Buying Real Estate With Bitcoin and Cryptocurrency — The Future is Here
Blockchain is changing the way the world records transactions and how we invest in real estate.
It promises to revolutionize everything — from the monetary system to health care records, voting, the anti-counterfeit industry, and how people invest in real estate. It’s rapidly becoming part of the way society works, and most experts agree that it will play a huge role in the way we will do business in the future.
The world talks a lot about blockchain, but the concept can be a little difficult to wrap your head around when investing in real estate.
Change #1. Rise of Smart Contracts
Transactions and documentation in real estate have always been offline — through face-to-face interactions and with several parties. In fact, it was only until recently that it was possible to make transactions via digital channels for real estate and other high-value assets.
But today, blockchain is challenging how the world is trading in real estate. Blockchain platforms introduce smart contracts that tokenize real estate properties so that you can trade them like Bitcoin and other cryptocurrencies.
Unlike traditional contracts, two parties create an agreement — including the consideration to be paid.
Then, they create a code of the agreement and store it on a blockchain-based platform that replicates on multiple nodes of a blockchain to improve its security, immutability and permanence.
When the payment is due, and both parties meet the agreement’s parameters, the code auto-completes the agreed action.
For many years, real estate investors have been avoiding the smart contracts approach to executing agreements.
Nearly every investor has been shying away from the risk that bad actors could hack the code of a typical smart contract and change the contract’s terms.
Then came blockchain...
Its decentralized nature promises to store the smart contract’s codes in several blocks distributed across multiple computers in the network. In other words, for a party to manipulate a smart contract on the blockchain, he will have to alter all the codes on every block — on multiple computers on the network — which is close to impossible.
For that reason, blockchain platforms are improving codes’ security to the point where it’s virtually unhackable. And this security assurance has popularised the idea of smart contracts and make it more feasible because one can trust the code to execute what it says it’ll do at a specific time.
And even more...
Smart contracts cut down the huge and hectic paperwork involved in real estate transactions. Blockchain can store all the documents and transaction records safely with lesser effort and cost.
Change #2. Elimination of Intermediaries
Can you imagine real estate transactions without banks, lawyers or brokers?
Blockchain is a serious threat to the roles of all these intermediaries in real estate. In fact, blockchain’s main promise is to eliminate the need for centralized entities and legal enforcement.
Instead of relying on human intermediaries, the blockchain relies on transparent computational protocols as an alternative.
Will that present broker-less real estate trading?
Let’s dive a little deeper into the structure of blockchain to find out.
The Architecture of Blockchain
A blockchain-based platform employs a replicated, shared, and distributed (i.e. decentralized) ledger.
Such a platform’s decentralized nature allows the transfer of tokenized real estate assets without a trusted third party.
And to ensure transparency, efficiency, and reliability of the system, every user in a blockchain network can access a full copy of transaction ledgers. More importantly, the platform ensures that every user’s copy reflects the current state of the transaction.
In simple terms, development in the blockchain network will handle the middlemen’s work of property listing, tamper-proof legal documentation, providing the buyer with a financing option, and ensuring payment. The platform will ensure the buyer gets a title, and the seller receives payment without any third party.
As a result, both buyers and sellers will save off commission fees, and the process of investing in real estate will quicken — especially when buying a home in Edmonton.
Change #3. Transformed Real Estate Trading
To date, the technology that real estate uses only focuses on matching sellers with buyers. However, the blockchain promises to redefine nearly everything.
The technology presents the possibility of revolutionizing commercial real estate. It will advance leasing, purchasing, and sales of properties, improve the search of rental properties, and even expedite pre-lease due diligence.
A simple example includes trade controls to ensure that tokenized real estate is only transferable to specific counterparts. The new blockchain-real-estate trading platform allows traders to tokenize assets — handling them like stock sales. Tokenisation further liquidates real estate assets by allowing token sales on the blockchain platform.
As a result, new trading platforms and online marketplaces are emerging to support all real estate transactions.
Organizations like ATLANT have already developed a blockchain platform to facilitate real estate and rental property transactions.
Change #4. Liquification of Real Estates
For years, real estate has been an illiquid asset because of the long time it takes to sell.
