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Many people have not heard the term blockchain technology. However, the majority of the nation’s population has heard about bitcoins and other cryptocurrencies. Blockchain technology supports these cryptocurrencies. The basic idea is that it is a database that is accepted by a wide range of people, rather than an entity such as the government.
This can be applied outside of bitcoins, however. Should it become accepted, the real estate market could become a lot more efficient. For starters, traditional title searches could become much faster and cheaper.
How Blockchain works when applied to Property Titles
Homeownership transfers would be recorded using the technology. It would work the same way as when cryptocurrencies change hands. In the simplest terms, it is an online ledger that records the transaction. In applying it to real estate, the property is assigned a unique code. There would be a record every time of the date and name changes each time the property exchanges hands.
The entire process would be streamlined, with all the information in one place. This would eliminate the need for a lot of paperwork.
Theoretically, this would make title searches much more efficient. Those espousing the technology also claim it is secure since the block can only be altered by the participants. There are restrictions on who can make a change to the record, but there have been those that have taken advantage of the system in virtual currency, proving it is not perfect.
Is title insurance passé?
There are claims buyers will no longer need to purchase title insurance. The entire property’s history needs to be recorded on blockchain to accomplish this, though. This seems a long way off, however. For now, you will still have to purchase the insurance at closing.
Squeezing the middleman?
While this could allow real estate to be traded like virtual currency, eliminating all the intermediaries seems far-fetched. Recent advances in technology have made it easier to connect real estate buyers and sellers. You can even take a virtual tour of the premises.
However, while removing all middleman sounds attractive, real estate still requires the personal touch. Buyer’s agents and lawyers are still needed to provide you guidance based on your unique circumstances. An agent is your expert advisor that knows the market and the properties very well. This cannot be replaced by technology.
A test in Sweden
Sweden is one of the first national governments to test blockchain technology in property sales. This will be conducted as a test over the next several months. Currently, sales take three to six months to close. Officials expect this time frame to whittle down dramatically, potentially to mere hours.
This is a new technology, and it is unclear if it will catch on. There have been promising advances that have not come to pass. Still, online banking was considered risky, and it has become a normal part of many people’s lives (although there are security risks). Should blockchain technology gain acceptance in the real estate market, certain costs are bound to decrease, and the time required to close the transaction will lessen.