Blockchain & Real Estate: Part 2
Exploring the functionality of Blockchain technology in the due diligence process.
This is part 2 of a 3 part series. Part 1 can be read here. Part 3 is coming soon. Follow us if you want to read more.
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An Opaque Industry
In part 1 of this series, we outlined and established the fundamentals of blockchain technology and briefly observed the benefits of its implementation in real estate. In part 2, we will dive in-depth into just how blockchain could be utilized in the home-buying process, specifically, the pre-sale and due diligence process.
Approximately 9/10 home-buyers utilize online resources in their home search process and 51% of buyers successfully find the home they ultimately purchase on the internet. Even as these numbers increase, the property search process and the due diligence process is severely hindered by fragmented data being held in antiquated systems.
Legacy data vendors charge exorbitant amounts, county websites are impossible to navigate, and lead-generation websites sell consumer data to brokers, proving that while the world is calling for convenience and innovation, our old data organization habits still haunt us.
Property Search Process
When it comes to the property discovery process, real estate brokers, agents, buyers and sellers rely on listings services or the MLS to access property information by address. The data included in these services covers location, property features, rental rates and some historical data.
The issue here lies in the accessibility and the accuracy of this data, as the lack of standardized processes and arrangement allows for lapses in decision-making and a complete lack of trust from people relying on the data.
Rex MLS & Data Integrity
A fully comprehensive and efficient blockchain-based MLS has been the mission statement of a few companies such as Rex MLS for a while now. With the current landscape of real estate data suffering from poor accessibility and fragmented, incomplete or incorrect data, a centralized blockchain MLS system could be one of the first blockchain breakthroughs in PropTech.
Rex MLS specifically is built on the Ethereum Blockchain. Using the Interplanetary File System (IPFS) to store data and a token system to honor it, REX is a collaboratively built, interconnected real estate data portal.
The goal is to enable property data to be distributed across a P2P network, decentralizing the data and leveraging a platform that allows for the secure exchange of data for all professionals on every side of real estate.
Users are directly incentivized to contribute listings and inspect data for accuracy and comprehensiveness. When users upload a property listing on the RexMLS blockchain service, they are rewarded with Rex’s own native cryptocurrency. This allows for users to have unbounded access to data, and also make fast and secure transactions all inside of Rex’s system.
Due Diligence Process
The time spent navigating the due diligence process after engaging in a lease, purchase or sale is an arduous and taxing process. This is due to a copious amount of documents that need to be reviewed by financial, legal and environmental teams who all move at their own individual pace.
The cause of this remains in the simple fact that the best course of action to protect security and ensure verification is still reliant on physical documents (i.e. history of ownership, income and expenditure, occupancy and tenant agreements, and maintenance records).
This manual verification process increases administrative tasks and is an excuse to change hands more frequently. Ultimately though, it is a procedure prone to loss of information and errors.
Digital Property Identities
A digital identity akin to a unique property ID would act as a virtual identifier that consolidates information such as vacancy, tenant profile, financial and legal status, and performance metrics. The power of blockchain technology paired with these unique identities can expedite many of the aforementioned physical processes.
More than that, digital property IDs can be linked to the actual transacting parties opening yet another avenue for recorded data. Digital personal identities could work hand-in-hand with property IDs, and alleviate the painful and expensive process of proving your identity with physical documentation.
Since 2007, Estonia has been utilizing a universal national digital identity system powered by blockchain. This means that all government data about a particular individual is reserved in a distributed ledger that individuals can then have control over and share with others.
Such a system is rid of paperwork and leans on digital signatures. The structure is powerful enough for Estonians to actually lure business from other European nations with the advanced level of ease.
Next Time…
In Part 3, we will conclude our series by looking at how blockchain can transform aspects of home-buying such as the financing process, and title management. We will also profile companies that are poised to leverage blockchain and take PropTech by storm in 2018.
This is Part 2 of 3 pieces exploring Blockchain and it’s current place in real estate technology. Part 3 will be available Friday. Follow us if you want to read more.
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