Real Estate is a major asset class, if not the most valuable, and in many cases a basic need for every human being. Residential property is estimated to be about 75% of all Real Estate and the result is an asset class with a dollar valuation is about $160 Trillion. Because of its nature, real estate is not traded as frequent as most assets, this has resulted in they slow uptake of technology in the process of buying and selling real estate. However, there are substantial benefits to incorporating technology alongside property brokers to achieve more secure, transparent and liquid markets. In this brief introduction, we will briefly outline why we believe rapid developments in Web 3 will enable the creation of next generation marketplaces through peer to peer interactions.
For more than a century, title registries in most parts of the world have kept large amounts of paper tracking ownership of land. The process of transferring ownership involves due dilligence on more paperwork. Back in the day, to transact residential properties, we used to visit property brokers door to door collecting pieces of paper with information about the the property market. Gone are those days, we’ve since evolved to platforms such as Zillow to access property listings online. However, besides accessing property information, the rest of the transaction is processed offline through a number of intermediaries. More consistent with streamlining transactions is the short term rental market, companies such as Airbnb have contributed massively to directly matching space seekers with space owners online and further facilitating the transfer of funds between the two parties involved.
The various 3rd parties involved in the process of transferring ownership in residential properties contribute in price negotiations, property evaluations and managing property viewings among other things more These repetitive services are the main reason real estate transactions attract massive commission fees. A majority of these repetitive tasks solved by companies in the short term rental market remain unsolved in transactions in which ownership of the title deed is being transferred. However, this is changing through PropTech 3.0.
Although numerous parties are involved to mitigate risk and increase confidence between any two parties involved in any transaction, it is not quite clear whether the value added is greater than value extracted from the transaction. There remains a number of inefficiencies which result to poor liquidity, settlements take up to a year in some cases and massive commission fees mean the property owners do not realize their property’s true value. In many countries, market participants face more overheads through title insurance.
Property transactions that are conducted across borders attract even more intermediaries to move money between two countries. By allowing settlements on the Property2chain Platform to be done through cryptocurrencies we will reduce this transactional friction through peer to peer transactions. However it is also important to note that beside its transactional benefits, not everyone will be comfortable holding crypto for their just sold property. For this reason we are looking to partner fiat enables exchanges to provide swift exchanges between cryptocurrencies and fiat.
One of the least discussed shortcomings of real estate transactions is the double spending problem, it is perhaps the main reason various intermediaries are involved to decrease uncertainty. Not only does this pose a massive risk for property buyers it also leaves property brokers with massive liability if they were to deal with bogus property owners.
Since there’s no limit to the number of look-a likes title deeds could be replicated, there remains no efficient way to track parallel transactions that might be getting signed using numerous copies of one title deed. This is the main reason property brokers in turn engage more 3rd parties. Because the root problem is paper based deeds and the amount of time it takes to transfer ownership, market participants all over the world are susceptible to the double spending problem in virtually all property transactions. In order to fundamentally solve the double spending problem and improve settlement times, we’ve tasked ourselves to alleviate the paperwork involved in transferring ownership and instead utilize the Ethereum Blockchain to track title deeds using the ERC 721 Standard.
Once a digital copy corresponding to the original title deed issued by the title Deeds Office, it is virtually impossible to replicate it into numerous copies.
As a result, residential real estate transactions will no longer be susceptible to the double spending problem. However, before the process of buying and selling properties in its entirety is brought online, a few issues need to be addressed, mainly online identities and the manner in which the original paper title deeds will be corresponded to unique digital copies. To solve these two key factors which are detrimental to identifying transactions we will collaborate with a decentralized network of property brokers to verify title deeds and identities offline.
Identities are crucial to regulatory compliance and as such the digital copy of the title deeds created on our platform will only be accessible to Ethereum addresses that have passed verification.
Just as the FinTech Revolution gave us banking online, we are excited to be evolving the real estate industry to a point where you can finally buy and sell residential properties online.
Kudzi and Panashe
Founders of Property2chain