Eliminating trust issues, Weiss Ratings says blockchain and real estate are a perfect fit

Webster Ratings pointed out in a recent blog that blockchain has the potential to change the business models of any industry, with real estate being the most suitable sector for transformation.

According to the blog, consulting firm Gartner based in the United States conducted interviews with thousands of Chief Information Officers (CIOs) from various industries, including manufacturing, government, banking, energy/utilities, education, insurance, retail, healthcare, transportation, telecommunications, and media.

The results of Gartner's annual CIO Agenda interviews show that most senior executives are looking to "adopt blockchain to some extent within the next three years."

In fact, Gartner believes that blockchain has the potential to completely change the business models of all industries.

Real Estate is Ready for Blockchain Transformation

Weiss Ratings points out that every real estate transaction involves numerous intermediaries, including buyers, sellers, both parties' attorneys, lenders, title insurance providers, tax assessors, insurance companies, and contract registration companies, making the process very complex.

The key reason for this complexity is the lack of trust, as the parties involved do not know each other, leading to the need for many intermediary third parties to verify each step of the transaction and maintain their important paper documents.

With the complicated process, both the costs and time involved are high. Therefore, the transaction costs for most real estate deals exceed 10% of the property value.

The Magic of Blockchain is in Eliminating Trust Issues

Blockchain can publish various tasks in a secure online ledger to automate the transaction process, often referred to as smart contracts, without the need for lawyers, regulatory bodies, and trust institutions.

In addition, the buying and selling parties in the transaction will share the same data, making blockchain an ideal choice for payment and transaction records.

The blog points out that the most significant impact may be the tokenization of real estate. Blockchain can issue tokens representing ownership of real estate instead of physical property. Through the operation of smart contracts, the buying and selling parties can securely trade these tokens.

The issued tokens can replace traditional deeds and can be bought, sold, and traded like stocks. There is no longer a need for intermediaries such as lawyers, notaries, lenders, trust companies, and title companies. Real-time, auditable records from smart contracts will replace third-party intermediaries.

The transformation of real estate transactions can be seen as a win-win situation for both buyers and sellers, with no longer a need for intermediaries such as real estate agents.

Further Reading

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