Blockchain in Real Estate: 7 Ways It Can Revolutionize the Industry
Updated 14 Jan 2023
Real estate trading is undoubtedly stressful. It's getting even more nerve-consuming because real estate trading usually contains a set of vague and fragmented operations, tiresome paperwork, as well as surprise tasks and money expenses.
Utilizing Blockchain in real estate is a perfect solution to the troubles above. Blockchain real estate startups that had already begun to utilize the tech benefits started to appear more than 3 years ago. So mass acceptance of this technology is just a matter of time. And if you desire to be among these innovators, obtain tremendous profits form this brilliant business idea plus feel yourself as cool as Google or Amazon, you'd better consider software development of your blockchain real estate app.
State of Current Real Estate Transactions
People often apply to real estate services online: according to the NAR material, 97% of homebuyers use the Internet to make their choices without leaving their current accommodation. On the one hand, such accessibility opens new perspectives for realtors and their clients, but on the other — it makes real estate vulnerable.
Let’s look at the most common dangers and problems the real estate domain faces these days.
- Price rising turns real estate opportunities into a distant dream for most people. For example, the average house price in the UK was about 296 thousand pounds in August 2022, which is more than the last year’s cost, as to the ONS report.
- Mortgage lenders can perform fraudulent operations with the help of smart contracts: thus, 1 of 120 mortgage applications included fraud, mentions CoreLogic.
- Improper management of building materials leads to shortages of these materials and delays in the building process as a consequence. According to NAHB report, more than 85% of builders told their managers about these problems.
- Homebuyers are getting younger, as the RealTrends research says. These categories of real estate customers popularize crypto mortgages that don’t need credit checks. Such a circumstance is advantageous for individuals with bad credit history, or those who don’t want to pay a tax.
What is the way to overcome the defined issues? Ragnar Lifthrasir, Founder & Chairman of the International Blockchain RE Association, thinks it’s Blockchain technology real estate can rely on and mentions the following about it:
Founder & Chairman of the International Blockchain RE Association
There are many ways we could use Blockchain technology in the real estate: purchasing real estate, escrowing real estate, recording the transfer of ownership onto the Blockchain.
Furthermore, we can add that these operations (as well as many others) will be performed securely and more easily. Let’s learn more about the advantages of blockchain technology and real estate conjunction.
Blockchain and Real Estate: What Advantages Can It Bring?
Blockchain is mainly famous as the key feature of Bitcoin. However, real estate experts have realized that Blockchain property can dramatically improve real estate transactions. We’ve researched this theme more and discovered the essential benefits Blockchain technology brings to the real estate field.
Utilizing blockchain technology for real estate field can efficiently solve its major problems
Easier property search
Nowadays, every party interested in real estate trading utilizes multiple listing services (MLS) to search for necessary property info like property ownership, rental rates, property specificities, etc. The problem with MLS is that they demand extra financial costs while the quality of data they provide is variable or insufficient. Since there's no standardized way to arrange property data, the reliability and detail of it are fully under the control of the real estate brokers. Thus, the data could be imprecise, outdated, or non-exhaustive.
Using blockchain for real estate enables realty data to be shared among a p2p network. It enables brokers to receive additional monitoring of this data as well as reduce the MLS fees as data will be in the free access. According to Deloitte's company poll, 37% of 308 executives consider cost-efficiency as one of the major advantages of real estate Block chain usage.
Improved pre-purchase Due Diligence
Before buying or renting the desired property, a lot of time is usually spent on due diligence activities. Due diligence usually includes a thorough inspection of the documents, including title deeds, proof of possession, the list of renters, and repair cases. At present, this data is kept as papers that can be easily corrupted, so it becomes vulnerable to the human factor.
With the utilization of block chain, real estate property documents can be kept digitally in blockchain-based platforms. The digital documents can contain all the required property data and are easily be searched anytime. Hence, blockchain allows one to do all the paperwork automatically and is able to minimize the possibility of annoying paper errors as well as inaccuracies
Smart contracts advantageousness
Realty deeds formerly involved a number of parties in the transactions (e.g., renters, brokers, property owners, lawyers, etc.). So managing all the amount of paperwork and payments became a cumbersome challenge. Consequently, the realty agencies spend a large sum of finances on accounting and money trace management.
Smart contracts enable the real estate to finally enjoy the benefits of deal automation and transparency. This real estate and Blockchain process includes the following actions:
- Transaction parties sign the smart rental contract.
- The smart contract can initiate tenancy payments automatically and regularly to the landlord or other contract parties.
