The Step-by-Step Process of Blockchain Real Estate Exchanges

January 13, 2022

Blockchain has a significant impact in several industries, including commercial real estate. With decentralized access, blockchain continues to win the hearts of many. Despite their unique achievements, many are still skeptical about the prospects of blockchain in the real estate market. In this article, we will explore how blockchain impacts commercial real estate exchanges.

What Is Blockchain in Real Estate?

Blockchain is a chain of blocks with real-time information. It records digital documents in real-time, making them impossible to alter. Blockchain technology removes the mistrust that’s common with transactions in the centralized system. It also eliminates the role of government or banks as regulators of financial transactions.

A blockchain cannot exist without the internet, and it also operates through other technologies. So, it contains the database, computers, and software applications.

When you mention blockchain, many people often think about cryptocurrencies. Well, all cryptocurrencies, including bitcoin, utilize blockchain technology. The blockchain platform also records and tracks transactions across computers in the network, and it is an open ledger that anyone in the network can access. Thus, blockchain builds trust, making it perfect for real estate exchanges.

How Does Blockchain Work?

Here are the steps which blockchain transactions follow:

  1. Someone requests a transaction
  2. Different computers within the network pick the transaction request signal
  3. Use algorithms and nodes to validate the transaction
  4. If the trade is successful, the blockchain records a new block
  5. The block becomes nearly impossible to alter

Why Should You Use Blockchain?

As mentioned earlier, blockchain is becoming more popular each day. However, you should know a few of the reasons why this technology is quickly taking center stage:

  • Fraud prevention: The decentralized sharing of information makes it complex for people to embezzle funds with blockchain. Many industries already use blockchain to monitor financial processes and limit costs.
  • Time reduction: Blockchain allows you to move a large amount of money within a few seconds. It bypasses the tedious process of identification and verification that’s common with traditional financial institutions.
  • Security: Since everyone keeps a copy of the ledger, the system cannot crash if there’s an attack on one database.
  • Transparency: Blockchain offers a high level of transparency because the ledger is accessible to all.
  • Reliability: Blockchain verifies the transacting parties’ data in seconds, promoting trust, accuracy, and speed in real estate transactions.
  • Immutability: Blockchain registers transactions, creating a chain of blocks per their time of occurrence, making it difficult to alter or remove data in the ledger.
  • Decentralization: Each node must stick to the protocol that governs how they exchange data. Hence, it ensures that the ledger only accepts validated transactions.
  • Collaboration: Blockchain technology enables people to transact without a third-party mediator or regulator.   

Why Should You Use Blockchain For Real Estate? 

Blockchain improves the speed of transactions in the real estate industry. It makes information regarding property available to investors in real-time.  

As the internet affects the commercial sector by creating online market stores, blockchain also impacts real estate by easing the flow of information.

How Blockchain Technology Changes The Real Estate Industry

Let’s consider different ways in which blockchain technology can affect the real estate sector:

#1. Marketplaces and Platforms

The real estate marketplace is all about listing properties, connecting buyers to sellers. But blockchain technology introduces more innovative and more comprehensive options for real estate trades.

With a tokenized property, investors trade assets like stocks on an exchange. It allows sellers to tokenize assets and make it easier to liquidate. The tokens received can be converted to regular currency.  

#2. Land Titles

Blockchain can store and verify information about land titles as a significant real estate document.

#3. Cost

The transparency found in blockchain can reduce the cost of real estate transactions, and it saves money that should be given to intermediaries as commissions or fees.

#4. Greater Participation

The net worth of the real estate industry runs into billions of dollars. Yet a significant portion of this wealth belongs to a few individuals and large corporations. 

With blockchain, more people can assess the real estate marketplace. More so, people can transact with greater trust and speed.

Blockchain platforms can make real estate transactions smoother and faster for everyone.

#5. Smart Contracts

Blockchain can verify and audit real-time contracts anywhere without third-party intervention. Investors can code instructions into the transactions to ensure that the party receives payment after fulfilling the instructions. Hence, it removes the likelihood of distrust and payment disputes.

Smart contracts improve the speed of leasing and save costs. More so, blockchain can identify income and reduce the rate of fraud.

#6. Leasing

Real estate investors can identify, verify and sign contracts on the blockchain. Employer checks, tenancy payments are examples of contracts that can be processed on a blockchain platform.

#7. Ownership

A real estate investor can verify the ownership of an asset through the blockchain, and it makes available the identities of owners of tokens to the public.

#8. Liquidity

If more investors tokenize an asset, that means the asset’s liquidity has increased. Liquidity problems reduce if investors can easily buy and sell shares in a purchase.

What The Future Holds For Blockchain In Real Estate?

Blockchain removes third parties’ need to record, verify, and store transaction information. It improves liquidity, reduces costs of transactions, and saves time. However, many investors are yet to enjoy the full benefits. And that’s because a lot of this innovation is still at the theory stage.

Despite the benefits of blockchain, we are yet to implement it all in real estate. More investors should consider ways to execute the promises of blockchain innovation in the real estate market.
Contact us today to learn more about blockchain transactions in the real estate industry.