Blockchain technology is everywhere. It is in the banking system, in supply chain management, in high-tech enterprise security. Blockchain technology is also firmly implanted in the Canadian real estate market.
So, what role does blockchain, cryptocurrency, and all of the underlying technology play in the real estate sector anyway? Let’s explore!
How Blockchain Technology Can Help Improve Canada’s Real Estate Market
The first question many Canadians have is: What exactly is the blockchain?
Blockchain is an encrypted record-keeping system that stores data on a “block.” Every record is stored on a block and has a unique identifier. The blocks are linked together through a chain and must be synced to function correctly. Blockchain technology is secure because no block can be hacked or tampered without breaking the whole chain. As a result, the security of the record and data is intact, and the movement of funds and transactions is transparent and accurate.
The use of blockchain technology is not limited to cryptocurrency.
Indeed, the blockchain is a viable option in all areas involving the exchange of money and financial transactions. The real estate market is one such sector and could greatly benefit from the potential application of blockchain. The Canadian real estate market can use blockchain technology to implement smart contracts, improve real estate data storage systems and provide opportunities for fractional housing investments.
Unfortunately, because of the red-hot housing market at the height of the coronavirus pandemic, the situation attracted some nefarious characters. Blockchain technology can help address some of the deficiencies in real estate transactions through the option of smart contracts.
Smart contract? What is that?
A smart contract is a self-executing contract between a buyer and seller. The contract is written directly as code on the blockchain, and all the conditions and agreements are clearly outlined and distributed across a chain of blocks. The code controls the execution of the contract, and all transactions that are recorded are irreversible and completely trackable. So because of this, blockchain technology allows real estate transactions to be executed through a computerized protocol. There is no need for a central authority, external mechanism, or the legal system to enforce the transaction. Smart contracts can allow real estate organizations to automate transactions and implement a more secure, reliable and accurate system. In addition, smart contracts can ensure the automatic release or transfer of funds when specified conditions are met. This can help reduce the risk of fraudulent activities like real estate title or mortgage fraud.
Another application of blockchain technology in real estate is data storage. Blockchain technology can provide real estate agents with the ability to create unique identifiers for all properties. Each record or piece of data would have comprehensive information about the property, including information about past owners, repairs or renovations.
Since blockchains cannot be tampered with, there is no option of concealing any information that could potentially impact the sale of a property. This would make the system more transparent and reliable. Homeowners could also use this unique identifier to service future repairs. Any improvements to the property would then be recorded automatically, keeping the data updated.
Over the last decade, the Canadian real estate market has been growing tremendously. There has been a surge in the costs of residential homes across the country, and investing in real estate and homeownership has become very challenging. Blockchain technology can change this in future. It is possible that property would be tokenized and sold in portions. This would be something similar to crowdfunding. Interested homeowners would be able to liquidate or remortgage the whole property or parts of it. This would allow investors to share ownership in real estate investments without incurring extra costs or going through complicated transactions.
The Benefits of Blockchain Technology in Real Estate
Overall, there are many benefits to applying blockchain technology in real estate. Blockchain can improve the track-ability and transparency of real estate transactions.
It can help the real estate market become more efficient and automated. It can also help reduce the risk of fraudulent activities. In addition, the use of blockchain technology opens the door for the tokenization of real estate assets. Investors would gain access to global assets, and the investor pools could expand due to the opportunity for ownership fractionalization. Finally, real estate data management could improve significantly with more secure data storage, increased transparency, and ease of access. This would lead to better investment decisions and improved portfolio management. Blockchain could also open the door to alternative financing models by offering more investment opportunities, transparency and continuous tracking of ROI for investors.
The improved process, automation, security, and reliability would increase investor confidence and provide access to a wider investor pool within the real estate market.
The future is bright! While integrating blockchain into Canadian real estate is still a ways off, you can count on your RE/MAX agent to have the best information, tools and techniques to make your real estate transaction smooth and safe.