- When the tenancy period ends, the smart contract can evoke the payout of the guarantee fee to the renter.
Therefore, financial institutions can conduct payment and money trace inspection using the only undamaged source by means of the digital contract.
You can deepen your knowledge about smart contracts and their use cases. Learn more with our very extensive guide!
Transparency of the Blockchain in real estate
Since there are many steps in the property trading process, the realty field offers a suitable environment for various scams. Recently, the interested party had to cooperate with the title as well as escrow companies to guarantee successful deal completion, and it resulted in additional expenses.
Because of the decentralized nature of Blockchain technology, it offers absolute transparency for its stakeholders. The required data concerning the desired property is always accessible to every purchaser or property owner, or others involved. Thus, utilizing Blockchain for real estate development and property transactions is promising to greatly reduce scam chance.
Real estate purchasers spend 2-5% on different additional fees. The quantity of fees is tremendous as it includes expenses on property evaluation, lawyers, applications, and much more. Besides, we didn't mention the huge time and energy losses required for transaction closing. The closing period has gradually risen lately and amounts to about 50 days.
The real estate field was a lucrative source of enrichment for numerous specialists like attorneys, assessment experts, realtors, etc. Blockchain technology in real estate is capable to eliminate the need for all of those mediators. From managing a highly secure database of property records to automatically conducting every payment, blockchain can become an absolute realty mediator.
You can also explore more about how to apply Blockchain in small and medium businesses. This article also breaks down the common myths concerning using Blockchain
Liquidity of real estate investments
Liquid investments are difficult to exchange for cash fast, or they lose some of their value to do it. Investments into reality are considered to be illiquid because you can't trade them in a heartbeat.
But Blockchain enables real estate investments to become liquid. That's because real estate on Blockchain provides transparent records for the desired reality, secures multi-signature contracts and no tedious paperwork. So trading realty in a heartbeat becomes possible, and more than that, it becomes reliable. Thus, Blockchain technology can raise the comfort of real estate investment over other types, such as equity investment.
Blockchain Real Estate Startups: Turning a Fantasy Into Reality
We’ve prepared for you a set of actual successful real estate on the Blockchain startups to consider how real businesses deliver the benefits of blockchain to the real estate field.
Real estate blockchain startups which don't fear to be the pioneers of the new technology
The goal of Blocksquare's founding in 2017 was to make it possible for real estate professionals to design and promote tokenized real estate investment transactions directly on their websites. Startups and major corporations may employ Blocksquare's solutions and APIs to create their investment platforms, digitize the value of Blockchain property investment, and link customers to tokenized real estate deals online.
Additionally, Blocksquare is based on tried-and-true decentralized networks like IPFS and Ethereum. Because of this, their apps are created with scalability in mind, enabling clients to easily expand their enterprises.
This real estate Blockchain company aims turn hard to trade assets like property into the tokenized securities which comfort to Securities and Exchange Commission terms.
Here's how it goes: after a property in Blockchain and real estate industry has been legally validated, its price can be tokenized (e.g., in area measurements). It means that 1 token a cost 1 square millimeter of the realty. Thus, instead of investing a huge amount of money into a single real estate unit, a person can invest a little bit into multiple properties.
Harbor utilizes R-Tokens as a digital version of property assets. One of the rules concerning R-Tokens is accredited investors are unable to sell them to non-accredited ones. It's an essential way of protection to eliminate possible scam transactions.
If you desire to develop your real estate website, you can explore how to get started. Read our article to discover more!
Ubitquity was founded in 2015 in the US and promised to be the first international platform for a digital way of storing real estate records. Ubitquity is a specialized Blockchain in real estate industry platform that allows physical persons, companies as well as inspection bodies to monitor real estate records via blockchain ledger technology. It is a transparent, indefectible, and secure source of data. Ubitquity company evaluates that by making record-storing a digital automated process, up to 4 billion dollars per year can be saved.
The undeniable advantages of the Ubitquity real estate blockchain platform are:
- No mistakes in public records
- No unpaid checks from the former landlords
- No inheritance issues
- No falsifications
To protect susceptible transactions from the time they are sent until the time they are received and processed, the SafeWire platform (another interesting example of Blockchain use in real estate) uses a Blockchain network. This reduces the loss of money, clients, and time due to wire fraud. SafeWire looks for ways to safeguard targeted real estate professionals and guarantee secure real estate transactions. The software also assists in the process of verifying buyers and vendors.
