The real estate industry contributes to a significant portion of the world’s transaction activity and economic assets. However, real estate transactions are loaded with paperwork, they are time-consuming and expensive. Contract execution can take up to three months of your time because the process involves a lot of parties, including brokers, title insurance agencies, attorneys for the seller, lender, and buyer and title companies.
The whole real estate transactions result in high fees and delayed waits as the requisite information is gathered and verified. This process may lead to errors and fraud. However, incorporating blockchain technology would help reduce fraud and errors, save time, and streamline tracking of titles which would be seamless and accurate. Blockchain technology would also enforce mortgage provisions and conditions.
Blockchain technology is a technology that fuels most of the global cryptocurrency platforms. It was the basis for the creation of Bitcoin, and it is made up of three main components, which include:
- A network of computers or systems across the networks
- A blockchain ledger that stores data within the nodes
- Consensus algorithm that generates the data to be stored.
Below are some ways crypto can be used and implemented in the real estate industry.
Tokenization of Real Estate Ownership Assets and Interests
Tokenization in real estate means digitizing financial instruments, alternative assets, and securities. With crypto technology, digital assets can be automated, including transaction history, ownership rights, transfers and distribution, and rules to ensure asset issuance.
Cases, where crypto technology has been used in tokenization, include ensuring that tokens are only transferrable to certain parties or make them completely inaccessible to anyone during a lock-up period. It is also possible to customize digital assets to meet all the issuer’s requirements.
With your real estate assets digitized, it is easy to trade with them. Tokenizing real estate interests and assets could hasten the transaction process and help liquidate since real estate interests are inherently illiquid due to the time-taking process of transferring the interests. You can do stock broking by looking at the list of the best stock brokers in the UK, and start making a profit using your digitized real estate assets.
Enforcing Loan and Mortgage Provisions Through Smart Contracts
Mortgages are filled with complicated covenants, conditions, and contingencies that bring about different default events upon their occurrence throughout the loan period. If there is a default through the loan period, the penalty is increased interest rate until the fault is cured. This will require notice between the parties whenever there is a breach, and the breaching party can fix the violation.
Smart contracts automate the notice process faster and more accurately. A smart contract refers to a computer code that notes and stores legally relevant events on the crypto network. The smart contract would trigger the imposed interest payment when the borrower defaults in the above example. It would also create a verifiable and documented notice record for the defaulter. It would also note the increased interest rate. The smart contract can also automate the occurrence’s reversal when defaulting is cured.
Improving the Legitimacy of the Investor’s and Tenant’s Identity
Crypto-based digital identities are powerful across multiple sectors, public and consumer applications. Investor and tenant identities from similar crypto-based KYC/AML procedures can help straighten background checks, cut costs, and improve security.
The KYC process in crypto technology allows everyone to prove property ownership since essential documents like proof of identity, insurance, and credit history are easily shareable with necessary parties.
Storing Documents in the Crypto Ledger
Crypto ledger hastens transactions and reduces fraud when title, deed, and assignment documents are recorded. The current system that does not use crypto technology requires the involved parties to request title documents while hoping that the necessary documents are recorded accurately. There is an absence of mismanagement in the interim between transfers.
By recording the existing title, deed, and assignment in the crypto ledger, there is a reliable trace of your ownership interests available on the decentralized crypto network. This brings about a more precise record trail of title for a particular property, reducing time and costs to obtain title reports between the start and close of the contract.
With real estate transactions and cash flow, asset owners and investors would benefit from near-immediate and automated accounting. Preparing annual financial statements like the balance sheet, income statement, and statement of cash flows will be conducted with the potential for real-time audits by the crypto technology.
Using crypto technology is improving rapidly, impacting the real estate industry. A breakthrough of the crypto industry in the real estate industry would also mean a breakthrough in the construction industry. It would change how properties are built, sold, and bought.
The crypto technology brings efficiency in an industry filled with inefficient third-party communication, red tapes, and market volatility. Housing applications through crypto technology will be made easier and faster to acquire all the required records.