There’s few buzzwords if any that are as hot in the world of computing quite like Blockchain is. Some realtors in Canada may be familiar with Blockchain, but we imagine the majority aren’t familiar with it. A blockchain is a growing list of records that are resistant to modification of the data and can digitally record transactions between two parties efficiently, verifiably, and permanently.
Now some will read that and see the words ‘transactions’ and ‘verifiability’ to quickly make the connection for how blockchain technology could be beneficial for real estate. Others may still need it to be laid out a little further, and that’s perfectly fine too. And of course while we’re on the subject of beneficial technologies, here at Real Estate Leads our online real estate lead generation system is 100% proven beneficial realtors looking to build on their customer base. See out testimonials page for more convincing on that if you need it.
But back to Blockchain for now. What makes it have so much potential for Real Estate?
Open, Transparent, and Traceable
A group called the Enterprise Ethereum Alliance (EEA) recently put out a 30-page Real Estate Use Case document to promote blockchain as a more open, transparent and traceable method of conducting transactions in the real estate industry.
It lists eight different uses for blockchain, including:
-property identification (including listings and data)
-token-enabled marketplaces
-token securitization
-public registries detailing ownership of properties
-sales process optimization
Along with its role in the creation of a real estate exchange, blockchain has been used as a platform for conventional real estate sales. Look no further than New York-based ShelterZoom, who have plans to go live this year with a platform enabling buyers and sellers to make and consider offers over an Ethereum blockchain.
Real estate tokenization may take some time to take hold, but it’s quit likely that it will. How this will almost certainly work is that the firm will offer a number of buildings in an index, and participants can buy tokens from that index. The appeal is quite simple, less risk and more profit.
It’s important to remember that the real estate market is highly liquid, meaning property can be bought or sold relatively speedily with little to no loss in value. To date, however, the marketplace has primarily been for a wealthy investors. Blockchain has the potential to change that.
It will enable anyone to invest because the costs to do it are so much lower, and it enables fractionalized ownership. Tokenization makes it so that someone can indirectly acquire a piece of real estate, and it also has the potential to create a much more transparent marketplace. This makes more of a level playing field so that everyday people aren’t at a disadvantage compared to more seasoned, deeper-pocketed buyers.
It has the potential to enables anyone to own and acquire a piece of real estate. Blockchain allows anyone to sell anytime, even if that means selling your share on a secondary market. Of course, a decentralized exchange for real estate tokens.
Blockchain and REITs
A Real Estate Investment Trust (REIT) is a fund or security that allows investors to purchase shares of income-generating real estate properties. REITs are owned and operated by shareholders who invest in commercial properties such as office and apartment buildings, hotels, and shopping centers.
With the new technology, the property will have its own smart contract and thus its own token. They can choose to invest in a specific property at a specific address wherever they like.
How It Works
There will be a central authority of users who whitelist those who can participate by first authenticating their identities. Once the individual is cleared, their personally identifiable information is encrypted and stored in a crypto wallet – a piece of software that keeps track of the secret keys used to sign blockchain transactions digitally.
The blockchain onboarding process involves potential users automatically being asked questions and required to submit sufficient proof of identity through a business automation application known as a smart contract – which serves to satisfy financial industry regulations. Once buyers / investors have completed the onboarding process they’ll have their crypto wallets whitelisted for blockchain real estate transactions.
All very interesting stuff, and something for real estate professionals in Canada to keep tabs on.
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