Blockchain may be coming to the real estate industry sooner than you expect.
In mid-July, a man bought 10 acres of vacant land in Kern County, Calif., roughly 130 miles north of Los Angeles, in a transaction conducted entirely on the blockchain.
The first such deal in the Golden State, it could be a harbinger of how real estate is bought and sold in the future. Conducted through a platform created by Propy, a Palo Alto, Calif.-based startup, the sale demonstrates blockchain technology is capable of recording and conducting property purchases.
There are roughly two dozen platforms attempting to put real estate transactions on the blockchain.
Experts say the technology could simplify deals and increase their transparency and speed. By using a distributed ledger, all involved parties can meet virtually to view and sign all documents on an immutable record that advocates say is more secure than traditional systems.
The next hurdle for widespread adoption is regulatory approval from state and local governments. But if more transactions like the Kern County deal take place, they could create the critical mass for officials to act quickly.
Simplifying the Deal
Using cryptocurrencies such as bitcoin (BTC) to purchase real estate isn’t new. The Crypto Realty Group, for example, has brokered multiple home purchases using cryptocurrency in Southern California.
But the Kern County deal not only used bitcoin for payment; every step of the transaction was executed using Ethereum smart contracts. Propy says that makes it the first fully recorded blockchain deal in the state. It’s also the first one fully executed on the Propy Transaction Platform. The title deed was recorded on the Propy Blockchain Title Registry and on the public Ethereum blockchain.
When the transaction began, the parties were scattered around the globe, with California-licensed realtor Kate Fomina in Hong Kong, buyer Luke Carriere in New York, seller Diana Dominguez in Northern California and the escrow agent in the San Francisco area.
Propy aims to simplify real estate transactions by bringing all parties, including the buyer, seller, brokers and title company, onto a single platform where all documents can be securely viewed and signed.
Last September, the company announced it helped TechCrunch founder Michael Arrington purchase an apartment in Kiev, Ukraine, using the Ethereum blockchain network. The same month, it raised $15 million in a sale of its PRO tokens. In January, it unveiled a pilot with the City Clerk’s Office of South Burlington, Vt., to record real estate documents.
Propy uses a registry, which consists of several smart contracts that are initiated as buyers and sellers move through the transaction process. It records everything, from the purchase offer and purchase agreement to the title report and disclosures, on the Ethereum blockchain.
As the Propy Registry expands, the company wants to incorporate local rules and regulations into the system. Propy enables payments in dollars, bitcoin and ether (ETH).
The Technology Is Here
There are roughly two dozen platforms attempting to put real estate transactions on the blockchain, Kevin Shtofman, technology strategy and real estate lead at Deloitte Consulting, tells ThirtyK.
Although the technology is already here, the challenge is obtaining local government approval for the transactions, he says. “Even though the transaction and title transfer are done on the blockchain, you still have to get approval from whatever municipality or state agency oversees titles for that area,” he says.
Blockchain-friendly states, such as Wyoming and Vermont, are already moving to make that possible with legislation aimed at paving the way for blockchain companies and applications. New York and California will also likely be early adopters, Shtofman said. The hope is that as the technology reaches critical mass, regulatory agencies will adapt it and create business-friendly rules. “Country-wide adoption with some standards is likely five years away,” Shtofman says.
Mark Zilbert, executive vice president at the realty Brown Harris Stevens, tells ThirtyK smart contracts will be prevalent in the industry in the next 24 months. Zilbert says the contracts have the potential to change how real estate transactions are negotiated by enabling parties to interact directly, aided by an agent.
Zilbert says agents will have a smaller role and act more as advisers. Blockchain could also affect the roles of other parties involved in deals. “It’s also possible that escrow companies may be eliminated or, at best case, mere facilitators of the blockchain transaction,” Zilbert says.
Previous Articles:
- TradeLens: IBM And Maersk Collaborate On Blockchain-Powered Global Supply Chain
- Why the Health Care Industry Has Little Patience for Blockchain
- Yale Researchers Study Factors Behind Cryptocurrency Price Shifts
- How to Disrupt the Entertainment World With Blockchain – ThirtyK
- Gitcoin Offers Bounties For ENS Integration Into Dapps
