Guide To: Blockchain - How will it Affect the Real Estate World? 


            Blockchain has the potential to change how businesses, banks, law firms, and real estate agencies operate. According to Investopedia, Blockchain is “a distributed database that maintains a continuously growing list of records, called blocks, secured from tampering and revision. Each block contains a timestamp and a link to a previous block.”  In layman’s terms, Blockchain is like one giant whiteboard that everyone can write on and everyone can see, but no one can alter or erase. Blockchain can be used to record anything of value.  Each party involved on a Blockchain is able to access the entire database and can view every past transaction.  To make the transactions official, Blockchain uses Bitcoin as a currency.

            No one actually controls the Blockchain; each party has the same amount of rights to the information. This allows each party within the Blockchain to check the records of its partners directly instead of having to go through a middleman.  Once a transaction is entered into Blockchain, the data cannot be altered, because the data is linked to every transaction that has been entered in the system before them. Blockchain can also be programed to automatically trigger transactions between parties.      


1.    Disintermediation and Expediting the Process

            Buying and selling real estate can be a slow and expensive process because of all the middlemen. Government property databases, title companies, escrow companies, inspectors, appraisers, and notaries can all slow down the process.  Blockchain will eliminate many of them because you will no longer have to wait and pay for the information that those middlemen hold - that information will all be stored on Blockchain.  In essence, Blockchain will allow every property, everywhere, to have an aligned digital address that shows the occupancy, finance, legal, building performance, and physical attributes that illustrate all transactions in that property’s history.

            Let’s use the process of transferring a title of property as an example of how Blockchain will change the real estate landscape.  When transferring title without Blockchain, you need to fill out the blanks on the deed, sign it, travel to a notary, and then finally give the paper to the county recorder’s office so it can be stored and recorded in their database. This takes both time and money that does not need to be spent. Third party verification can cost between 1-2 percent of the total purchase price. This process can be eliminated entirely with the use of Blockchain.  Blockchain can use Bitcoin to create a digital title.  This is a cryptographically secure currency that can be easily transferred between parties.  

            Blockchain will make the process of buying and selling real estate much easier and much more condensed than it is now. It will save people time and money and will be more transparent and better organized.

2.    Prevents Fraud

            The main reason title companies are used in process of buying and selling real estate is fraud.  Technological advances such as the internet and Photoshop have made it easier for criminals to create fake deeds, mortgages, rental postings, and fake notary stamps. Having third parties verify these documents make buying and selling real estate much safer.

            Blockchain cannot be corrupted by current technology. The saved properties in Blockchain all have “digital ownership certificates.” These certificates are impossible to forge and would be linked to only one property in the chain. With Blockchain, the crime of selling a property that is not yours may become a thing of the past. 

3.    Improved Currency (Bitcoin)

            Blockchain and Bitcoin will change how money is dealt with in the real estate world. For example, when a tenant rents a property from a landlord, they pay a security deposit that is supposed to be kept in an escrow account; the landlord is not supposed to spend it.  In theory this is supposed to work. However, 30% of the time, landlords don’t return a tenant’s security deposit.   

            Using Bitcoins through Blockchain can do away with the uncertainties of security deposits.  Multi-signature or “multisig,” is a function of Bitcoin.  In order to send Bitcoins, you must use a private key to send the money to someone else. “Multisig” allows someone to create a transaction that can only be accessed with three separate keys.  Instead of sending the landlord currency to be placed in a bank account solely controlled by the landlord, parties can create a transaction with multisig. In a multisig transaction, the tenant will have a key, the landlord will have a key, and a neutral arbitrator will have the third.  This way, if the landlord has to pay the tenant back, the tenant and the arbitrator will be able to allow the transaction to go through. If the landlord gets to keep the money, the landlord and the arbitrator will use their keys to allow the transaction to go through immediately. Only 2 signatures are required for funds to be released.  This benefits both the landlord and the tenant. The tenant will be more willing to pay the landlord a security deposit and the tenant will know that he will get his money back if he does not damage the property. 

4.    Smarter Contracts

            Blockchain and Bitcoin have the ability to create “Smart Contracts.”  Smart Contracts work using software called Midasium that automatically executes an action within the contract when certain conditions are met.  This means that each party will have to perform each of their tasks in order to fulfill the contract. “Midasium Contracts” do away with the need to have outside sources enforce the performance of the contract because once the money has been sent to the seller, the deed will automatically be transferred to the buyer and the purchase will be recorded.

            This process works because Midasium contracts act according to how their source code tells them to act (make a payment or transfer title), which means the contract will be carried out according to the pre-agreed contract conditions.  Once a Midasium Contract is published on Blockchain, it cannot be reversed, deleted, or altered in any way, which will give participants confidence that the contract will be carried out.  Even with Blockchain, you will still need to check up on the property that you are buying to make sure it is in good condition or that the seller actually has plans to move out. In order to complete the transaction, there will still need to be a closing to transfer the keys from the seller to the buyer.

            The introduction of Smart Contracts could greatly reduce breach of contract litigation, and since the contract is going to automatically execute the action, individuals may be more careful while agreeing to a term in a contract.  Remember that before entering into a binding contract, you should always consult a lawyer to make sure the deal is fair and you understand all the rights and responsibilities associated with the transaction.


            Now you may be thinking, “in the future, we may not need brokers, real estate agents, or lawyers?” Actually, if Blockchain becomes the new norm, lawyers, brokers, and real estate agents will be more important than ever. Just because the process may become expedited, expert guidance will still be necessary. The average person will have a difficult time finding a property to purchase; the agent can help you find the right place for your needs.  The broker can make sure you are paying the right price for the right location and the lawyer will make sure you are not getting the short end of the stick in any deal you are going to make. If you have any questions about purchasing a property or agreeing to a contract you can contact our firm and we will be happy to help you with your real estate needs!