Moving House On The Blockchain
By: Andrew Chamings
Tags: Blockchain, Ethereum, Insurance, Bitcoin, Real Estate

Of all the industries that blockchain technology could turn upside down in the coming years, a revolution in real estate transactions may be most overdue.

The current process of buying a house is a nightmare.

Imagine someone owes you $100, but they tell you to just take their old jar of coins. They claim there’s $100 there, maybe even more! But what if there isn’t? What if it’s mostly foreign money? Are they trustworthy? Whose jar is it, or are they borrowing it? Maybe it’s best to ask a friend to count it, but instead of them being neutral let’s actually give the friend a vested interest and pay them some of the money too. Are they trustworthy? We also need to pay off the person who introduced us. Oh, and let’s not actually look into the jar for a month, maybe two.

The escrow period involved in a real estate transaction currently employs countless middlemen — realtors, title companies, title insurers, appraisers, banks, notaries, brokers, inspectors. Within this process secrets are deliberately kept. Rental rates, valuations and other offers are hidden in an attempt to gain a competitive advantage. A cut of the increased valuation is then dolled out the middlemen, around 1–2% to title entities, 5–6% to realtors.

Title insurance is an entire industry that doesn’t need to exist, and it makes $18 billion a year.

Using blockchain tech to control real estate transactions won’t fix all of these ills, but it will make the process unrecognizably more efficient.

In the same way that the blockchain verifies who owns a bitcoin, and then verifies when it is transferred to someone else, the same thing can be done with a house.

When using a public, secure digital ledger to transfer assets, there’s no need to trust, doubt, or to pay others off.

Some parts of the world are already using the technology to transfer property. Sweden’s 400 year old government mapping agency, Lantmateriet, recently become the first to conduct property sales through the blockchain.

South Burlington, VT, the home of Ben & Jerry’s, has partnered with a Propy, a blockchain developer, to trial a method of using the tech to record real estate transactions. The company is also planning pilot projects in Arizona, Colorado and Ukraine.

Last year TechCrunch founder Michael Arrington made history when he used an Ethereum smart contract to buy an apartment in Kiev.

Beyond making the recording and transfer of titles faster and more efficient, the transfer of assets on the blockchain is practically fraud proof.

To quantify the current inefficiencies in ownership of property, Peruvian economist Hernando DeSoto estimates that the value of dead capital, in which people do not have legal title to their houses, is at $20 trillion worldwide.

Jorgen Modin, of Swedish blockchain innovators Chromaway, predicts that the new technology could literally lessen the time it takes to register a sale in Sweden, currently up to six months, to a few hours.

It’s very rare that something that improves a process that dramatically doesn’t eventually find its way to ubiquity.

Other partnerships between governments and blockchain tech companies include Factom in Honduras and Velox in Chicago. IBM’s blockchain is also testing land registry use. Ghana and various states in India are considering using the technology for asset registry. It’s likely that the benefits are likely to be enjoyed most in less wealthy countries, where land holdings have less certain ownership and a higher rate of fraud.

The government of Georgia (the country not the state), in partnership with tech company Bitfury, signed into law the ability to secure land rights through the blockchain. CEO Valery Vavilov said “The big goal is to move the process to smartphones, so people can use it 24/7 and all transactions are secured, transferrable and accountable.”

There are a few hurdles. Losing that long long list of middlemen means losing jobs. The title insurance industry may be eradicated. There is also legislation that needs to pass in many countries, such as the acceptance of digital signatures and updated data protection laws. Still, the current complicated and cumbersome process of transferring a house from one person to another may soon, finally, be a thing of the past.

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