Real estate transactions are complex. Some of that is by design per rules and regulations, while some of that is a result of a complex ecosystem of fragmented industries working together to buy and sell homes. While Blockchain has largely been reserved for the distribution of cryptocurrencies, specifically Bitcoin, the technology behind it (distributed ledger technology) has the opportunity to disrupt the mortgage, real estate and title industries.
Let’s take a look at just how complex the real estate transaction is and all of the moving parts, just as a refresher. This infographic from Florida Realtors, illustrates it:
Essentially, Blockchain could provide an avenue for the lending and real estate industries to speak the same way in a transferable, secure and verifiable way.
Blockchain is defined by guardian.com as:
“a digital ledger that provides a secure way of making and recording transactions, agreements and contracts – anything that needs to be recorded and verified as having taken place … rather than being kept in one place like the more traditional ledger book, the database is shared across a network of computers. This network can encompass just a handful of users, or hundreds and thousands of people. The ledger becomes a long list of transactions that have taken place since the beginning of the network, getting bigger over time.”
Blockchain is widely celebrated as being secure because the “blocks” include sets of data that are encoded. It is secure by design and is a perfect example of how technology, if leveraged in the right way, can have a profound impact on established businesses and entrenched industries.
Distributed ledger technology is currently being tested by many big banks right now, but the inclusion of mortgage, real estate and title is on the horizon. Check out how the technology can impact each of these industries with examples below:
Blockchain could be used for valuation, auditing, chain of information and transferring of a borrower’s data. Not to mention the possibilities when it comes to streamlining the credit-decision process, opening up more opportunities for those with little to no credit history. More information on this can be found here.
Blockchain could defragment MLS property data and give people the ability to share data and finances in a much more secure and streamlined manner. More information on this can be found here.
Blockchain could allow for the creation of a centralized dataset of title information. It also could replace paper deeds with the transfer of a “token.” This, essentially, would allow for a digital form for proof of ownership, which would deliver a secure way to protect deeds and streamline the title process overall when ownership changes hands. More information on this can be found here and here.
As I wrote about recently, several startups were recognized on the Forbes Fintech 50 2018 and many have the potential to create innovative breakthroughs leveraging Blockchain. Symbiont provides a product that helps track share ownership and issuance. Chain offers Blockchain products for financial institutions with the goal of fixing faulty record-keeping processes in finance.
It is going to take some time to validate and scale, but I believe Blockchain can fix a lot of the fragmentation that creates frustration among mortgage and real estate professionals, and as a result, consumers.
Let’s be ready, because the future is now.