In property transactions there is sometimes the need to set up a virtual or trust account depending on the kind of Limited Partnership Agreement in place. When these separate trusts or virtual accounts need to be amended, the costs can rise considerably. This is a problem that can easily be solved by the blockchain technology thereby saving both time and money.
Additionally the blockchain technology could assist in offering real estate investments liquidity. This can be done by creating a secondary market which allows investors to get out of a real estate investment when the need arises, by bringing in new investors. Achieving this would require real estate properties to be registered on the blockchain in order to make exchanging shares easy.
Property search process
Other ways in which a blockchain could positively impact the real estate sector includes improving the property search process. Currently there is a big problem that has been brought about by the fact that the listings data is highly fragmented and spread across multiple platforms. A blockchain enabled solution could solve this by distributing the data across its peer-to-peer network while still allowing brokers to have full control of their data. Not only would this enhance data democracy, it would also make listings freely accessible.
Adopting blockchain technology in real estate would also expedite the pre-lease due diligence process. In the course of a lease transaction a lot of time is spent conducting due diligence and this mainly involves legal and financial reviews. Various physical documents are reviewed during this due diligence process and this includes those that support the history of maintenance, repairs, tenants and ownership. As a result of this verification process, which is largely manual, the administrative tasks are increased and there is also a danger of errors as well as loss of information.
In such a scenario blockchain technology can assist in enhancing the accuracy and efficiency of the due diligence process. This can be achieved by assigning digital identities or digital identifiers to each property. Such an identifier would consolidate various pieces of information and include performance metrics, legal and financial status, tenant and vacancy profile.
Some of the blockchain solutions and cryptocurrencies that have been introduced to solve this problem inherent in the sector includes Propy (PRO), LAtoken (LA), Real Estate Asset Ledger (REAL), Atlant (ATL) and Rex (REX). Among these cryptocurrencies LAtoken has the largest market capitalization at over $23 million. The number of LAtokens in circulation is over 77 million.
Despite the many benefits of the blockchain technology in the real estate sector, there hasn?t been a wide adoption. Part of the reason is lack of trust. Another factor hindering the adoption of blockchain technology in the real estate industry is the fact that some of the players in the industry think it is too complex. This is made worse by the fact that tech firms and vendors bombard real estate professionals with options that are not well understood. To solve this problem simplicity and clarity would be the best way to proceed.
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