Last month I introduced you to the concept of blockchain and what it is. This month we are going to discuss potential blockchain applications that can impact your real estate brokerage.
Earlier this month, the National Association of REALTORS® held their annual conference here in Chicago. NAR’s Center for REALTOR Technology (CRT) was demonstrating some practical applications of blockchain, and I met and subsequently interviewed David Conroy, an R&D Lab Engineer for CRT.
According to the CRT, blockchain applications provide a verifiable, trustworthy record of events and transactions. OK, but how does that impact a real estate brokerage? What we discuss here will not occur overnight. Think longer timeline: 3, 5, 10 years out. It will take a while for all the players to get on board, but when they do, you can have transactions that close much faster, with greater accuracy, and all parties that touch a real estate transaction will be updated in real time.
Why Blockchain Applications in Real Estate Matter
According to Dave, research shows 40-50 people “touch” a real estate transaction — real estate agents, buyers and sellers, lawyers, title companies, mortgage providers, county recorder staff, insurance companies, and more. With so many parties involved in pretty sensitive information, the opportunity for a cyber criminal to strike increases with more and more folks involved. A hacker only needs access to one person among all who are involved to steal information leading to fraudulent wire transfers and identity theft.
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In a blockchain world, with all these parties permitted access to a single property’s blockchain data, the transaction cycle shrinks because the parties can access the information they need in real time, there’s less room for fraud, and data accuracy is increased. Each property would get a unique property ID which is the cornerstone of this technology. All transactions involving that property ID are in the data (chain) for others to access (once access is granted), so data is current, and entered once.
How Blockchain Applications Work
The CRT built a demo prototype to show how blockchain can impact a real estate transaction, focusing on a new construction sale. First, the buyer can configure their finishes and extras on the builder’s website. See a sample below:
Once the buyer chooses all his or her options, the builder is notified in real time, and can order the parts necessary for this build. Accounting and production teams are notified, and any changes are made and updated in real time.
Once the new home is completed and sold to the buyer, the county recorders office can be notified instantly and the chain of title is updated immediately, all on the same blockchain record for the property (as seen below). Blockchain applications keep all the interested parties updated in real time as the transaction progresses.
Because of the distributed storage of these records (think peer-to-peer music — sharing the song is kept on many many servers, and the software gets the pieces it needs from various servers to download the song), no one person or entity can modify or control the data, enabling better security and faster transactions. Blockchain applications also increase confidence in the data, since no one can edit or modify prior records.
This aspect of blockchain technology has the potential to radically change how real estate gets bought, sold and insured in years to come.
