The question is not whether blockchain technology is coming to real estate. The question is, when will Aunt Blockchain arrive and will she be making any changes to the house? The quick answer is, she’s already here and yes some changes will be made. What is up for debate, is how big of a disruption blockchain poses to the real estate industry. For every industry veteran who predicts blockchain will do for real estate what the internet did for communication, another says, that is not the case.
What is blockchain technology?
Before we delve too far into blockchain’s potential impact, let’s define what it is. Blockchain technology was created to support transactions made with cryptocurrencies such as Bitcoin. It is a digitized, distributed ledger of economic transactions. Picture a spreadsheet copied thousands of times across a network of computers. Then imagine this network regularly updates this spreadsheet. These continuously growing records of transactions are called blocks and each block is linked to a previous block. The chain cannot be altered or added to. Simple, right? Just kidding.
Other uses for blockchain besides Bitcoin
Although its creators originally designed blockchain to support the exchange of digital currencies, the tech community is finding other uses for it, such as real estate transactions. Real estate, for example, is a highly regulated industry, with transactions that have to be recorded in a government ledger to be recognized and enforceable. Not a big deal until you consider that in the United States, alone, there are more than 3,600 governments where deeds can be filed. Most of these deeds get recorded on paper and filed with a court clerk, making them not easily accessible.
Arizona and others changing the law to allow for blockchain
Blockchain potentially offers improvements in efficiency, but laws would have to change in many places to allow for enforcement of transactions using blockchain technology. Arizona has already stepped ahead of the curve. It passed legislation recognizing blockchain signatures and smart contracts as an electronic record. Another bill that recently passed, requires governmental agencies to allow the use of electronic records or electronic signatures, including for the transfer of real estate. Vermont, Delaware, Nevada and Illinois all have laws authorizing blockchain transactions.
Blockchain to disrupt real estate?
How would blockchain disrupt the real estate industry? Right now, real estate deals involve neutral third parties to verify transactions and hold funds before the deal closes. These neutral third parties are trusted to keep the funds safe and to eventually release them to the correct party once everyone agrees all the conditions have been met. Blockchain could allow multi-signature transactions, where once all required parties sign, or once verifiable conditions are met, the funds would release automatically.
However, some industry insiders don’t foresee blockchain causing that big of a blip on the radar screen, at least in terms of title and escrow. For most, buying a piece of real estate, whether it’s residential or commercial, represents a major investment. While blockchain may offer certain efficiencies, people want to deal with people, not technology. There is also some doubt about blockchain’s ability to handle the nuances of a very complicated transaction. Still, blockchain technology has enormous potential and is certainly something on which to keep a close eye.
At Landmark Title, we pride ourselves on providing personalized service. Our team of experienced professionals is well versed in residential and commercial title and escrow services, and handling complex estate transactions. If you have questions about our services or need assistance, please contact us at (602)768-2800 or visit our website.