Making Real Estate Transactions Safer with Blockchain Technology
Digital technology is a wonderful thing, but it has also produced a number of unintended side effects, especially when it comes to sharing secure, sensitive information. Think of the millions of people who were affected by the recent Equifax hacks, the data breaches at companies like Target and the increase of identity thefts. Crooks are also using digital tools for real estate fraud. Blockchain technology as the potential to prevent these and other digital security issues.
What is Blockchain?
We live in an increasingly digital world where sensitive data is constantly shared and transferred. Blockchain technology was designed to secure breaches like the ones listed above.
In simple terms, blockchain is a secure method of digitally transferring and distributing data without it being copied. The technology was originally developed for Bitcoin digital currency, but many more uses have been found for this versatile technology.
In general, blockchain cannot be controlled by a single person or entity and does not have a single point of failure. Operating on a network of ‘nodes’, the technology is very decentralized. Blockchain is a network of consensus which is transparent and cannot be corrupted.
As Don and Alex Tapscott, say in the 2016 book Blockchain Revolution, “The blockchain is an incorruptible digital ledger of economic transactions that can be programmed to record not just financial transactions but virtually everything of value.”
Blockchain and Real Estate
For real estate, blockchain can make transactions faster and more secure. Below are three specific ways in which blockchain technology can benefit the real estate industry.
- Fraud Reduction – Every year, real estate fraud costs Americans millions of dollars. It happens to buyers, sellers and even renters. Forgery has played a big role in fraud. Crooks use counterfeit property deeds sealed with forged notary seals. Blockchain offers unique, impossible to replicate ‘digital ownership certificates’ which make forgery impossible. Another big problem is wire fraud in which people are duped into wiring money to an unverified recipient. Blockchain offers a 100% incorruptible method to log both the sender and recipient of funds.
- Greater Transparency – Using this technology could potentially create a more seamless transfer of ownership for much faster real estate transactions. Blockchain could facilitate digital IDs for properties and for buyers and sellers. Also, for buyers, credit histories and incomes could be verified almost immediately. Not only would blockchain make real estate transactions more secure, but it could speed the notoriously slow mortgage process.
- Faster, Less Expensive Transactions – For the average buyer or seller, real estate transactions are neither quick nor easy. Some of the hindrances come from regulations and bureaucracy, things which blockchain cannot fix. But it can provide relief. Currently, third-party escrow services are commonly used in real estate transactions to help prevent fraud. Yet even those can be compromised. However, the design of blockchain and its inherent security would allow homeowners to bypass escrow services. This would speed up the process, but also reduce the cost of each transaction by 1 – 2 percent.
Safer, Faster Real Estate Transactions
Blockchain technology has the potential to speed up real estate transactions while at the same time making them much more secure. With the application of blockchain in the real estate sector, agents, buyers, sellers, renters, attorneys and financial institutions can benefit.