Smart Contracts and their application in real estate
Within the last decade, two technologies that have caused quite a stir for enthusiasts and critics are the blockchain technology and cryptocurrency.
Not many envisoned the versatility of blockchain, until developers began to discover that the tech had a plethora of uses other than being the underlying technology to power cryptocurrency, and thus new use cases for the technology were discovered.
By default, blockchain is a decentralized, transparent, trustworthy, and immutable distributed ledger technology, and these among other features make it an adaptable technology in different systems across industries, including real estate.
What are “Smart Contracts”?
Blockchain comes with some interesting features for the ease of doing business, however, it is also important to ensure that stakeholders in a transaction do not default on their part of the contract, and just as you would get a lawyer or broker involved in a contract, Smart contracts function as blockchain-based automations that are used to control, execute or perform the necessary legalities needed for the actualization of the terms contained in an agreement or contract.
Smart contracts were created to reduce the need for 3rd parties that could interfere with the contract processes, as well as mitigate the risks of malicious exceptions and losses as a result of fraud. Another benefit of smart contract is its automation that reduces the need for intermediaries that could increase the costs involved in effecting and executing a contract, as well as slow the process down because there would be a lot of paperwork and documentations.
Real estate then and now
In different parts of the world, real estate is big business that has transcended generations and will do so for a long while to come. However, real estate practices haven’t really gotten that facelift that some other industries have enjoyed, especially with the adoption of emerging technology. One problem that has continued to linger in the real estate industry is the lack of trust in real estate agents, because there is always that notion that the agents are in the business to get rich off their clients by hook or crook.
While it may not be easy to trust the agents, there is the issue of having different intermediaries involved in a single real estate purchase; there’s the real estate agent looking to close deals and get compensated, the banks are bothered about credit scores, risks and compliance, not to forget the house inspectors and lawyers among others- each intermediary will get paid for their services, and there’s a lot of paperwork to deal with.
With the emergence of new technologies, real estate transactions do not need to continue being the way they were 20 years ago. It’s the 4th industrial revolution and it is characterized by cyber-physical systems, and the real estate industry can be much better than before. The solution is the integration of “Smart Contracts” and it is just the perfect technology needed to not only reduce the need for intermediaries, but also create a trustless ecosystem where the automated conditions are transparent and immutable. The smart contract acts as an automated regulator that ensures that involved participants in the contract fulfill the conditions stated in the agreement before funds can be released, and should there be a default, the smart contract cannot be influenced to be partial. With smart contracts, all transactions would be strictly between the real estate agent and the client; no amendments, lawyers or voluminous paperwork.
It makes it easier and faster to transfer homes within minutes, as opposed to taking weeks for transfers, and apart from the reduced cost, it mitigates fraud, and also makes it possible for stakeholders to perform their transactions remotely without meeting physically to have documents signed. It is a win-win solution for both the real estate agent and the client looking to purchase a property.