper property title management
Existing challenge: High title insurance and related costs due to chain of title and lien recording issues, fraud risk, required diligence, and cumbersome clearance process.
The blockchain opportunity: A blockchain-based digital identity of a property can reduce fraud and simplify the process of title records and checks. This would result in lower costs, less title fraud, faster title transfers, and increased security and transparency.
VII: Financing and payments
Existing challenge: Sometimes slow, expensive, and opaque financing mechanisms and payments, especially in cross-border transactions.
The blockchain opportunity: Blockchain-enabled digital identities and smart contracts can simplify the financing process, reduce inefficiencies, and increasing transparency. This would result in faster payments, improved security, and increased transparency in financing and payments.
For those interested in how their real estate business can benefit from the implementation of any blockchain solutions, please reach out via the inquiry form on our website. Our team will create a proposal tailored to solutions that we believe will be effective for your business.