Blockchain isn’t just for banks. The real estate industry also sees promise in the technology for online distributed ledgers.
“A ledger – a way of recording transactions and recording ownership of assets – is what real estate is all about,” said Stuart Appley, CTO of Shorenstein Co., a commercial real estate company in San Francisco. He expects his industry to get serious about exploring blockchain in 2016. “The potential is big. It’s huge, really.”
Real estate as a whole historically lags in adopting new technology, Mr. Appley said, with buyers and sellers exchanging a lot of paper. Entire industries have developed for relaying information between parties, including title companies, title insurance companies and all manner of data-retrieval services with employees who trek to town, county and state government offices to pull information from paper files.
“It’s ripe for change,” Mr. Appley said. He is exploring ways Shorenstein and others in the industry might take advantage of blockchain to reconcile and store data, speed up deals and make the buy-sell process more efficient.
In a blockchain, the credentials of each party conducting a transaction are encrypted and stored online. So is the data related to the transaction. Others can check this “proof of work” information and participants in related future transactions can access the data. Transactions cannot proceed without consensus among these participants, or nodes, in blockchain parlance.
The proof of work inherent in hand-offs between nodes readily provides verification of information about transactions and the people or entities conducting them, said Bart Cant, a principal at Capgemini Financial Services.
In real estate, one aspect of business that could be improved, Mr. Appley said, is finding figures for comparable sales. Today, the process of comparing lease prices for similar properties, for example, is difficult because owners often keep the information private. In a ledger built on blockchain, such data would be readily available, he said. So would metadata that provides more insight about properties to both buyers and sellers, including exact address, previous owners, tenants, age of the property and information about surrounding buildings. “That would be easier and quicker for companies to access,” he said.
Mr. Appley doesn’t see Shorenstein itself setting up a block chain system in part because of the complexity of the technology. However, his company could tap into blockchain systems set up by banks and related financial services firms, he said.
Along the way, title companies and other intermediaries might be displaced, he said. “They have rooted interests in the whole foundation of today’s inefficient transactions,” he said. “They’re going to push against that, just like taxi drivers protesting Uber.”