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Real Estate: Blockchain Threatens Notaries and Realtors

26 September 2018 20:31, UTC
Daniil Danchenko

The total value of the notarial services market is $30 bln, estimated amount of documents that gets notarized each year in the land of the bold and free - one billion. These numbers are colossal and seemingly notarial services as industry has no reasons to be bothered with anything. And if it was not for that meddling blockchain things could’ve stayed the same for years and years. Because right now - they have a good reason to think about early retirement or changing profession. Recent cases of blockchain application in the real estate industry make one doubt the value of services that notarial agencies can provide.

Main pros of the blockchain are well known to any person that have been in the industry for more than a couple of weeks. And now, when it’s slowly starting to get mainstream recognition and being used in the real estate - clients don’t need to see pretty much anything like cash or legal aspects of each and every deal. All they need is handy, safe tool. And that tool is blockchain.

People love financial efficiency as it saves them money, and buzzword tech is very good at it - mostly because it helps to save, and that single thing is more than enough to consider using blockchain based solutions for many-many people. And numbers make this more than reasonable - good part of the easiest and most primitive notarial procedures cost around $70 - 100. When it comes to commercial real estate with dozens of documents that should be legally reviewed by notarial agent this sum quickly skyrockets. And price tag on the “full package”, that includes legal counseling and notarial support will drive the price out of this world.  

And that's only the surface of the issue and when you are dealing with DLT tech - you need to get in a middle of things. And the deal is simple - with blockchain, real estate will tokenize everything, which makes the whole 9 yards of investing or buying or selling property far easier and convenient .

Armed to the teeth with blockchain and crypto, potential investors will have a much easier time too. Because of the DLT implementation, boring, tedious and paper heavy task will become a thing of the past. Road to the previously closed off markets is open and people are gladly going after opportunity to get a piece of the multi trillion dollar real estate pie. Before that potential investors were turned off by the complications. Duo of relatively expensive price of getting into the market and legal difficulties were making sure that only the most determined are going to get on the market, and that means that market lost quite a lot of money.

But technological progress makes everything easier: as we see in the example of existing projects it really affects all the aspects of the real estate industry. And the simplest of them is rent. Due to the very nature of the blockchain, this process becomes much more transparent and clear, as far as fraudulent actions and outright deception lose its meaning. The main reason is all these actions are recorded in a distributed registry.

A good example of such a blockchain service is a platform for potential house tenants and owners. In fact, there is nothing revolutionary about them, but they just made an evolutionary leap by transferring their services into the blockchain. And although there is nothing principle to be has fundamentally changed but despite of that it is totally different service.

While starting using the blockchain, such platforms leave a very large layer of all the “horror stories" of tenants or rentier in the past. The blockchain “remembers” everything and it is of high importance: nowadays it is impossible to penalize or keep the pledge unreasonable. As well as to defeat the rented house and leave in an unknown direction: in any case, the record of the actions of both deal sides remains in the DLT.

Blockchain and crypto are also fundamentally the new types of services that previously would be either economically unprofitable or technically impossible. One of the potentially revolutionary ideas of this kind is the transfer of real estate in the form of tokenized assets, which actually creates the new market segment. In practice, this is related to the economic segment of joint consumption, which is a new trend.

A good example is the New York blockchain project, which is introduced by the company’s spokesperson to Bitnewstoday.com:

“We believe that blockchain has the potential to help accelerate the adoption of the Sharing Economy which has already begun to unleash industry disruption by opening up significant amounts of previously untapped private capacity. Tokenization of property may completely change real estate transactions and ownership transfer as we know them. Real Estate is the largest asset class in the world, and also one of the most inefficient.

Empowering the $217+ trillion global real estate market with 2017 volume of $1.4 trillion to seek a more transparent and liquid way to invest and trade. The platform seeks to help subdivide individual parcels of real estate into tokens, and subsequently facilitate PTOs (Property Token Offerings), and then list those tokens on exchanges. Fractional ownership of real estate can potentially be a game-changer, if it is done correctly. And that is exactly what platform project is working to do”.

The sharing economy is the central aspect of some projects in the market. Their goal is to create platforms that operate within this branch. There, through a combination of P2P and information processing protocols, they can find suitable neighbors for those who want to earn some money and resolve disputes and disagreements that arise within the platform. Thus it creates something in between AirBnB and a Dating site.

But the blockchain solutions in the real estate field are not limited by private cases or attempts to create a new economic system. There are some projects that work exclusively in the B2B sector among the projects that have taken place yet.

In such cases blockchain allows individuals, businesses and municipalities to securely store and track real estate data in the blockchain register. And that ideally means the totally transparent conditions during any transactions and the inability to create false information. Subsequently, it will be possible to create a blockchain notary system on top of such platforms. However, such thing as the interest of the state and municipalities in their engagement in the activities of these companies, plays an important role. But it is not always that case.

In general, an interesting situation happens when unchanged by years industry moves to a qualitatively different level under the influence of the blockchain, which has just surpassed its first decade.