If the mere mention of blockchain technology – or cryptocurrency, for that matter – triggers a mix of skepticism, disdain, and confusion, you’re certainly not alone. Much of what is “explained” to us about blockchain in media and academic papers is itself perplexing, filled with jargon like “decentralized distributed ledger” and “cryptographic hash.” Like many technologies, its own complexity has become, in some ways, exclusionary.
Yet blockchain has such universal – and inevitable – applications that it simply cannot be ignored, particularly by the commercial real estate industry. It will soon serve as the very backbone of the way in which we initiate, verify, and complete CRE transactions. That means that brokers, owners, and tenants alike need to start thinking about blockchain as a vital new tool in their daily workflow.
This doesn’t mean that everyone suddenly needs to become an expert in cryptography. In fact, most of the functions that the technology performs will be hidden from plain sight. This isn’t unusual. For instance, very few people in CRE who use everyday programs like Salesforce have the technical background to know what’s under the hood, but that doesn’t stop us from using it. Similarly, successful real estate professionals will want, at minimum, to understand the immense benefits that blockchain will provide to their business in the years ahead.
Fundamentally, blockchain is a technology that will ensure that data is transparent, verified, and unalterable. This ability carries major implications for real estate professionals:
Drastically Reduced Timelines: Think about all the time that’s currently spent on underwriting, due diligence, title work, and, ultimately, signing a contract. Each of these processes is individually time-consuming because the data at hand must be manually reviewed and confirmed. CRE professionals depend on information (property title, operating statements, etc.) that come from a variety of sources. Blockchain technology will be used to aggregate and store critical property information that can easily prove that other data — used underwriting and due diligence, for example — is true. For a broker, this will cut traditional transaction timelines dramatically.
A Reliable MLS: One of the core challenges for brokers today is finding property information that is both complete and up-to-date. Most databases are proprietary and somewhat unreliable because the data is cultivated manually and stored across different providers in different formats. A blockchain, on the other hand, can function as a comprehensive ledger that is updated by confirmed transactions, with the ability to house critical information including property records, capital values, ownership history, tenant details, age of the property, and title. A blockchain-enabled MLS provides a broker and the market with more transparency, since all transactional information will be updated publicly and in real time.
Trusted Identities: Today, real estate professionals confirm the identity of their counterparties with one reliable tool: their eyes. That’s because deals are inked in-person with pen and paper. However, what if there was a way to execute a deal with the click of a mouse, while still knowing with certainty that your deal partner is who they say they are? That’s what a blockchain will do, thanks to its ability to create a unique digital signature for each participant, with the ability to see transaction history to gauge reputation. This will break down geographical barriers, and remove friction from the transaction process.
Real estate is, at its core, a people-centric, relationship-driven industry. However, as has become clear in recent years, technology can enhance the deal process. Technology can help to automate the science of a transaction, but still empower the broker, principal and tenant in the art of deal making.
As the industry inevitably inches toward storing its data on a blockchain, it would be wrong to think of it as an elite and complex technology. (In fact, you might not need to think much about the underlying technology behind it at all.) Instead, look forward to a day when a blockchain can make the transaction process more straightforward, efficient and secure for all CRE professionals.
Gordon Smith is the CEO of biproxi. The views expressed in this column are the author’s own and not that of ALM’s Real Estate Media Group.
Original Article on Globe St: https://www.globest.com/sites/nataliedolce/2018/07/02/time-to-start-thinking-about-blockchain-in-real-estate/