‘Blockchain Impact On Real Estate Brokerage’

7

October

2021

5/5 (1)

The real estate brokerage process


According to Nitin Gaur, the former Director of IBM Blockchain Labs, “we live in the age of

disintermediation,” or the removal of middlemen. On a worldwide basis, individuals appear to be wary

of intermediaries and prefer to engage directly with one another. Currently, most purchasers and

sellers of real estate use escrow and title firms for third-party verification, which serves as a safety net

to ensure that both parties maintain their end of the bargain and reduces the danger of fraud.

However, the real estate brokerage model has many inefficiencies.

Among these are a requirement for a great deal of paperwork, a need for face-to-face interaction among the parties

to most transactions, and a lack of technological capability to legally bind property purchase with complete

documentation and security (Cheng-Shorland & Alishahi, 2019). Furthermore, the present real estate brokerage

process is not transparent or verifiable. These problems are also closely related to

the non-transparency of its data (Deloitte Centre for Financial Services, 2017). The information

asymmetry relating to real estate assets contributes to the real estate market’s transaction costs. In

addition, a complicated structure of interrelationships between participants also accounts for a large

portion of the transaction costs in the price of real estate (Kalyuzhnova, 2018).

Blockchain technology could potentially improve some of the current shortcomings in the real

estate brokerage process. The blockchain is a peer-to-peer network that does not require any

centralized authority or trusted third party. It only adds information to the database after it has

collectively verified the accuracy of the data (Tapscott, 2016). If the assets are digital, they can

contain any sort of value.

Blockchain

The innovative power of this technology makes it possible for companies to use a computer network to do business

with other companies they do not trust. A ‘smart contract’ powers the blockchain. The smart contract’s

programmability allows registered peers to validate transactions automatically and anonymously and

decide whether a new block can be added to the chain in chronological sequence (Baliga, 2017).

Moreover, any valuta, any contract, any tangible or intangible good can be traded using a system like

blockchain. Transactions are not the only thing that can be used for blockchain. Blockchain can also play

a role in the system of record and inventory to record, track, monitor, and trade assets. Hence,

blockchain could be applied for any form of recording, inventorying, and exchanging assets, including

all areas of finance, economics and currency, tangible assets, and intangible assets. According to

Spielman (2016), blockchain technology provides greater security and makes fraud impossible

because blockchain is immutable. Aside from security, another significant feature of blockchain

technology is transparency, as all parties involved have access to the data. So, the four primary

characteristics of blockchain are transparency, immutability, programmability, and decentralization.


The change

Blockchain represents a total shift away from the traditional ways of doing things, even

for industries that have already seen the significant transformation from digital technologies. It places

trust and authority in a decentralized network rather than in a powerful central institution. And for

most, this loss of control can be deeply unsettling (Deloitte, 2018). According to the theory, the blockchain digital

ledger’s transparency and traceability will dramatically lower the cost of verifying trading partners (Catalini and

Gans, 2016). Blockchain technology and a smart contract can overcome the problems associated with the real

estate sector. A decentralized system can allow buying as well as selling properties without a third party. The

document is also verified and validated digitally. All the documents are stored in a digital ledger

distributed database where everyone can see them (Mohanta, Panda & Jena, 2018). As a result, the

amount of time and money it takes to collect the information needed for a transaction will be lowered.

Real estate agents currently gather the information manually in multiple databases and verify the

stakeholders through slow protocols. Many of these documents must be bought. In addition, a real

estate agent charges fees for services such as enhancing reliability and reducing the risk of trading

with unknown partners. The transaction costs would be reduced if this procedure was carried out using

smart contracts. Furthermore, if the majority of this transaction were handled via smart contracts, most

of the labor of real estate agents would be eliminated, resulting in the brokerage fee being eliminated

or significantly reduced. The primary reason blockchain is not being utilized in this procedure is

because it is not yet legal. Public authorities have rules and standards regarding privacy when people

conduct a real estate transaction, that prohibit blockchain real estate transactions and registrations.

As long as human factors play a prominent role in the process of buying or selling real estate

objects, information asymmetry, goal incongruence, and high transaction costs will not disappear. In

the future, there should be blockchain alternatives to support or completely provide this process for the

involved parties in a real estate transaction.


References

Baliga, A. (2017). Understanding Blockchain Consensus Models.

Catalini, C., & Gans, J. (2016). Some Simple Economics of the Blockchain.

CHENG-SHORLAND, C., & ALISHAHI, A. (2019). BLOCKCHAIN-POWERED REAL ESTATE

SALES AND RENTAL SYSTEM.

Deloitte Centre for Financial Services. (2017). Blockchain in commercial real estate – The future is

here!

Kalyuzhnova, N. (2018). Transformation of the real estate market on the basis of use of the blockchain

technologies: opportunities and problems.

Mohanta, B.K., Panda, S.S., and Jena, D., (2018), “An Overview of Smart Contract and Use Cases in

Blockchain Technology.”

Spielman, A. (2016). Digitally rebuilding the real estate industry.

Tapscott, D., & Tapscott, A. (2016). Blockchain revolution : how the technology behind bitcoin is

changing money, business, and the world .




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Is virtual reality the future for real estate?

3

October

2016

5/5 (1) Imagine buying a house, you want to find the perfect place as you will probably live there for a long time. To find this perfect place you want to see multiple houses before making your decision. In the past, you had to travel to all the houses you wanted to see. As you can imagine, this took a lot of time. Nowadays, more and more real estate agencies use virtual reality to make this process more attractive.

The usage of virtual reality in the real estate business is revolutionizing the way real estate transactions are made, and raising expectations from both the buyer and seller perspective. 3d tours allow buyers to easily ‘walk’ through their potential new homes and the best thing is that they can do it whenever and wherever they want. The only thing they need is a laptop or computer and a virtual reality headset (this will be provided by your real estate agency). Real estate agencies profit in 2 main ways. Firstly, by making the whole proces more attractive for their customers, customer satisfaction will increase. This has a lot of positive consequences. Secondly, real estate developers design new builds using computer software and show this to their customers via virtual reality headsets. This makes them able to show their customers a peek into the future, giving them the benefit of knowing that what they see is what they will get.

There are a number of reasons that support the game changing capability of using virtual reality in the real estate industry:

  1. Availability of the technology: Virtual Reality is becoming more populair and accessible.
  2. Ease of creation: Interactive 3d images can be easily created by real estate developers.
  3. Showcasing the future: The ability to show what a new build would look like.

As the virtual reality industry is still a new thing and will definitely grow and improve drastically, there are huge chances for virtual reality in the real estate industry. Do you agree?

Sources:

  • http://www.augment.com/blog/future-real-estate-vr-ar/
  • https://appreal-vr.com/blog/how-virtual-reality-is-transforming-real-estate-in-2016/?gclid=CMbRxpDgvs8CFe8V0wodYFIJmQ
  • https://about.archilogic.com/blog/virtual-reality-real-estate-fad-future/

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