Where the (real estate + crypto) world is going
It is very clear that the Blockchain represents an opportunity for the real estate industry.
Potential benefits include:
- accurate land titles;
- faster and cheaper transactions;
- higher liquidity;
- cross-border simplification;
- better accountability and financial disclosures;
- trading and fractional ownership.
First, any innovation has to deal with existing regulation and players. An example? Tokenizing a real estate asset is quite simple from a technological standpoint. However, making sure it’s legally valid, and can hold in court, is a completely different beast.
Second, I reject the notion that an entire industry will be dismantled by a technical innovation. Banks will still be there. Title companies? You bet. Escrow services, realtor, mortgage companies? Same.
What will change, however, is their role in the process of transacting real estate, and their ability to charge for their services.
The players that will be damaged the most are title companies in the United States (a $16B/year market). They provide a great service, for a very unreasonable price. In fact, they only pay ~5% of these revenues in claims; the rest is margin. It’s basically a legalized racket.
Banks and mortgage companies will offer a more streamlined and efficient service to home owners, and they will mostly benefit from a simpler “backend” to handle titles and transactions.
The increase in transparency and auditability will potentially reduce fraud (mortgage fraud, title fraud, etc). This is of great benefit for consumers, even though they won’t notice much.
Third, the Liquidity Premium offered by asset tokenization will also vastly benefit everyone in the space (some companies more than others), and bring large gains to first movers. (more by Stephen McKeon).