The real estate industry is fast-growing, and now its impact with the innovations in the space of blockchain technology. The blockchain and cryptocurrency realm is slowly altering the way many markets work, and the real estate industry is no exception.
The term “blockchain technology” has been circulating around in social media over the last few years, much therefore, in the finance industry. Blockchain technology is revolutionalizing real estate. Transactions in the real estate industry verified by the blockchain have emerged as an innovative necessity which could be due to its total transparency in the economic system.
Here’s how blockchain technology and smart contracts can assist reshape the real-estate industry.
Tokenization of property
Every industry, real estate included, is in the business of connecting the existing supply with the existing demand. Through the tokenization property, they can essentially crowdfund their purchases by leveraging their collective buying power.This same tokenization concept can be used to provide an owner or seller with liquidity.
Blockchain technology is also poised to innovate fractional ownership within the real estate industry. The fractional ownership created by tokenizing a property is one of the most equitable innovations blockchain has introduced; it changes the game for that one person who wants to get into real estate but can’t find five friends who additionally have $10,000 to pool for a downpayment and renovations on a duplex.
Through online marketplaces and cryptocurrency exchanges, the demand for these types of tokenized real-estate assets is pre-aggregated so small-time players can more effectively pool their resources.
Program of smart contracts into assets themselves
1. Guarantee safe form of transactions
With this integration, intermediaries from the process in each real estate transaction could be removed and safest form of transactions could be guaranteed.
Smart contracts allow the seller and buyer to save costs on attorney fees. The open-source ledger at the heart of blockchain technology also permits the buyer to verify the seller’s ownership and eliminates the need for the buyer to pay a title company. That same ledger allows the seller to verify the buyer’s funds and negates the need for the creation of an escrow account.
2. Simplify long-term ownership
Smart contracts can further simplify the long-term ownership by taking in rent payments and disbursing proportionate shares directly to the wallets of the property owners.
3. Accelerate timeline
Normally, with so many intermediaries and legal processes, it can take weeks or months to complete a real-estate transaction. While the buyer’s money sits in escrow and the seller awaits the transfer, that capital is dead for both parties. Smart contracts governing these transactions can expedite closings and expand the overall cash flow for the economy as a whole. Contractors will begin getting paid quicker to renovate, and in turn, they will purchase supplies more quickly, those lumber yards will order more inventory and the listing goes on.
The backside line is that dead capital in an escrow account costs everyone, even those peripherally involved, more hard-earned money they ought to be producing by way of deploying their new inflow of capital.
Shifting of capital expenditures and costs
For any real-estate purchase, many factors go into the array of prices that make up the capital expenditure. With further innovation in the blockchain space, banks are the being removed out, as loans can come directly from cryptocurrency loan pools. Then, the capital expenditures that were previously associated with the purchase itself can be invested into the renovation of the property and the appreciation of the new proprietor or owners’ asset.