The topic of a smart contract in real estate is usually raised in the discussion about the future of the real estate industry and offering that blockchain-powered smart contract technology helps to streamline real estate business around the world. Exactly what a smart contract looks like, the nature of its capabilities and potential smart contract application in the real estate industry make more transparency. This article will explain basic concepts of smart contracts, how will blockchain-powered smart contract impact in real estate industry? what are the benefits of smart contracts in the real estate industry?
Nowadays "N" number of real estate business industry has been engaging in a number of different projects to stay at the forefront of the development, regulation, and application of smart contracts under blockchain technology.
When it comes to the traditional real estate industry, it's facing many issues which is mainly affecting the real estate industry. Let's look at some of these main things:
To overcome these issues, the blockchain-powered smart contract comes into the real estate industry and revamping the entire real estate industry into a decentralized ecosystem.
Smart contracts which are self-executing scripts that automatically operate on a blockchain ecosystem. Smart contracts may form part of a smart legal contract or smart document but do not show the agreement in its entirety.
The topic of a smart contract as "a legally self-executing contract that is digital and able to connect its terms and the performance of its contracts to external sources of information and software systems".
Principles to the concept, and the main operator of efficiency through faster processing times, is the automatic performance of the condition of the contract without the need for human verification. A certain outcome of this is a lower transaction and operating costs compared to traditional contracts.
However, it is not just about ability. Smart contracts can also provide greater trust between the parties, specifically when incorporating blockchain or other distributed ledger fundamentals which ensure the immutability of input data.
Today, most real estate systems and processes act in isolation and information are spread across various sources of data. This consequently results in duplication of records, redundancies, duplicated tasks, and a regular opaqueness. Most opinions are taken based on data sets that revoke real-time intelligence. Actually, smart contracts could be the biggest disruption the Real Estate sector has seen in a long time.
Second thing, most of the real estate transactions cover paperwork, including a contract between the buyer and the seller. This usually involves third-parties like brokers, lawyers, notaries, etc. Real Estate transactions are especially popular for their time consuming, paperwork intensive procedures.
For examples in the real estate industry where smart contracts could increase the trust of implementation, streamline processes and reduce costs include rental & leasing agreements; rental service agreements engaging multiple activities, complicated levels of service or credits; commission fee agreements where the certainty of payment is needed; as well as service guarantees and warranties.
Now imagine a real estate transaction that happens without any intermediaries or third parties, is much faster, secure, transparent and most importantly, immutable and therefore fraud-proof.
That, in a brief, is what a smart contract execution. This contract cannot be modified without both signatories knowing and agreeing on it.
Once the terms of the contract are met in full, blockchain protocols initiate transactions automatically. Every transaction is transparent, secured, traceable, and irreversible.
The real estate industry has come across many major advantages of smart contracts in real estate transactions which have made lengthy processes a thing of the past.
Keep a record of transactions - Smart contracts assure 100% secure and digital transactions where scams are impossible. Every real estate transaction is automatically recorded on the blockchain in a historical order letting you have a separate record of every action. This allows for reliable financial data across industries, improving financial reporting and lowering auditing costs. The records at a future date, they also make an auto-release, auto-repeat or automatically request collateral. In performing such functions, smart contracts reduce legal and auditing costs.
Smart contracts have eliminated the need for costly third-parties to verify the payments and have come up as a direct relationship between the buyers and sellers.
Property & Land Ownership - Now an N number of places where property registries have been digitized and are held on a blockchain along with the smart contracts. Any digital property ownership is able to be handled with Smart Contracts.
Property ownership now can be transferred to the primary beneficiary in a much transparent way using blockchain-powered smart contracts in real estate transactions in just a few seconds.
Further Reading - 11 Best Smart Contract Development Platforms for 2020
Allow Transaction & Payments Overseas - You can transfer money in any part of the world without struggling about paying any additional fee to any third party. Smart contracts have empowered the speed of every real estate process because everything is done online.
With blockchain technology, real estate transactions would be done a few seconds at a very low cost. Eliminating third-parties removes extra fees, allowing businesses and their customers not only to interact and handle directly but also to do so with low to no fees for transactions.
Automatic E-Signatures - Smart contract technology makes it potential for everyone to create a smart contract, e-sign agreements, and automation of all payment processes. This could help with removing additional inspection costs, registration and loan fees, as well as taxes, and mean the process is all enforced by quantifiable smart contracts
Rent Out & Leasing Transactions - Real Estate owners have an opportunity to lessen some of the existing big challenges in their rent out or leasing transactions using blockchain technology, creating it near impossible for frauds to undermine the rental procedure on any level.
The smart contract implement on a decentralized rental platform will create a set of complete and traceable records. It means that any transaction between parties can be audited and recorded.
Reduce the risk of Fraud - For example, a seller and a buyer agree to transfer title as the agreement with $400,000 in digital currency.
The transfer of the money to the seller would trigger the automatic movement of a specialized digital coin or token that represents the title to the buyer, with the title transfer immediately recorded in a block on the blockchain.
Property or Land Title Recording - The benefit of property transactions will be met with removed fraudulent activity, improved transaction transparency, and efficiency, and enlarge confidence in identity. Also, it will speed up land registration, be a simple process, and provide for an open approach to data.
Trust - Smart contracts build complete confidence in their execution. The transparent, autonomous, and secure nature of the agreement removes any possibility of manipulation or error.
Real Estate transactions conducted between contract parties can now be audited because of the contract execution on a decentralized ecosystem. The auditing of transactions would help prevent any issues which might occur between the involved parties in the future.
The advantages of smart contracts that have been avant-garde in so many industries - automation, equality, and speed - could finally be brought to bear on segments of the real estate industry.
In the real estate industry, smart contracts to execute and maintain property purchase and rental agreements. Whether it’s paying rent, implementing mortgages or purchasing a home, the real estate smart contracts help to establish protocols that, if not met, immediately dissolve a contract.
Further Reading - Top 10 Industries Which Utilize Smart Contract Development
Most of the real estate marketplace that uses smart contracts to enact universal land and property transactions. The decentralized platform enables buyers, sellers, brokers, agents to use a series of smart contracts that help speed up the real estate process — one that is often prevented by international legalities.
Want to learn more about how blockchain-powered smart contract is transforming the real estate industry? or want to integrate smart contract application into your real estate industry? or looking for the complete smart contract development or smart contract audit services for your venture? then you have reached the right place!
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