Crypto — you hear it frequently on the news, social media and the Internet. But do you really know what it is?
First of all, let’s begin with some explanations. Blockchain technology has been around for a while, and it offers a transparent, shared ledger that makes the transaction record of any digital asset unalterable and trackable. To help explain, Built In gives the analogy of a Google Doc. When shared, Google Docs are distributed, not copied, giving everyone access to the same document at the same time. The same goes for blockchain tech as it allows real-time access for the public and preserves document integrity, underpinning the technology for digital currencies, or cryptocurrencies, like Bitcoin.
Even though this technology discussion started more than a decade ago, only recently have major purchases been conducted entirely through cryptocurrency. What impact does this have on the industry down the line?
The largest cryptocurrency transaction in history just occurred this year
Need a sign that cryptocurrency is impacting the real estate industry? A $22.5 million dollar Miami penthouse that sold entirely in cryptocurrency became the largest deal ever in May 2021. Not to mention, the selling agent also accepted commissions entirely in cryptocurrency. Inman notes the potential influence of this technology as it could also impact processes like closing length, leads, and attract new clientele who have a pent-up net worth in cryptocurrency. As it continues to grow not only in popularity but also usability, there will be more buyers with the ability to purchase a home through cryptocurrency.
Crypto can speed up the real estate transaction process
Real estate can easily utilize the benefits of blockchain technology to help expedite many aspects of the transfer process. Everything from recording ownership of a property in the title to using smart contracts can benefit from blockchain. Just imagine a world where the purchase timeline is a few days rather than 30 — just that thought alone shows how this tech is an incredibly strong disruption. However, when it comes to cryptocurrency specifically, the payments process would be simplified dramatically. Purchasing a home, paying rent and escrow payments could take a matter of hours and cut fees making the entire process more affordable.
It expands the possibilities of real estate investment
A couple months ago, a company called FOHO emerged with the possibilities to change the real estate industry. Fractional ownership of real estate rentals and ownership becomes much simpler as the platform allows for people to buy and sell residential and commercial property fractions through the use of the FOHO coin.
In this case, each fractional owner holds access to the real estate title providing a deed of ownership, shared costs, and much fewer owners than similar investments such as a timeshare. It’s a much more affordable way to own a high-cost asset like a home, splitting the difficulties of ownership including maintenance and repairs. Blockchain technology simplifies this process as fractional owners can buy and sell their portions easily while also growing the number of options for fractional ownership.
Real estate tech companies are jumping on the opportunity to improve the real estate industry
We have to acknowledge the real estate industry’s kryptonite: technology adoption. Slow to adopt and slow to recognize benefits, the industry hasn’t historically been welcoming to new technologies. With that said, there are plenty of companies out there who are building softwares and ecosystems that will directly benefit the real estate industry. Major companies are promoting blockchain technology, but there are plenty of startups who have dedicated their funding to improving the industry. Here are a few that display the future changes inevitable for the industry:
- RealBlocks is a blockchain company that specializes in fractional ownership. Even though it opens a new way to invest in real estate, its technology and tokenization reduces costs and speeds up the transaction process.
- PropertyClub completely changes the way people search for homes, rentals and investments. It tokenizes the real estate transaction and dramatically reduces costs by moving the transaction process completely online. A platform such as this forces agents and real estate professionals to consider their role in a crypto world.
- SMARTrealty utilizes smart contract technology to change the way the industry operates. Using its RLTY tokens, SMARTrealty sets protocols in its smart contracts to dissolve if not met.
- ATLANT is a platform that tokenizes real estate assets to make real estate investment a simpler investment form. Properties can be traded just like a stock sale with the ability to liquidate an asset completely online.
Crypto modifies the role of professionals like agents and brokers
One way that blockchain technology and cryptocurrencies promise to cut down costs is to reduce the need for intermediaries — banks, lawyers, and unfortunately, agents and brokers. This tech can handle everything from listings, payments, managing documentation, and enables the peer-to-peer transaction that cut out agents and brokers. By enabling this digital transaction where crypto is exchanged from buyer to seller, it removes the costs of commissions and other fees associated with a traditional transaction. While a client might be intrigued by the thought or removing intermediaries, it can be daunting for real estate professionals.
If you’re concerned that this technology will replace your role in real estate, you need to look at it from another angle. First, it’s important to recognize that it won't do anything to ignore the existence of blockchain technology and cryptocurrency. It still exists, and it’s inevitable that this form of currency will continue to grow within the real estate industry. What you need to do is consider other ways that you can be of value. Many professionals are specializing in cryptocurrency transactions, attracting buyers and sellers who want guidance when it comes to a digital transaction. No industry is immune to change and evolution, and real estate professionals are no different.
Zipi is the Real Estate Operating System (OS) that aims to make real estate simple from agents and deals to commissions and billings. Request a demo to get in contact with one of our expert team members.
Special thanks to Joe Ciccolo from BitAML.