Less than a decade ago, blockchain was a foreign term, often associated with the crypto-craze that young investors took hold of instead of the private, secure ledger it is based on, widely used today to record sensitive information across a multitude of sectors.
Now, the use of blockchain is trending even in real estate, making its way into the home-selling and -buying markets, and being used to streamline fragmented transaction processes with the goal of simplifying both the consumer and business experience and reducing risk, primarily within the deed recording and conveyance steps of a sale’s closing.
What are the benefits?
Security – The decentralized nature of blockchain reduces risk because there is no one single point of control. Relying on several authorities instead of one creates a system that cannot easily be taken advantage of. This makes it the ideal place to record property deeds and other significant transaction processes, instead of continuing to use the centralized databases currently implemented, which can be tampered with by those looking to steal information or alter existing records in order to falsely claim property ownership.
Additionally, the permanence of blockchain safeguards important documents that could easily be lost or altered if kept only by government records, including titles. Information and transactions recorded on the blockchain remain on the ledger on a permanent basis; therefore, unpredictable forces, such as natural disasters or hacking, would not pose a significant threat as they would be with traditional methods of storing real estate transaction information.
Efficiency – With blockchain, the time it takes to record a deed is often significantly slashed. The transaction is completed electronically, thus reducing costs and time constraints. With a physical deed, there is scanning, printing and delivering involved, and, many times, real estate professionals are at the mercy of local government offices, which often run at their own, much slower, pace.
Accuracy – With manual indexing, information can get lost in translation. Much like the telephone game played during childhood, passing on the information from one department to another can result in miscommunication or misplacing documents. Since every step of the transaction can be recorded on the blockchain ledger, there is no chance of information being lost or incorrectly relayed.
Who’s offering blockchain-based deed/transaction recording?
ShelterZoom: A New York-based company that is reportedly the industry’s first blockchain-powered, end-to-end deal platform, ShelterZoom promises that all parties involved in a real estate transaction will be able to see their offers and acceptances in real-time, as well as access property titles, mortgages and related documents through the platform’s Ethereum-based blockchain ledger, which is fully encrypted. These capabilities are set to go live in the first quarter of 2019.
Propy: A global real estate market that runs on a decentralized title registry, with Propy, Inc., all involved parties in a real estate transaction can utilize blockchain-based smart contracts to facilitate closings. The digital transfer of ownership is often much faster and less costly than traditional methods used.
Ubitquity: An SaaS platform that allows users to input data and store it on a blockchain of their choice, with Ubitquity, title companies, municipalities and recorders of deeds can save information on the ledger in order to increase transparency, reduce title search time and keep a clean record of ownership.
velox.RE: A blockchain-based real estate company that allegedly produced the first legal blockchain deed software and procedural protocol, this platform boasts being able to give real estate stakeholders added transparency and liquidity, as well as increased profits.
What does the future hold?
There has already been government implementation of blockchain technology for land title records, meaning a more widespread adoption of the technology across the real estate industry may not be far away. According to Mintz.com, several countries, including Sweden, Dubai and Brazil—and even the U.S, in Cook County, Ill., with velox.RE—have begun utilizing blockchain technology for land title records.
Will title companies continue to be a necessity if transactions are fully recorded on the blockchain ledger? While title insurance is currently needed to protect against any possible title defects, some say the need for this added mode of defense may not prove as useful if blockchain can greatly reduce the risks of title fraud. Consumers should keep in mind, however, that blockchain does not fully eliminate risk, leaving room for services that offer protection.