In Chapter seven we established a few things, such as,
- The Medical Industry is reeling from a mass exodus of talent
- Platform Campuses solve a lot
Chapter 8 Real Estate Home Title Insurance
We can tell you where every single bitcoin fraction is with 100% accuracy, and we can trade millions of dollars worth of Bitcoin for ETH, and we can do it in a few minutes and for 10 bucks or so. Compare this to the title insurance industry.
Currently, around 19 million Bitcoins have been mined. Each has been fractionalized 10’s thousands of times. We can tell you with 100% accuracy which wallet owns each fraction thereof.
We can also tell you, with 100% accuracy, which wallet owned every fraction of 10 minutes ago.
We can also tell you, with 100% accuracy, which wallet owned every fraction of 10 Hours ago.
We can also tell you, with 100% accuracy, which wallet owned every fraction of 10 days ago.
We can also tell you, with 100% accuracy, which wallet owned every fraction of 10 Weeks ago.
And so on. But we can’t tell you accurately who owns a piece of Real Estate in America.
It is estimated that 20% of all titles in America are flawed to some extent.
It is flawed so badly, that we need title insurance. The market size, measured by revenue, of the Title Insurance industry, is $16.6 bn in 2021.
This is necessary because the current title system doesn’t work. We do not need title insurance when we move millions of tokens around do we? No, we don’t. And in less than 5 years we will not need title companies.
Some of the current problems with the real estate industry are as follows:
- Outdated Title Ownership Methodology – the system for tracking titles to properties is tedious, inconsistent, and archaic.
- Outdated Title Insurance Methodology – the system for issuing title insurance is time-consuming (generally days or weeks) costly (requires money with every transaction) and labor-intensive (subject to human error)
- Documentation Intensive – transactions require time to track down and furnish paperwork and other reports. -Transactions generally take weeks or longer to close. because there are many components of a real estate closing. For example, title insurance requires underwriting commitments, inspection reports, and any applicable homeowner association (HOA) covenants, conditions, and restrictions (CC&Rs).
- Barriers to Entry – Besides buying a share of an already existing Real Estate Investment Trust, there are very few options open to the average wage-earning citizen who wants to invest in the real estate market. It is not common for there to be more than a handful of owners on a single property due to the large capital requirements in real estate investing.
- Liquidity – Institutional investors such as pension fund managers invest capital for the long term and often chose real estate because it is backed by real-world assets. The average investor requires liquidity with their invested capital. So instead of having to wait for extended periods for a buyer to be found for a property, they might need to liquidate their investments quickly.
- Inefficiencies Related to Property Management – Inefficiencies related to property management mostly revolve around time, money, and document storage and retrieval. It takes time to fill out the utility bill form and a credit card or bank check transaction fee to pay that bill. Someone has to be paid to fill out the form and write the check and put a stamp on the envelope and walk the envelope to the mailbox if the company is using snail mail as a surprising number of property management companies seemingly still do. Then, more often than not, that check number used to pay the utility bill needs to be logged into a checkbook register and a copy of the utility bill needs to be made to send to the owner and the original copy put into the file cabinet in the back room. So a $400.00 utility bill actually in effect ends up costing the property owner another $100.00 when all of the employee time, bank fees, stamps, copy machine costs, and other overhead fees are associated with this inefficient archaic system.
- High Transaction Costs – When all of the fees and commissions are added up, generally the cost is 6-8% of the total asset value each time the property changes hands. For every USD 1,000,000.00 of real estate asset value, the total transaction costs are $60,000.00 to USD 80,000.00 which is a significant amount of money to the average investor.
Anyone involved in real estate transactions or real estate investments suffers from inefficiencies related to real estate transactions, investments, and title transactions.
Inefficiencies increase overall costs and time required to complete the processes. These processes can be simplified and improved upon specifically through the use of smart contracts which can increase efficiencies by advancing automation processes and reducing costs.
The unique solution is to integrate “off-chain data” with the chain and hence provide nothing short of what can be viewed as “block 1” to assets and items of all types ranging from real estate, equity, debts owed to others, investment funds, REIT’s, automobiles, valuable works of art, containers of computer chips, grandma’s wedding dress, and most anything you can conceivably want to “register” as yours and then have the foundation built to “tokenize” this asset and hence turn it into what can be viewed as a digital currency.
