The newest buzzword in real estate technology is “smart contract,” the outcome of development in blockchain technology. For real estate enterprises, it has become an essential tool for ensuring that all parties involved in a binding agreement are protected.
It also eliminates the need for intermediaries in corporate contracts, making the entire transaction more efficient.
How “smart” is a “smart contract” in the context of this definition? What are the real-world applications of this technology?
All of these inquiries will be addressed in this blog. To proceed, please continue reading.
Real Estate and Smart Contracts
Before we get into how smart contracts will change the real estate market, let’s first grasp what smart contracts are.
Using a smart contract, the rules and agreements governing company transactions can be easily established.
Allow me to simplify things for you. A smart contract is a digital code that eliminates the need for paper by defining a set of promises based on previously agreed-upon circumstances. The decentralized blockchain network is used to run these programs.
When a condition is met, the persons concerned can set off a chain of events.
An advantage of smart contracts is that their ledgers are impenetrable after a transaction.
This is why smart contracts are considered trustworthy for transactions requiring transparency, trust, and anonymity among participants.
As a result, the code may be relied upon to perform as expected at the time provided.
As a result, its popularity continues to soar. A CAGR of 24.55 percent is expected by 2028 when the market is expected to reach 770.52 million USD.
Also Read: Development Of Decentralized Finance
Benefits of Blockchain and Smart Contracts in Real Estate
Although smart contracts have seen tremendous growth, you may still be unsure why you should switch from formal legal agreements, which have served you well for so long.
Smart contracts offer an astounding number of advantages to the real estate business. Some of the most notable benefits of employing smart contracts as a prop-tech include the following:
#1. Eliminates the Need for Middlemen
A real estate transaction involves many intermediaries such as lawyers, brokers, and others, so it’s no surprise that closing costs can run into thousands of dollars.
It’s unnecessary to involve many individuals when using blockchain and smart contracts.
When it comes to document verification or mortgage approvals, this cutting-edge technology can write a piece of code that will speed up the lengthy and tiresome process of purchasing a home.
When it comes to real estate, blockchain technology is a boon.
In the case of an intelligent mortgage contract, for example, the need for middlemen and the frequent back and forth between parties concerned can be eliminated. As a bonus, you won’t have to wait months to get a mortgage.
The smart mortgage contract code will grant your request for a mortgage as soon as all specified papers and standards have been met.
In addition, if you use fewer brokers, banks, agents, and lawyers, the associated costs and processing times will be greatly reduced.
Because of this, using blockchain technology and smart contracts as listing agents, payment brokers, or legal documenters increases market liquidity.
#2. Improved Usability
You can only invest in real estate if you can afford a home, which might be too expensive for many people. People are often put off by the time and effort required to invest in real estate.
Using blockchain technology provides people with new options. Parcl, for example, allows you to invest in real estate in your preferred places, allowing you to customize your exposure to the market. Smart contracts and synthetic assets make this possible.
You don’t need to own any real estate to invest in your favorite communities; the amount you put down is entirely up to you.
#3. Savings on Expenses
The expenses associated with real estate transactions are reduced when central institutions and intermediaries are eliminated from the market. Transactions, such as registration, loans, and legal advice, require fees to be paid to proceed.
Customers and sellers can communicate and transact directly with reduced transaction costs by eliminating intermediaries in smart contracts.
#4. Increased Openness and Confidence
The development of a smart contract occurs when all of the parties involved agree to all of the terms of the contract when it is triggered.
Because smart contracts are stored on the blockchain, they cannot be altered or manipulated once they are activated and put into effect.
Blockchain’s immutability and openness make it impossible for anyone to tamper with data once it has been saved.
Seeing all transactions on the blockchain makes smart contracts more trustworthy.
#5. Security and Safety
In terms of data safety, blockchain transactions are entirely secure.
The cryptographic techniques built into the blockchain make it virtually hard to attack or manipulate your data.
Hackers can also not get their hands on the data because it’s scattered over the blockchain.
#6. Quickness and Efficacy
It’s no secret that the real estate transaction process takes a long time. Traditional transaction finalization might take weeks, months, or even years.
This hassle can be alleviated by using a real estate smart contract. Concerning paperwork, it’s gone in favor of well-planned computerization. In addition, the transaction is completed immediately, making it convenient for investors and property owners alike.
