How Blockchain Technology Transforms Real Estate Transactions on Omnibasis

The Real Estate industry is undergoing a digital transformation. It started with the arrival of the Internet and liberation of information about properties for sale. 30 years later, the Blockchain technology is having a major effect on all aspects of the real estate transactions, from buying a property, to how due diligence is done, to holding a title.  Everything has been simplified.

A number of companies have turned to Omnibasis to build their Blockchain solutions. From a Real Estate registry in Africa to a Title Insurance company in South East Asia. IRESE is using Omnibasis Blockchain technology to power new innovation in the Real Estate industry financing.

Buying a house today

Today any real estate transaction requires a lot of paperwork and several middleman have to be involved, each of them taking a bite out of the transaction. Real estate brokers, lawyers, title insurances, appraisers, home inspectors, just to name a few. Every one of them is expecting to get paid. For a $300,000 home, you can expect to pay $6,000 to $10,000 in closing costs. If you add 6% agent commission, we are talking around 10% of the purchase price.

With every real estate transaction, all the actors involved are doing is useless replication of information. Why? Because that is how the transfer of assets, i.e. house, is recorded today. At the end of the transaction the asset itself has not changed, but all the paper work around it, ended up costing a lot of time and money.

Blockchain liberates us from TOO MUCH INFORMATION

At the heart of the Blockchain technology is the concept of a shared ledger. Think of a database that is shared among all participants in the business value chain. Just like the heart of the Internet is a shared network that is used to exchange information today, in the heart of the real estate transaction the Blockchain technology servers as the decentralized-record-keeping database.

The underlying technology is designed to instill trust in the authenticity of digital transactions, where the real estate asset is a permanent record on the Blockchain, and can be used to create efficient solutions for both commercial and residential real estate. The task of buying property or conducting due diligence becomes as easy as accessing the record on the Blockchain.

The Blockchain Benefits to Real Estate Industry

There three key technologies that power the Blockchain: decentralization, security, and speed.  Read more in details at Why Businesses Large and Small are turning to Blockchain technology.

With decentralization, the Blockchain technology offers a form of shared record-keeping which is designed to be tamper proof as all record are written once and cannot be modified or deleted.

The Blockchain technology is built on decentralized peer-to-peer concept, where numerous nodes communicate with each other to confirm the transaction, thus building resilience against the spread of corrupted information and boosting resistance to fraud.

Here a sample list of challenge that Blockchain technology is addressing:

• Trust and transparency – with data about the real estate property verifiable and tamper-resistant, the information is accessible, and FREE.
• Reducing information pollution – with all stakeholders sharing a common tamper-resistant database that compiles real estate records and documents. The need by all the stakeholders to keep and replicate real estate transaction data disappears.
• Efficient transaction process – with minimum of 30 days to complete real estate transaction and costly verification processes, the Blockchain-based transactions could enable a streamlined process which delivers information instantly and reduces costs.
• Eliminating waste and intermediaries – from brokers to escrow companies, they will be rendered obsolete by the Blockchain-based transaction, as records are stored, verified, and transferred using the Blockchain technology. It will be dramatically reduce the cost and save time.

Real Estate Property Search

The most common method that brokers, sellers, and buyers use to store and access property listings are through third-party platforms such as Zillow/MLS. Those platforms aggregate the data and property information from numerous sources without going through any verification and allow owners to modify and alter the record. Do you want that house to have 5 rooms not 3 rooms, not a problem, just login and claim to be the owner.

This causes property data to frequently be inaccurate, dated, or incomplete. In addition, the records can be different across multiple listing platforms, which introduces inefficiencies and suspicion of what is true.

Blockchain technology fixes these problems by providing that a property listing that exists on a single decentralized database.

With data distributed across a distributed network, brokers will be able to have more control over their data, as it is difficult for the records to be tempered by a third party. All real estate transaction participants could access more reliable data at a lower cost.

Omnibasis provides easy tools for anyone to define what information to record on the Blockchain. For example, a house on Omnibasis, is defined as the asset, with common fields attributed to the house, like the address, the year it was built, number of rooms, square footage, title number etc.  Learn more about Assets on Blockchain.

Due Diligence

Paper still rules today, a lots of it. Your proof of identity, your proof of financial records – all of it requires significant time and effort during due diligence and verification.

The manual process increases the likelihood of errors and most likely involves a third party service that in turn can be costly, slow and temper the records.

The Blockchain technology allows to use digital identities and the entire process is reduced to verify that digital identity, thus increasing efficiency, lowering costs, enhancing data security, and reducing the chance of manual errors.

At Omnibasis, any user profile can be enabled with digital identity, where user identity is verified by a trusted third party and stored on the Blockchain. Users can share their public keys with 3^rd parties to verify their identity and choose what information that party has access to. Learnmore about data privacy and identity management on Blockchain with Omnibasis.