Current inefficiencies in the way real estate are owned and managed have led to property owners not maximizing possible profits when all of the technological advancements related to blockchain technology, and smart contracts.
- We’re starting to see real estate-related blockchain projects come to life. Some projects aren’t necessarily just for real estate, but they can be used to advance the industry.
The most promising projects that have piqued our interest are:
- “Digital Street,” a project in the United Kingdom, is already underway. The project plans to transfer all of the United Kingdom’s land to the blockchain by 2023. The same concept is currently being tested in numerous European countries, including Sweden.
- Dubai Land Department is employing a consensus-based private network to automate and optimize end-to-end real-estate business processes using Blockchain technology. They are employing the blockchain in three initiatives (Ownership verification in DLD Mobile Application, Property sale by Developer, and Smart Leasing Process) targeting the improvement of services, improved collaboration with other parties involved in the real estate market and to create a secured digital asset.
SMARTREALTY
- SMARTRealty is poised to change the real estate industry, and the way this works is by offering smart contracts. The company will serve as a contract platform with a template system that creators can use to make their contracts.
- What’s different and unique about this startup is that they realize that contracts need to be specific to the transaction.
- When contracts are created on the platform, they’re done so with the assurance that they’ll:
- Comply with local codes
- Comply with local statutes
- Buyers, sellers, and even tenants will have peace of mind in knowing that their contracts are based on a solid legal foundation.
- There will also be a listing platform created for property owners that will allow the property to be listed for rent or sale. And the company plans to offer listings for everything, from short-term rentals to sales and purchases, too.
BLOCK SQUARE
- Block square is another company that is focusing on real estate tokenization, and the plug-and-play system is set to be used with commercial real estate. The company is geared towards small investors, and they’re based out of Europe.
- Fractional ownership will be possible thanks to Blocksquare, so anyone with an Internet connection will be able to invest in commercial real estate using tokenized assets.
- A proof-of-title protocol will be in place, which will utilize blockchain for the use of smart contracts. PropToken, the so-called smart contracts that the startup is using, will bring security to traders. Rules and regulations will be put in place for each property, and these very tokens will be able to be stored in ERC20-compatible wallets.
HARBOR
- Harbor is a San Francisco-based company, and it has received funding from some of the world’s best investors and firms. Peter Thiel’s Foundation along with Craft Ventures and Pantera Capital have all invested millions into the company.
- What the company does is focus on hard-to-trade assets.
- These assets can be anything, but they also include real estate, which isn’t an easy asset to trade. What Harbor does is use blockchain to turn assets into a tokenized security.
- These securities will also comply with SEC regulations, so they can legally be traded. Let’s think of a real estate investment trust or REIT. Harbor will check all of the asset’s compliance, allow for a “regulated asset,” and then if the asset is to be traded, Harbor will take care of the checks and balances.
UBIQUITI
- Ubitquity is a company based in Delaware and offers a software-as-a-service blockchain platform. What the platform does is one of the points that we already covered. The company will keep records and track property.
- Ubitquity works with municipalities, title companies, and recording companies to record the ownership of real estate.
- The company works with legacy programs and platforms that record property transactions. Users can upload and record documents on the platform, and then they can perform title searches and verifications.
- The company is piloting its platform at the moment, and it just released version 1.0 of its platform and API.
PROPY
- Propy is a property listing platform, and the platform secures all transactions through blockchain. Property can be purchased or sold entirely online, and the company raised $15 million through its token sale last year.
- The company was originally designed to accept just cryptocurrency payments, but fiat currency is also being accepted.
- Propy will use blockchain for all of a property’s record keeping, so the risks in purchasing a property are very limited. Dishonest contracts will also be eliminated since the final contract, accepted into the blockchain, must be approved by all parties.
- Utilizing a decentralized title registry, the company calls itself an asset transfer platform, and the platform makes extensive use of smart contracts to validate property sales. Propy Registry will also keep records and history of all real estate transactions, offering a clear chain of ownership for a given property.
Blockchain has a lot of potentials to change the real estate industry, and as the industry starts to create new platforms and services, we’ll see the old way of handling real estate transactions fade away. It’s only a matter of time before blockchain will be a part of most real estate transactions.
It’s the safer, more secure way to buy and sell real estate.
Next Chapter
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Michael Noel CBP
aka Biz Builder Mike Twitter – @BizBuilderMike Youtube @BlockchainWeekly
eschew obfuscation, espouse elucidation