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Technology is Changing the Real Estate Industry… and Fast. Enter: #REsourceBlockchain
Here at The Mountain Life Companies, we’re always seeking out opportunities to improve the way we do business within our industry. One of the biggest opportunities for massive industry change has come to the forefront as Blockchain technologies are simplifying and digitizing so many different industries, from banking and trading commodities to shipping and logistics, to manufacturing and supply-chain management. Our newest venture REsource Blockchain (Real Estate Source Blockchain) is the vehicle through which we will bring about greater efficiency, security and transparency to our industry.
A Quick Primer Of Blockchain
Blockchain is a distributed ledger technology, the same technology that Bitcoin and many other cryptocurrencies run on. Think of it as a digital transaction ledger that is stored and encrypted on thousands of computers around the world.
All of these computers are in agreement, not only on which transactions have occurred but also in what order they have occurred. Anyone can download the Blockchain onto their own computer and become part of the network.
The real power of these distributed personal computers is that they are used to validate and contribute transactions and enables Blockchain to be a distributed system with no central authority.
The actions that these computers perform to validate transactions is called “mining.” For example, regarding crytptocurrency specifically, the reward for successfully validating a transaction and adding it to the blockchain is called ‘mining a Bitcoin’. This lack of a central authority and distributed public ledger allows the blockchain to grow beyond being a decentralized database of cryptocurrency transactions.
How Blockchain Is Changing Our Industry
The real estate industry seems to take great pride in keeping many aspects of its operations secret, such as comparable sales and rental rates, property prices, and valuations, to attempt to basically fabricate a competitive advantage, however they can. The thing is, secrets are very hard to keep and many of them may not even be worth keeping.
In today’s increasingly digitized and hyperconnected world, there is an emerging consumer demand for greater transparency, technology advancements and the continued disintermediation of startups gradually making some of this information public.
As a result, property-related information is increasingly available online and in the traditional paper form. However, a significant amount of the digitized information is hosted on disparate systems resulting in a massive lack of efficiency and transparency, and a much greater incidence of inaccuracies which create a higher potential for fraud.
Blockchain technology, the digitized, distributed ledger that uncompromisingly records and shares information, could enable the real estate industry to address these inaccuracies and inefficiencies.
According to a 2015 World Economic Forum survey of 800 information and communications technology experts and real estate executives, nearly 60% of respondents believe that 10 percent of the global GDP information will be stored on blockchain technology by 2025.
Today, real estate industry thought-leaders now realize that blockchain-based smart contracts can play a much larger role in the real estate industry, potentially transforming core operations such as property transactions including financing, purchase, sale, leasing, investing and management.
Over the course of the next few years blockchain tech adoption will have a broader impact, as it can be linked to public utility services such as waste management, water efficiency, smart parking, and energy billing, and also enable data-driven municipal management.
Our newest Mountain Life Companies venture, REsource Blockchain is currently exploring all of the opportunities to positively impact the real estate industry through distributed ledger technologies in order to develop new, better, faster and more secure methods of buying, selling, leasing and investing in real estate.
Our analysis is revealing many scalable benefits that could seriously improve our industry:
1. The Blockchain enables near real-time settlement of recorded transactions, removing the friction of multiple parties working on the same deal and reducing risk, but also limiting ability to charge back or cancel transactions. This securitization of the transaction is a critical piece of the puzzle.
2. Given the potential mistrust between many disparate parties in any given transaction (lenders, appraisers, brokers, lawyers, inspectors, title companies, etc, etc), Blockchain technology is based on cryptographic proof, allowing any two parties to transact directly with each other without the need for a trusted third party, changing the entire dynamic of real estate transactions, speeding the process and securing digital proof of all aspects of the transaction along the way.
3. This is distributed ledger technology, a peer-to-peer network that records a highly available public history of any given transaction that retains a secure source of proof that the each element of the transaction has occurred.
4. Say goodbye to shenanigans and unethical dealings. In a blockchain real estate transaction there is no lying, no turning the tables or pulling the rug out of under an unsuspecting party to the transaction at the last minute, such as the old bait-and-switch (which I even have unfortunately experienced at the last possible moment when buying a home for my family) whereby the broker leads one party to believe that a deal has been agreed upon by both parties, while backhandedly (and quite unethically from my perspective) working another potential buyer to present a higher offer. The blockchain contains a certain and verifiable record of every part of the transaction ever agreed upon, mitigating the risk of fraud, abuse and manipulation of transactions.
5. On, and did I mention liquidity!? The holy grail of real estate investing is liquidity. Who doesn’t want their investments to be uncorrelated with the equity markets in order to build a more diversified investment portfolio? We are finding ways that real estate can certainly offer that liquidity.
Often is the case where a real estate investor might say something like “What are my liquidity options?” and currently the answers can vary from “There is no liquidity” to “There is limited liquidity but it comes with a penalty.”
Secondary markets could offer immediate liquidity. It would provide existing investors the ability to get out of an investment if and when they need to, and new investors the opportunity to get in.
If we register real estate investments in the blockchain, we could more easily exchange shares between investors. There are several relatively new companies offering crowd-funding opportunities which could become another incredible way to get into real estate investments with little initial investment and blockchain would improve this business model.
Issues around loans and requirements would invariably come up, but if this market is known upfront, these issues can be part of the consideration from the get-go.
REsource Blockchain Will Change This Industry
It is our duty to be game-changers, to flip the paradigm and make positive change in our industry that will bring greater transparency, greater security and greater peace of mind for ourselves and our clients.
#REsourceBlockchain will be the catalyst of a new future in our real estate industry, a beacon of change that will level the playing field and bring about new and better ways of investing in real estate.
Stay tuned for updates as we bravely move forward into a new, better world…
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