Making the real estate industry more efficient


Blockchain Technology In The Real Estate Industry

Blog 41

On Monday of this week, Bitcoin hit an all-time high surpassing $4,200 per unit/coin. Year to date, the cryptocurrency’s value has increased 400% and its acceptance for the purchase of luxury items, including real estate, continues to grow. Earlier this year a multi-million-dollar property in California was purchased with Bitcoin and a luxury condo in Vancouver recently came on the market for 2999 Bitcoin. While most of us are not likely to see a Bitcoin funded transaction come across our desk soon, the blockchain technology on which Bitcoin is based may soon find its way into segments of the real estate industry.

For those of you not familiar with blockchain technology, there are many articles available on the internet that describe the technology. In the interest of space, we will not go into detail on the technology but focus on two areas of our industry where blockchains could have the greatest impact – searching property records and transfers.

Suffice it to say that blockchains are a decentralized network that widely distributes a public digital ledger that tracks assets and chronologically records transactions. In the Bitcoin world, that ledger is tracking both the Bitcoins as they move across the network and the owner of those digital asset, using both public and private keys or certifications.

As a sizable asset, the transfer of real property is ideally suited to benefit blockchain technology. For centuries, real property has been described using tools such as legal descriptions, Block, Lots and Sections, Plots or Tax ID numbers. As transactions occur, whether a sale (deed), mortgage, lien, etc., they are recorded against the property in the Town Clerk or County Land Records. For many years this required physically bringing a paper document to the County Recorder’s Office which was verified and recorded. Over the last couple of decades, the internet and electronic recording has sped up the process, but the property records are still centralized, and while public, often require a paid subscription to access online.

With blockchain technology each property would be given a unique public key or certificate. This public key could contain information on the property and would maintain a chronological historical ledger of all transactions and ownership of the property. Since this ledger is public, any information on the property could be attached, such as occupancy rates and maintenance records, without incurring record fees. Buyers interested in a property could enter the properties public key and immediately access the property information and historical data remotely and without charge.  Searching a property’s title could be done quickly, at no cost and without having to physically go to the land records or the County Recorder’s website.

Factoring in blockchains ability to manage cryptocurrency, the technology can go beyond reducing the cost and time to search a property’s title, but could facilitate or manage a transaction. Using smart contract technology, the blockchain could create a digital deed. This digital deed can only be transferred using the owner’s private key or certificate, which would have been generated and saved when the owner initially purchased the property. Once this key is entered, the technology verifies the seller is the owner and transfers the deed to the buyer while simultaneously transferring the cryptocurrency purchase funds from the buyer’s account, who is also verified through a private key, to the seller’s account. Utilizing a private key approach could not only speed up the sale process but will greatly reduce, if not eliminate, real estate fraud in the areas of forged deeds and misdirected wire transfers.

While there are many questions that still must be answered when it comes to blockchain technology in the real estate industry, it is a technology that has the potential to significantly alter the landscape of our industry.

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