With the purpose of upgrading the real estate industry's method of information transmission and eradicate wire fraud, SafeWire's assets were bought by ClosingLock in 2021, the leading platform for the prevention of wire fraud in the real estate sector.
In our related article, you can also find more inspiring information about top blockchain startups in various industries!
Another business that enables landlords to use Blockchain is ManageGo. It aids in more effective management of their real estate. Additionally, the site features a leasing tool that enables you to create lease and rider templates, renew existing leases, track the status of applications and current residents' signings, and more.
It can handle maintenance tickets and do in-depth credit background checks. Landlords benefit from Distributed Ledger Technology (DLT) because it gives them access to a more transparent past, a detailed picture of renter payment history, and tenant backgrounds.
RealT was established in 2019 as an innovative Blockchain-based real estate platform to streamline international access to American blockchain real estate market. RealT investing includes low-maintenance real estate ownership, accessibility to property-related financial flows (such as rent), and frictionless ownership transfers using RealTokens.
RealT gives investors a chance to participate in the American real estate market through a fully compliant, token-based blockchain network, in addition to serving as a platform for fractional real estate investments. The technology enables investors to purchase tokenized real estate using permissionless Ethereum and keep access to cash flows and low-maintenance ownership through RealTokens.
How to Implement Blockchain in Real Estate Solutions: What You Need To Know
As we said before, Blockchain can make real estate operations more comfortable and simple. Let’s find out what such a process will look like with the integration of the innovation.
- A Non-Fungible Token (NFT) is used to transfer a property ownership title.
- A seller (or seller's agent) produces a smart contract with the terms and circumstances of the NFT sale.
- A blockchain-enabled MLS is the place where the seller further puts the NFT and sale contract.
- Based on the terms of the smart contract, a buyer can construct an offer and deposit earnest money
- The earnest money must be deposited into the smart contract before the seller may accept an offer.
- After then, the seller has 30 days to transfer the remaining funds to the smart contract before the deal is terminated and the earnest money is lost.
- A third-party lender can finance the escrow contract in accordance with financial arrangements made by the seller on-chain.
When the smart contract is completely financed, the seller gets paid out, and the buyer receives the ownership title NFT. After that, the Blockchain and the NFT history both now include transactional information related to escrow, financing, and settlement.
What to know to successfully implement Blockchain?
Blockchain is quite complex technology to implement. So, first off, you should decide how a Blockchain-based solution is built to bring benefits to your real estate business.
You’ve got two variants that will help you properly act while creating and integrating Blockchain property app into your business.
- You can gather an in-house software development team of professionals who will work at bringing to life your Blockchain-based app concept. However, this variant will be preferable if there are any budget limits, as you will have to pay salaries, rent office, and have many other expenditures. Moreover, the hiring process of the specialists can be delayed in case you won’t find a sufficient specialist.
- Outsourcing software development will be a simple and efficient way for entrepreneurs as it allows them to build qualitative, powerful, and easy-to-use software economizing their funds and time. All the processes will be entrusted to the hands of a qualified software development team managed by a skilled vendor. Moreover, you should remember that Blockchain solutions implementation requires unique and specific expertise that can be found through outsourcing experts.
If you choose the second variant, you can just contact the vendor with a raw concept of your app. They will make everything from project planning to delivery to delivering a full-fledged application with extensive functionality to attract more of your future clients and facilitate your real estate operations.
The core functionality your Blockchain-based real estate app may need is represented on the image below.
Core feature set for your real estate software
How this list can be technically realized by vendor's developers? They've got two ways to act.
Create a solution using Lick
Lisk can be considered as a Blockchain "Platform-as-a-Service" (PaaS) software. It provides databases, an operating system, middleware, and cloud infrastructure. You bring your data and for your app to be coded.
Build an application with the help of Ethereum
The second strategy to use Blockchain for real estate transactions is to build an Ethereum-based real estate marketplace. Your real estate smart contracts will also be created to simplify further deals.
Cleveroad Software Solutions For Real Estate
As you can see, blockchain in real estate delivers a new level of transparency, security, and simplification. The benefits of blockchain are so obvious that the real estate world has to think if it can afford to exist without it. Now it's the best time to create your own startup in collaboration with an experienced real estate software development provider to gather the biggest profit until blockchain becomes mainstream.
So if you're searching for a tech partner to build your own blockchain real estate app, Cleveroad is here to help you! We are an outsourcing real estate software development vendor based in the CEE region. Our digital solutions help real estate businesses of different sizes boost their performance, solve business issues and improve profitability.
