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Blockchain has the potential to change the real estate industry

While blockchain technology isn't a part of all transactions right now, it's important to understand how it will change real estate in the future.

Cryptocurrency and the future of payments continue making headlines in 2022. From the everyday person selling a condo as an NFT (non-fungible token) to Warren Buffet investing $1 billion in a crypto-friendly bank, it’s clear that blockchain technology, tokenization and digital assets are here to stay.

To some, blockchain real estate may sound just as bizarre as meme coins (such as Shiba Inu or Dogecoin) or Pringles’ new flavor NFT. However, Blockchain’s inherent trust system actually makes it ideal for the real estate industry. Here are three ways it will change the future of real estate.

Faster real estate transactions

Using the blockchain could significantly change the parties involved in future real estate transactions. It makes it possible for buyers and sellers to close deals directly, without the need for certain intermediaries, such as closing agents and attorneys.

While some middlemen may get cut from real estate transactions, real estate agents will likely become more valuable to buyers and sellers. Home shoppers and investors will still need help finding the right property, negotiating selling prices and navigating contingencies. But blockchain technology will likely speed up real estate closings and reduce costs for buyers and sellers.

Tokenization of real estate

Blockchain technology will change real estate investing with the tokenization of properties. Tokenization is converting a property into digital assets or tokens and selling them in an online marketplace or exchange. The record of the transaction exists on the blockchain.

Buying a real estate token means you own a portion of the real-world asset, such as a residential or commercial property. Each represents direct ownership of something, such as a portion of a property or participation in a real estate investment fund.

Tokenization allows investors to purchase a portion of a property anywhere in the world instead of buying it outright. Any seller can divide their real estate into many smaller tokens and sell them individually. That means investors can buy pieces of real estate with smaller sums, lowering the barrier to entry for those with less capital.

Real estate tokens are similar to an NFT; however, they’re linked to the value of a physical asset. Multiple experts have said tokens are the next phase in the development of real estate blockchain. That’s because they allow investors to purchase digital assets backed by tangible property.

Transparency in real estate

Companies in various industries already use smart contracts for automation and transparency. Smart contracts are programs stored on a blockchain that run when predetermined conditions are met, such as executing an agreement or financial transaction, without the need for an intermediary.

Within a smart contract, you can set conditions that satisfy the parties in a real estate transaction. A developer uses if/then and if/when statements to structure the contract digitally to ensure the data is represented accurately on the blockchain.

Smart contracts can significantly improve many aspects of real estate, such as lending, renting, buying and selling. The blockchain makes it possible to automate many tasks, such as mortgage application paperwork and recording real estate records. And because the technology is decentralized and immutable, the data is secure.

As the building blocks of real estate blockchain are placed, consumers and real estate agents must become educated about blockchain technology, various digital assets, and their pros and cons. That’s the best way to prepare for a massive shift in how we’ll buy and sell property in the future.

Laura Adams is a Senior Real Estate Analyst at Aceable.

This column does not necessarily reflect the opinion of RealTrend’s editorial department and its owners.

To contact the author of this story:
Laura Adams at laura@lauradadams.com

To contact the editor responsible for this story:
Tracey Velt at tvelt@realtrends.com

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