In the last year, cryptocurrency and blockchain has gained new recognition in the dominant currency markets, more so than ever. At this point, it’s likely that you have heard of Bitcoin in the news, in line at a coffee shop, or from a really excited dinner guest. Perhaps you have thought of buying some, or maybe even own a few tenths of a unit.
In real estate news, we have seen that it is now possible to buy and sell properties with Bitcoin. But what does this really mean about the future of home buying and selling?
Since cryptocurrencies are known as one of the most volatile investments, it might be more beneficial to make large financial purchases that take time, like real estate, with a currency that is more stable. It would be a shame to be that person who goes under contract to purchase a property with Bitcoin when the currency is worth $5,000/coin, and actually get to closing when it’s worth $10,000/coin — in other words, experience a 100% increase in purchase price over the term of the contract. When it comes to addressing the possibilities that cryptocurrency and blockchain have to offer the real estate industry, being able to purchase property with alternative currencies is just the tip of the iceberg. What is really exciting, if you ask me, are the advances of blockchain (the technology behind cryptocurrency). This is what will really move and shake the real estate world in the years to come.
So, how will blockchain help me?
Have you ever purchased property and found yourself hoping that the seller really did disclose all material defects? Did they hire licensed and insured contractors to fix issues as they arose? Have you ever had to file a claim with title insurance for a lien that you had no idea about? Or been concerned about an incomplete chain of title that was reported in a title commitment?
The primary areas where blockchain technology could make the largest impact on real estate is in property records and title, property inspections and maintenance history, and with smart contracts. As blockchain technologies are adopted and developed by individuals with real estate experience, all of the gray areas we traverse in transactions can be alleviated. Blockchain technology is inherently resistant to data tampering and is, by design, decentralized — which means that no one authority can alter it.
Stepping beyond the current climate of real estate transactions, which is built on blind trust in multiple authorities, the decentralization of important pieces of a real estate transaction, like inspection, title, smart contracts, and more, offer us a more streamlined future with less guesswork and more hard facts, and therefore offer buyers more agency in purchase. For example, if each property had a blockchain ledger, claims made by property owners could be verified through cross referencing with service providers like professional contractors, and by municipal planning and development offices to ensure proper permitting.
Future blockchain development in these areas will shift a transaction from being centered and dependent on the testimony of sellers and limited records of title, as they are now, and lead to increased buyer confidence and a much more simplified process. Of course, widespread adoption might take a while, but in our increasingly digital world, it’s just a matter of time!