A range of benefits you’ll obtain during our collaboration includes the following (but is not limited to them):
- An expertise in developing qualitative real estate software solutions satisfying the needs of your company and solving its essential business issues
- Non-Disclosure Agreement (NDA) signing per your wish to protect the exclusiveness of your software concept
- Fast development process with no bureaucracy or hidden costs
- Team of acknowledged individuals capable of adapting to timetables and respond to project changes quickly
- Product quality and control at all the stages of software development
- Innovative software development methods and cutting-edge technology stack
- After-release support, maintenance and advertisement services, etc.
Our team of experts has released a bunch of real estate digital solutions, and we want to represent one of them — a KoralGo web platform for tourists, so you to get acquainted with our work. Our client, a company from Singapore, required to have a business platform assisting their travelers to quickly identify accommodations.
KoralGo from Cleveroad: Platform's interface
So, Cleveroad professionals deliver the tech solution which helps customers find the proper housing results. The software’s cutting-edge ranking algorithms allow for the enhancement of booking and purchasing features which simplify the operations made through the platform; moreover, the customers may manage their offers and bookings and look through the unique reviews that can help them make their property choice.
Our developers also created an MVP version of the KoralGo system containing the core functionality of the customer’s Unique Selling Proposition (USP) as well as perfect UX. The MVP was helpful for our client to represent the platform to the stakeholders and attract more investment.
We can also build the perfect real estate software based on your unique business needs and requirements. All you need is just to contact us and tell us more about your project concept to start productive cooperation.
Build your own real estate solution
Skilled experts will assist you in creation of such an app equipping it with modern technologies!
Blockchain in real estate can bring various advantages. Some of them are:
- Easier property search
- Improved pre-purchase due diligence
- Smart contracts
- Improved transactions
- Real-estate crowdfunding
Utilizing blockchain in real estate seems like a perfect solution for solving the troubles above. Why? It's because blockchain is a decentralized digital ledger that enables to verificate and monitor transactions while the trusted external party control is not necessary. Thus, it records valid information chronologically that can't be changed or controlled externally. What's more is that blockchain in commercial real estate offers a high level of security making hacking attacks close to impossible.
Here are some examples of blockchain real estate startups:
- Harbor. This real estate blockchain company aims turn hard to trade assets like property into the tokenized securities which comfort to Securities and Exchange Commission terms.
- Ubitquity. Ubitquity was developed as a Software as a Service platform that allows physical persons, companies as well as inspection bodies to monitor real estate records via blockchain ledger technology.
- SafeWire. SafeWire looks for ways to safeguard targeted real estate professionals and guarantee secure blockchain real estate transactions.
- Blocksquare. Startups and major corporations may employ Blocksquare's solutions and APIs to create their investment platforms, digitize the value of Blockchain property investment, and link customers to tokenized real estate deals online.
- ManageGo. It aids in more effective management of their real estate. Additionally, the site features a leasing tool that enables you to create lease and rider templates, etc.
- RealT. RealT gives investors a chance to participate in the American real estate market through a fully compliant, token-based blockchain network, in addition to serving as a platform for fractional real estate investments.
One of the best use cases of blockchain in real estate is that with blockchain, intermediaries becomes unnecessary.
Real estate field was a lucrative source of enrichment for numerous specialists like attorneys, assessment experts, realtors, etc. Thus, it's understandable why the entire amount of fees may scare off the prospective investors. Blockchain technology in real estate is capable to eliminate the need for all of those mediators. From managing a highly secure database of property records to automatically conducting every payment, blockchain can become an absolute realty mediator.
Smart contracts are the most prominent technology in real estate. Smart contracts enables real estate to finally enjoy benefits of deals automation and transparency. This process looks like this: transaction parties sign the smart rental contract. One of it's conditions is that the smart contract can initiate the tenancy payments automatically and regularly to the landlord or other contract parties. When the tenancy period ends, the smart contract can evoke the payout of guarantee fee to the renter.
Therefore, the financial institutions can conduct payment as well as money trace inspection using the only undamaged source by means of the digital contract.
Since there're a lot of steps in property trading process, the realty field offers a suitable environment for various kinds of scam. Recently, the interested party had to cooperate with title as well as escrow companies to guarantee the successful deal completion and it resulted in additional expenses.
Because of the decentralized nature of the blockchain technology, it offers the absolute transparency for it's stakeholders. The required data concerning the desired property is always accessible to every purchaser or property owner or others involved. Thus, utilizing blockchain for property transactions is promising to greatly reduce the scam chance.
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