If you think of blockchain, you might think of data, secrecy or decentralization. But its primary purpose was to act as a digital time stamp and was first used in 1992 by Haber and Stornetta to create a verifiable audit trail. Back then time-stamping was incredibly useful in their scientific space, where ideas were currency and you needed to protect them. However, auditing is a universal language, and the latest fan of the transparency blockchain can bring appears to be real estate, where both new and long-established companies are looking at cost-cutting measures.
There are many advantages to using blockchain in real estate, including the technology’s immutable distributed ledger, universal accessibility, and other unique qualities. The EU market is showing excellent potential for blockchain, and as of yet, it is not being exploited to its full capacity. While it is thought that EU banking regulations will provide a boost for blockchain technology, adapting to GDPR could prove a potential stumbling block that will need to be overcome.
Crypto to attract clients
As it stands, most real estate transactions that involve cryptocurrency require the parties to transfer their assets into fiat cash – although experiments involving direct crypto to crypto transfers are ongoing. According to one of the world’s largest real estate companies Cushman & Wakefield, the industry is just starting to attract interest. In their latest, Blockchain, Bitcoin and Real Estate - Part 2 of the Tech Disruptor Series, they look at the industries and verticals most likely to transition to blockchain technology in the coming years, and how these innovations will, in turn, impact commercial real estate. Commenting: “While blockchain is forecast to turn into a billion-dollar industry in the next few years, growing to $9.7billion by 2021, the report states that adoption in the commercial real estate markets is limited. To date, only a handful of single-family sales have taken place using cryptocurrency.”
These tentative steps are probably associated with the volatility of the crypto market, currently on its third downward spiral. Mostly it can add extra risk to the conveyancing process, which tends to scare off traditional banking institutions. “As of today, blockchain and cryptocurrency adoption in our industry is in its early stages, but as with any technology that possesses the potential to essentially redefine how transactions occur in the real estate space, we are paying close attention to it,” said Revathi Greenwood, Cushman & Wakefield’s Americas Head of Research.
Fiat cash will still be required for post-completion payments including tax, title transfer fees, and other nominal expenses. However, some law firms are already accepting crypto for their fees. The potential obstacles tend to outweigh the advantages at the moment, but this isn’t stopping real estate agents from advertising sellers that are open to carrying out the transaction in crypto as an added selling point.
And there are already startups that are looking to explore the market, Propy facilitated one transaction in which a French buyer bought a property using Ethereum. The sale was a cross-border transaction between a French buyer and Spanish seller and shows how the use of crypto in long-distance purchases could be explored more in the future, especially across borders.
Blockchain to reduce marketing costs
Over in America where real estate is big business, the commission alone can be crippling. So it’s no surprise that new startup Deedcoin has been garnering attention for its slogan “Save 5% in commission when selling a home”. They promise to slash the standard 6% cash commission to just 1%, if you pay the rest in Deedcoin, 50 to be precise. Still, there is a substantial saving to be made, and not just in the U.S.
European countries also have high commission rates such as Italy (5%), Germany (4%), Sweden (1.5%), and the U.K. (1.5%) who are primed for a Deedcoin disruption according to the company’s whitepaper. And it works for buyers too.
Deedcoin’s business model hinges on reducing customer acquisition and marketing costs for their partner agents. By screening top-quality agents and limiting the number of agents working in any one market, Deedcoin ensures that partner agents don’t need to compete with one another and can attract customers through the Deedcoin website, where customers can find and contact their area’s agents. Because these agents need to spend neither time nor money on marketing or customer acquisition, they can close more deals per year and pass on savings to customers by accepting smaller cash commissions. Deedcoin’s marketing strategies tie these advantages to their brand.
Deedcoin CEO Matt Herrick said: “For CMOs, succeeding in any one of these three industries--real estate, marketing, or blockchain--requires staying open to new ways of thinking. It’s unpredictable where blockchain real estate marketing will head next, but it’s likely that we’ll continue to see new ideas for the intersection of all three industries in the future and the creation of interesting and innovative branding strategies to go along with them.”
Real estate, the blockchain, and compliance
The rising profile of cryptocurrency will likely lead to increased interest from regulators who will be looking to ensure that it doesn’t become a way for illegal transactions to work around current checks that are in place for traditional conveyancing procedures. The U.S. Securities and Exchange Commission has deemed many cryptocurrencies securities, which are subject to strict regulation. The SEC’s statements have created ambiguity (and jittery nerves!) among U.S. token sellers.
Preoccupied with Brexit and other scenarios EU regulators haven’t made similar statements about cryptos’ securities status inside their jurisdictions, generating both sighs of relief and lingering uncertainty for blockchain innovators with no clear idea of the regulatory landscape they might have to navigate in another five or ten years.
Aassio recently said of the use of blockchain in real estate: “Blockchain can handle everything from ensuring that title deeds are authentic to allowing for the co-ownership of properties. There can be up to ten middle people involved in any real estate transaction, and that is far too many to have any kind of timeliness or ease for either the buyer or the seller. With the advent of the blockchain, legally enforceable smart contracts replace paper ones and save time and money as well as trees. Instead of calling the bank or another intermediary over and over to see if the transaction payments have been processed, blockchain brings automated payments and cash flow monitoring. Real-time process tracking can show you exactly the stage of your transaction and can even ease cross-border transactions and the conversion of multiple currencies.”
The result is that while slow growing, blockchain could create growth in the real estate market while also promoting transparency and low cost – a real game changer. And while some CMO’s may lean on crypto as a “novelty” hook, they should think again. As blockchain becomes mainstream, consumers will become better at separating valuable innovation from novelty as blockchain innovation continues to make strides into the fintech sphere.
