Market prices in the real estate industry are predicted to increase in 2019 as millennial demand rises. However, despite the rapid improvement the industry has been experiencing since the recession, it’s still plagued by issues that make investing in the sector less convenient than it should be. Blockchain could be an answer to several issues in the growing market of commercial real estate.
Drawbacks That Plague The Real Estate Industry
Three drawbacks are currently holding the real estate industry back. They include the issue of intermediaries, fraud and lack of affordable funding. It’s common practice for agents to take up to six percent of the total payment that is made on a real estate asset. Therefore an asset that costs around $400,000 has $23,000 in intermediary fees.
Interestingly, according to a report by the National Association of Realtors, up to 80 percent of homeowners are still using intermediaries something that is quite unfortunate.
Also, real estate assets are expensive, and their prices continue to rise with each passing year. It limits a larger amount of the population from investing in them.
Recent research conducted by CNBC indicates that an investment of $1 million is likely to buy around 270 square feet of prime property in New York. However, it’s a price tag that only 10 percent of U.S. residents can afford.
The industry is also rife with fraud globally. In 2016, the FBI released a statement that indicated that there was over 480 percent increase in the number of fraud cases associated with the real estate industry. The frauds included; online sale scams and title fraud.
The Solution The Blockchain Offers
With the blockchain being an immutable ledger that records transaction data, it offers many benefits including traceability, transparency, enhanced security and accessibility. All significant factors that aid the real estate industry.
Now there are blockchain platforms that are eliminating the need for intermediaries like agents and lawyers. Also, the ability to pay for a property using crypto can help bypass bank fees. Additionally, it cuts fees that are associated with escrow through smart contracts which can be customized according to the user’s needs.
The tokenized nature of crypto coins like Bitcoin and Ethereum also makes crowd ownership of the real estate possible. So, for the people that can’t afford the whole property, it’s possible to own a piece of it.
Finally, the blockchain will eliminate fraud in the industry by providing a way to authenticate property documents easily.