How Blockchain & Crypto Will Transform Real Estate: Part 2

Smart contracts are programs integrated into blockchain that run when predetermined conditions are satisfied. They automate the execution of real estate agreements and purchases so participants can be certain of outcomes in real time, without the need for third-party involvement.

The purchase of a home can become an expensive, lengthy process since the transaction must be legally verified by banks, brokers, lawyers, agents, and other third parties through conveyance. Smart contracts clarify contractual property sale, loan and mortgage terms of agreement, cut out middlemen, and allow home purchases to be conducted between the buyer and seller in real-time.

Users appreciate the speed, performance and precision offered by smart contracts, and this is a huge reason many companies serving the home market are deciding to use cryptocurrency. The bottom line: since smart contracts are digital and automated, no resources need be spent processing paperwork, following up to verify data, and rectifying errors originating from third parties.

Due to the fact that third parties are not involved, trust and transparency are guaranteed. Because transactions are encrypted and shared only with authorized participants, there’s no need to worry about transcribed mistakes, the alteration of information, or fraud introduced for personal benefit.

Along with trust and transparency, security is enhanced. All blockchain real estate transaction records are encrypted, making them impossible to exploit. Cryptocurrency purchase records are inextricably embedded to previous and subsequent records within the digital ledger, making alterations to any chain unfeasible.

Digital payment using cryptocurrency completely changes how money is moved and processed between agents, people, locations, and third-party vendors.

Blockchain will disrupt how traditional real estate transactions are conducted, removing the expensive and time-consuming process of negotiating with third parties, which greatly improves operational overhead. Eliminating intermediaries provides buyers and sellers more value, as commissions and fees are streamlined, with exchanges carried out instantly.

Blockchain introduces decentralization into all transactional processes. Right now, almost all digital interaction is centralized, a system whereby data must be verified by third-party intermediaries. Centralized banks act as single authorities that retain singular control over all network activity.

Centralized systems are prone to server invasion and manipulation through data breaches, which can cause data manipulation and/or outright loss. Decentralized blockchain networks are nodes that interact without third-party participation via a direct basis with every other computer in the system. Since there is no single authority, there is no single point of failure.

Real estate agencies and affiliate vendors deal with highly proprietary data that could be exposed through hacking a single point of weakness. With a decentralized process, the likelihood of information loss under normal circumstances is very low.

Buyers and sellers have more confidence in decentralized blockchain transactions. As mentioned previously, blockchain data cannot be altered due to hashing, which converts a string of characters into another value via an algorithm which is embedded into the immutable block. So, decentralized blockchain provides ultimate security, improving the quality of real estate services and solutions.

So, how does this help the real estate home buying process, you might ask?

As indicated, crypto enables the ability to transfer funds directly between buyer and seller, so multiple layers of intermediaries to process one transaction becomes unnecessary.

Banks, equity and mortgage firms may not agree, but contractual activity is negatively affected by their use of time-consuming, costly intermediaries. Transactions are often flagged for some type of dispute. For financial institutions, by law, when complete transactional trust is lacking, third-party intervention is required for compliance. The use of crypto via blockchain smart contracts alleviates this issue.

Commercial real estate agencies are now exploring the use of crypto via blockchain to reduce transaction costs while providing a secure, streamlined method of documenting payments. Blockchain data clarity and fixity will augment the quality of real estate industry services and solutions.

Real estate property tokenization converts a physical asset into a series of digital tokens which can be sold via a digital marketplace. The tokenization of entities in the industry aids fractional ownership.

Investors who buy these tokens own a piece of the asset, which exists in the form of a blockchain-based digital token, with each instance representing direct ownership of an asset.

Cryptocurrency will change how future exchanges and investments are made. Investors can now buy into fully compliant tokenized blockchain-based real estate with minimal capital. Cryptocurrency, including Bitcoin, is an example of a fungible token, meaning that all tokens are identical and can be divided.

Cryptocurrency creates transactions that can be paid in large and small denominations. When leveraging blockchain, financing and borrowing transactions can be broken down into incremental portions shared by many buyers and sellers, creating a lower barrier to entry.

Tokenization of real estate grants owners and investors quicker access to capital, and crypto enables borrowing from multiple people simultaneously through the use of the blockchain. So, tokenization makes it unnecessary for buyers and sellers to spend a large amount of capital on a single investment.

Tokenization can break up a real estate asset into smaller shares, enabling the opportunity to purchase less of the asset in comparison to owning a whole share in the case of traditional investments.

Tokenization breaks an asset into shares that you can sell to investors. This is a great aid for businesses seeking adaptability in the marketplace, as anyone can invest a certain amount and become a part-owner of an asset, and benefit from the profits generated.

From the investment angle, tokenization helps financial institutions and real estate investors diversify their portfolios. With tokens, you can pay for investments and loans with asset equity. Tokenizing 40% of an owned asset and offering it on the secondary market lets you convert the portion into a mortgage-like system, where you then purchase more asset equity at any time.

Real estate tokenization will make it dramatically more accessible and cheaper for investors to buy and sell real estate. It will also make it easier for developers to raise capital for costly projects. Instead of buying an entire property, you can own parts of many properties.

You can now use blockchain to tokenize and invest in any type of asset with crypto using smart contracts. Real estate tokens are backed by tangible assets, making them far less risky and volatile than crypto.

Buyers can now buy tokenized commercial or residential properties. Investors worldwide can purchase blockchain-based real estate with minimum capital. The tokenization of real estate is giving the buyers and sellers the freedom to raise or invest capital the way they choose.

Using crypto via blockchain is a great example of how this digital technology will impact commercial real estate. Despite recent issues with crypto valuation, the digital currency is still viewed with confidence by industry experts due to its ability to facilitate real-time transactions. It is evident that blockchain will change how current property and home markets operate.

As part two of a continuing series, we are just getting started. Stay tuned to learn more.