However, tokenization makes real estate immediately tradable for crypto or fiat currencies. Selling and buying real estate as a token reduces the exchange time, making it more liquid.
Plus, blockchain will introduce fractional ownership, which will lower the barriers to investing in real estate. Investors can buy fractions of tokens whenever they want, and the seller won’t have to wait for a buyer who can afford the whole property to get value.
Partial ownership would come hand as it would spread the burdens on property upkeep like regular maintenance.
The only problem?
Liquifying real estate will create lender-owner problems. Lenders require security to offer and determine mortgage payments. It will be hard for the property manager and owners to use their tokenized real estate when the agreement’s terms need them.
Change #5. Simplification in Real Estate Investing
Real estate investing has historically been available to people who can put down a huge sum of capital
Plus, the current method that owners, buyers, brokers, and tenants access property listing is through third-party platforms, which are subscription-based and might demand high fees from subscribers./p>
These limitations restrict real estate investing.
But blockchain technology promises to improve ways to invest and manage real estate. The platform will allow listings in a single decentralized database, which will simplify the property search.
All that real estate investors will need is a trading app to buy or sell their tokenized property.
For property managers, blockchain technology will shoulder the heavy property-management task.
For instance, rental property owners find property management an excruciating task because it involves multiple stakeholders — property managers, landlords, tenants, and vendors.
However, with a single decentralized application backed with smart contracts, owners can eliminate all the manual paperwork and let the blockchain platform conduct all the property management processes. — from managing cash flow to filing maintenance requests and signing leases.
All the data in the platform is confidential and encrypted, except for information like property location. After all, blockchain’s core intention is to reduce legal, accounting, and transactional costs and reduce the risk of fraud.
Change #6. Decentralization (Improves Trust)
The blockchain is secure because the decentralized system has no single party in control — even the administrator cannot change the information that’s in the chain.
Transactions and documentation would be secured in several blocks (nodes) through cryptography and linked. Altering one record will require changing an entire series of data blocks, which are in the network. For that reason, fraud attempts reduce to nearly zero.
The best part?
Information stored in the blockchain is accessible to all the network peers, making data transparent and immutable. Everyone on the blockchain network can verify the data’s authenticity, giving buyers and sellers more confidence in conducting transactions.
Change #7. Reduction of Invest-in-Real-Estate Expenses
Due to the extensive documentation and multiple intermediaries involved in real estate, the financing and payment models are usually expensive and inaccessible.
The blockchain’s first tool to reduce real estate costs is eliminating the intermediaries’ charges — bank charges, lawyer expense, and brokerage fee.
Second, the technology promises to record transactions and document everything in real estate, which will eliminate expenses on tax implications, registration fee, loan fee, and any other cost you’d incur in the traditional process.
More importantly, the decentralized network’s transparency will eliminate any hidden fees and miscellaneous expenses like inspection charges.
Is Buying a Home with Bitcoin or Other Cryptocurrencies an Option to Consider, Now?
The simplest answer is: yes.
In fact, the Canadian government already acknowledges the use of cryptocurrency for exchange. Suppose you buy a home with bitcoin (or any other cryptocurrency), the transaction will reflect as a separate layer of capital investment for tax purposes, in addition to the tangible property you have bought.
However, traditional escrow services are not familiar with cryptocurrency (for now). You’ll need mutual trust between the seller and buyer if you’re not operating under a smart contract.
Otherwise, all you need is a bitcoin and bitcoin wallet to buy a house.
And this begs the question:
Will Edmonton Homes Move to a Blockchain-Powered Platform?
Today, the global real estate value exceeds US$280 trillion. However, its wealth is dominated by large corporations.
More people may access the markets through blockchain technology, where transactions, documentation, and overall trading are more transparent, secure, and equitable.
Eventually, real estate trading may become a peer-to-peer activity. And we want to make that possible for you, too.
We want you to:
- Find and buy quality real estate properties in Edmonton with minimum friction possible
- Get the right mortgage and tips to finance it regardless of the means of payment
- Continue investing in real estate in Edmonton no matter the technological shift
- Get the best out of real estates
Even though the real estate industry is evolving right before our eyes, the transition should be as smooth as possible. It shouldn’t stop you from trading in real estate.