Financial Transaction

Financial transactions in Real Estate require a number of verifications and steps. All of those steps can reduced to a smart contract that is executed the Blockchain. The purchase and sale contract and conditions are recorded on the Blockchain and unless all of the conditions are met, the final transfer of the asset is not completed. 

This solution streamlines the process of transferring property titles while adding layers of security and trust. All parties involved in the process, including the buyer, seller, real estate agent, the buyer’s bank, and the land registry, have their own digital identities and are part of the transaction. They all need to sign off to complete the property transfer. Learn more how the Blockchain network can ensure smart contract compliance.

Each participant can use a single application to securely send and sign official documents using the Blockchain-verified smart contracts. All actors can view the associated documents and information, with verification of the steps that have taken place during the process.

Property Management

Property management is a large part of the real estate industry and involves many parties – landlords, property management companies, tenants, vendors that are creating for a complex system of interactions and transactions.

Today, properties are managed offline with paper and pen or by each stakeholder utilizing multiple software programs that not integrated and do not work with each other, resulting in constant duplication of data and costly errors.

With the power of the Blockchain, a single decentralized application that is backed by smart contracts, the entire property management process, from signing lease agreements to managing cash flow to filing maintenance requests, can be conducted in a secure and transparent manner.

For example, in a residential real estate, a landlord and tenant could digitally sign a smart contract agreement that includes information such as rent amount, lease duration, details of the tenant and property, tenant verification record and much more.

The smart contract can be used to document the agreed terms, and automatically initiate lease payments from the tenant to the landlord, as well as to any contractors that perform periodic maintenance. Upon termination of the lease, the smart contract could also be set to automatically send payment of the security deposit back to the tenant.

A large property management company in San Diego using omniPayments PaymentManagement on Blockchain by Omnibasis to automate and track its property leases and payments, as well as offering a convenient online payment options to its customers. Their traditional contracts are replaced by the Blockchain tenancy contract to establish a history of the rental agreement and financial transactions that can be traced and audited. All data, except for public information like property location, is confidential and encrypted. The intended goal is a reduction in legal, accounting, and transaction costs, as well as a decreased risk of fraud and corruption.

Title Management

The cost of title is a large part of a real estate transaction, about 1%. It partially due to property titles are often paper-based, creating opportunities for errors and fraud. According to the American Land 

Title Association, title professionals find defects in 25% of all titles during the transaction process.

Any identified defect makes it illegal to transfer a property title to a buyer until it is rectified. This means property owners often incur high legal fees to ensure authenticity and accuracy of their property titles.

Title fraud poses a risk to homeowners worldwide. US losses associated with title fraud reportedly averaged around $103,000 per case in 2015, compelling many property buyers to purchase title insurance.

These title management issues are mitigated by using the Blockchain technology to store immutable digital records of real estate titles. With digital records stored on the Blockchain, the title management is transparent, reduces the risk of title fraud and the need for additional insurance.

A number of companies and governments around the globe have turned to Omnibasis and are implementing the title management process with omniChainsolution.

Real Estate Purchase Financing

Financing real estate purchases are a very painful experience today. It is slow, inefficient, and cumbersome. According to the National Association of Realtors, it takes on average around 30-60 days to complete the mortgage approval for residential properties. For commercial real estate, around 90 days.

This entire process can be simplified and made more transparent with Blockchain technology. For example, IRESE is using Omnibasis solutions to streamline the mortgage financing process and offers new innovative products with:

• Secure digital identification management
• Secure data records management
• Digital signing of documents with private keys
• Payment processing on the Blockchain
• Blockchain based title management

IRESE uses smart contracts to secure loan documents, fully accessible by all legal parties involved. Blockchain can help cut costs and redundancies in the mortgage process, according to a new report from Moody’s, amounting to $1.7 billion in annual saving.

Real Estate Investing

In the past, real estate investing requires a large sum of capital for down payments or purchases. There are numerous players are taking cuts in the transaction, such real estate fund managers.

IRESE uses the Omnibasis Blockchain network to allow tokenize the real estate asset.  Anyone can createa token for any asset on the Omnibasis and distribute it to the property owners.

Tokenizing real estate assets refers to a process in which a property owner can offer digital tokens that represent a share of their property. IRESE with the Omnibasis Blockchain Network tracks these investments, transfers of tokens and because each transaction being time-stamped and immutable, it limits the risk of fraud.

In addition, tokenizing real estate makes it easier to establish a market for property “micro-shares,” creating the potential for a property to effectively have numerous co-owners with a stake in potential returns.

Real Estate Industry is transforming with Blockchain

Together with our business partners, Omnibasis is building powerful solutions with Blockchain technology for Real Estate industry. Our off the shelf solutions for Data Privacy, Customer Loyalty, Payments Management, Contract Management, Asset Tracking, Master Data Management, and Regulatory Compliance, just to name few, making it simple to startusing the Blockchain technology.

About Omnibasis

Omnibasis is a business management solution to run your sales, marketing, commerce, and operations powered by Blockchain technology. Visit omnibasis.com to meet the operating system for your business.