Given the disruption of financial services and its extensive application across sectors, it’s difficult to identify a sector that hasn’t been touched by blockchain. Bitcoin and other cryptocurrencies have had a significant influence on payments, remittances, and foreign currency. Initial coin offerings (ICOs) have put stock investment, startup financing, and venture capital on the defensive. Blockchain has even disrupted the food supply chain business.
Real estate is not immune to blockchain upheaval. Previously, only trading high-value assets such as real estate via digital platforms was not the norm. Real estate transactions are often handled offline, with face-to-face interactions with multiple organizations. Blockchain, on the other hand, has made it possible to modify this. With the inclusion of smart contracts in blockchain systems, assets such as real estate can now be tokenized and exchanged in the same way that cryptocurrencies such as bitcoin and ether can.
This method of trading real estate differs. Here are six ways blockchain has transformed the real estate industry.
1. Platforms and Marketplaces
Traditionally, real estate technology has been focused on listing and connecting buyers and sellers. However, blockchain presents new methods to exchange real estate and may allow trading platforms and online markets to more thoroughly support real estate transactions. ATLANT, for example, has created a platform that employs blockchain technology to ease real estate and rental property transactions. By tokenizing real estate, assets may be exchanged on exchanges in the same way that stocks are, and transactions can be completed online.
ATLANT enables sellers to tokenize assets, treating them as if they were stocks, and then liquidate those assets via a token sale on the platform. The tokens gathered may be swapped for fiat cash, with purchasers owning a part of the property.
2. No Intermediaries
Brokers, attorneys, and banks have long been involved in the real estate industry. According to a Deloitte analysis, blockchain may soon change their responsibilities and involvement in real estate transactions. 1 Listings, payments, and legal paperwork are some of the roles that new platforms may potentially take over. By eliminating the middlemen, buyers and sellers will receive more for their money since they would save on commissions and fees levied by these intermediaries. This also speeds up the process by eliminating the back-and-forth between these intermediaries.
- Blockchain technology has had an influence on the real estate business in a number of ways, including providing a new mechanism for buyers and sellers to communicate.
- Blockchain technology might be used to eliminate middlemen from the real estate transaction process, lowering expenses.
- This technology may also aid in the codification of the practice of fractional ownership of real estate.
Real estate has traditionally been seen as an illiquid asset since transactions take time to complete. This is not the case with cryptocurrencies and tokens, which may theoretically be swapped for fiat currency on exchanges. Real estate, on the other hand, may be easily exchanged as a token. A seller is not need to wait for a buyer who can purchase the whole property in order to extract some value from their property.
4. Fractional Ownership
Blockchain reduces the obstacles to real estate investment by enabling fractional ownership. Typically, large sums of money are required upfront in order to buy property for an investment. Alternatively, investors may combine their resources to purchase larger-ticket houses. Investors would only need to visit a trading software through blockchain to purchase and sell even fractions of tokens as they see appropriate. Furthermore, fractional ownership would allow them to avoid property management tasks such as upkeep and leasing.
Maintenance fees may quickly build up, and dealing with renters can be difficult. This also has an impact on associated businesses such as lending, where property owners are often required to use their homes as collateral for loans in order to have rapid access to cash. Property owners may also continue to enjoy usage of their property, depending on the circumstances.
As a decentralized technology, blockchain demands confidence and security. All peers in the network have access to the information recorded on the blockchain, making data transparent and unchangeable. It just takes a look back to the 2008 housing bubble crisis to realize how greed and a lack of openness on the side of institutions may have disastrous effects. Trust is embedded into the mechanism of a decentralized exchange. Buyers and sellers might have greater trust in executing transactions since information can be verified by peers. Fraud attempts would be reduced as well. With the passage of laws in Vermont and Arizona, smart contracts are rapidly becoming acceptable documents. As a result, smart contracts would have more enforceability outside of the technology itself.
The transparency provided by a decentralized network may also help to reduce the expenses involved with real estate transactions. Aside from the savings realized by eliminating intermediaries’ professional fees and commissions, there are additional expenditures involved with real estate such as inspections, registration fees, lending fees, and taxes. These prices differ even depending on the jurisdictional region. These, like middlemen, may be decreased or even removed from the equation as platforms automate and integrate these operations.
Global real estate is worth hundreds of billions of dollars, yet the affluent and major businesses control it. More individuals may be able to enter the market as a result of blockchain technology, where transactions may be made more transparent, safe, and equal. Real estate transactions might someday become genuinely peer-to-peer, with blockchain-powered platforms doing the majority of the labor.
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