In a nutshell, smart contracts allow buyers and sellers to communicate directly and rapidly.
#7. Improved Flow of Cash
Market entry restrictions, difficult outreach, lengthy transactions, and other factors all contribute to real estate’s low liquidity.
You can increase the liquidity of your assets by using a smart contract for real estate. This means that transactions will no longer take months to complete, the fractional ownership model may be used for trading, and the property can be accessed from any location in the world.
Another benefit of tokenizing real estate is the ability to offer a property in a smart contract, where buyers can claim it if certain conditions are met. If the parameters in the smart contract let it, you can also fragment assets and sell them to various bidders.
Also Read: Importance Of DeFi Ecosystem In The Cryptocurrency Economy
Smart Contract Use Cases in Real Estate
Using smart contracts, real estate transactions requiring confidentiality, trust, and transparency may be completed more efficiently.
Smart contracts can be used in various ways in the real estate industry.
#1. Management of Individual Identity
Identity theft can have disastrous consequences, such as someone gaining access to your bank account, email, and so on, without your permission.
Several existing technologies can prevent these crimes, but many don’t provide the owner complete control over their data and the information they choose to share.
Smart contracts are built on decentralized, distributed ledger technology for Digital Identifiers (DIDs). They provide individuals complete control over their personal information by increasing data security and lowering the risk of data mishandling or a breach.
To effectively maintain identity, smart contracts help to assure the following:
- Digital assets’ protection of user identity
- Data provided by the user can be customised.
- Verifying one’s identity has never been easier.
Also Read: Recognizing the Commercial Scope of Decentralized Finance (DeFi)
#2. Property Ownership Transfer
Due to various factors, traditional real estate contracts are becoming obsolete because of their vagueness and ambiguity, which can be read in numerous ways. That’s why we see so much money and time spent in disputes over contract conditions.
As a result, traditional contracts had a lower level of ambiguity.
Because of the lack of clarity in typical contracts, real estate transactions can be unpleasant and risky for both parties.
Ownership of a property is often transferred only once both the seller and the buyer have received payment. Notaries somewhat alleviate the issue but also increase the price of transferring property ownership and add unnecessary delays.
These issues are addressed by smart contracts, which expedite the process of changing ownership of property. When specific requirements are met, contracts to change the real estate owner are automatically performed.
Smart contracts can be set up to automatically transfer ownership of an item when a buyer pays for it. Alternatively, a notary public can promptly inform a buyer that the previous owner has paid off the mortgage on a certain property, allowing them to purchase it.
#3. Hassle-Free Lease Agreements For Rentals
Smart contracts are making it much easier to rent out real estate. Rent Peacefully, for example, is a blockchain-based platform for renting and listing real estate utilizing smart contracts.
Rent Peacefully provides tenants with the benefit of a smart contract that freezes the rent until a repair order is issued to the blockchain.
What’s the deal?
For example, a property owner can begin using smart contracts by setting up a new lease agreement that includes monthly rent or property management fees and payment terms.
When an agreement has been reached, the tenant sees the lease terms online and digitally signs the contract.
The property owner also signs the contract digitally, resulting in a legally-binding smart digital contract.
#4. Investing in Real Estate
It’s an altogether new way to invest in real estate, thanks to the power of blockchain technology. Suppose you know that a city in which you live has seen a significant increase in government investment in urban development. In the next few years, home values will rise due to this. You can now reap the benefits of increasing property values.
Fractional ownership based on tokenization is a new way to invest in the blockchain. One of the advantages of this system is that it makes it easier than ever for investors to acquire and sell a portion of tokenized ownership rather than the entire ownership.
Rentals or dividends can be paid to the property owner through smart contracts configured for this type of transaction.
Also Read: DeFi Protocol Development Can Help Your Blockchain Business Grow
Five Companies Using Smart Contracts to Change the Real Estate Industry
Create Smart Contract Solutions
Smart contracts in real estate have a bright future ahead of them.
If you’re considering implementing smart contracts in your company, please contact Suffescom Solutions Inc., a reliable defi smart contract development company.
In the real estate industry, they can help you find new ways to increase efficiency while enhancing the level of trust.
As a web and mobile app development business, they have extensive expertise in creating incredible digital success stories for many clients.