An economic system out of ancient Rome.
We would be selfish if we thought that the digital revolution is not changing the world, and the Real State market knows it!
TL;DR
Blockchain is reshaping real estate by replacing bureaucracy with smart contracts that hold escrow, authenticate documents without notaries, automate commission splits, and tokenize properties into tradable ownership shares. The main obstacle remains legal: converting a digital title deed into a recognized paper deed, which still requires a notary and country-specific tax handling.
An economic system out of ancient Rome.
We would be selfish if we thought that the digital revolution is not changing the world, and the Real State market knows it! The bureaucracy that a real estate transaction requires could change as these operations are adapting to Blockchain technology. Efficiency in the storage of information, zero taxes and decentralization of economies seduces more and more the real estate industry.
Many experts consider Blockchain technology to be as disruptive as popular access to the internet was 20 years ago.
Uses and benefits in Blockchain technology with real estate:
Smart contracts
Smart contracts are blockchain-based agreements that execute contractual clauses independently and without intervention from the parties to the contract, or a third party. These contracts create a secure escrow for funds to be released.
Authentication of documents (less added expenses).
Notaries will not have so much relevance in the buying and selling process since the authentication of documents may be endorsed through blockchain technology, without the need for external intermediaries.
The traceability of the entire transaction is visible to all parties involved and secured on the blockchain.
So when a buyer and a seller decide to carry out the transaction, they will register the agreement through a smart contract. Both parties, buyer and seller, will receive a hash, i.e. a unique and unrepeatable identifier generated by a cryptographic operation.
All this information entered in the smart contracts is immutable, there is no way to violate these documents.
Real estate commissions
It is common that several real estate agencies are working on the same list of properties, a situation that makes it difficult to distribute commissions among them. In these cases, each seller is paid a percentage of the commission as agreed in traditional contracts, while smart contracts allow automating this process. This avoids the administrative overhead of finding out who, how and how much the advisors have participated in the sales.
Other advantages have to do with: the immediacy of the transaction and not transferring money, thus avoiding mistakes when counting money, theft and counterfeit bills.
Tokenization of the market through the real estate blockchain.
Tokenizing a real estate means dividing it into smaller parts that are represented by tokens that hold ownership rights. Each of these tokens is digitized to be traded on the blockchain and stored in each investor’s virtual wallet.
Cases of companies already operating real estate on blockchain.
Propy: Silicon Valley startup handles all real estate transactions online through smart contracts.
Smartlands : offers a residence for students in Nottingham (UK). Payments can be processed with a proprietary token.
Tokenestate: is a platform for real estate managers and developers who can access their client portfolio, this gives investors the possibility to buy parts of a real estate anywhere in the world.
Real T: Investors from all over the world can buy into the US real estate market through tokenized properties.
Conclusions
By 2022 there will be endless tokenized real estate projects. Blockchain technology and its decentralized system offers an improvement in the main aspects that hinder real estate transactions today.
The holy grail of real estate and blockchain is the legal part, after talking to 5 lawyers from different countries all agreed that the big obstacle is to take the title deed from digital to paper.
In all cases it will be enough to hire a notary or notary public to draw up the title deed or deed taking into account the taxes of each country; and if this country does not yet have laws for blockchain, you can choose to own a property in another country.
As for the governance of the tokens, the developers (blockchain engineers) will be in charge, who will also take into account the commissions or gas to be paid each time a transaction is made.
Frequently asked questions
How do smart contracts work in a real estate transaction?
Smart contracts are blockchain-based agreements that execute their clauses automatically without intervention from the buyer, seller, or a third party. They create a secure escrow that releases funds when conditions are met. When both parties register the agreement, each receives a unique cryptographic hash, and the recorded information is immutable and cannot be altered.
What does it mean to tokenize a property?
Tokenizing a property means dividing it into smaller parts represented by tokens that carry ownership rights. Each token is digitized so it can be traded on the blockchain and stored in an investor's virtual wallet. This lets investors buy fractional stakes in real estate located anywhere in the world.
What is the biggest obstacle to blockchain real estate?
The biggest obstacle is legal: taking the title deed from digital to paper. According to lawyers consulted across different countries, you still need to hire a notary to draw up the deed while accounting for each country's taxes. If a country lacks blockchain laws, one option is to own the property in another country instead.