We all thought the start of the 2020's decade would be a repeat of the roaring 20's, but Covid put an end to that as soon as it started. Now with Covid coming to an end, we have seen optimism and hope, although our future now is different. Now that we are rising above the fog we can see a different path when it comes to real estate. The process itself of buying a home has been completely transformed with things like Facetime appointments and digital closings. This is only the tip of the iceberg. I'm sure you've heard of Bitcoin, a digital currency that many believe to be the future of transactions. Bitcoin benefits from first mover advantage, but it doesn't necessarily represent the best technology or transaction methods for the future. Bitcoin is a great way to send money from point A to point B without any government or bank interference. With the rise of Bitcoin, other technologies have emerged. Below are the 4 ways these digital currencies will change the way we buy houses forever.
One thing home buying companies, agents and home buyers can do is create a smart contract on blockchain technology. What this means is when it comes to offering a property, creating its purchase contract as well as the closing documents itself can be done through a smart contract. You may be wondering why this is so beneficial for you - and rightly so! When you can have tools that work for you more efficiently, and cost you less money, those savings are passed on to you. There will be no more middlemen in the transaction and costing you thousands of dollars of additional closing costs. A great example of this is Lemonade, although they are not a cryptocurrency, Lemonade is an AI driven insurance provider. Instead of dealing with an agent, you will have a real time quote made for you by their technology - with the savings passed on to you! Now imagine a contract that is made through the blockchain that cuts out a portion of the fees from your agent, their broker, your mortgage banker, lawyers and much more.
Decentralized Finance (DeFi)
Every month when I pay my mortgage I just feel like I'm a part of an antiquated system that doesn't really work for me. Its not exactly convenient for me, even though I can do it all online. The worst part was actually acquiring a mortgage. I had to pay points on the loan - like what?! The rate was based on the Fed - which conveniently for them has a built in money printer at their reserves. I end up paying 2 times the home's worth in interest over the next 30 years - ugh. I'm clearly not the only one who feels this way with the rise of decentralized finance. Although the technology doesn't yet penetrate the real estate market much, it is definitely on the rise. Decentralized finance are alternatives to financial services we use today. These include: savings, loans, trading, insurance, private lending and everything else. Decentralized finance can help in real estate through the mortgage itself, a home equity line of credit, a loan to build your addition, and your home insurance payments. You may be thinking - why would this benefit me? The same reason smart contracts do, the technology makes access to capital easier which will create competition and provide you lower rates.
Platforms and Marketplaces
That's right you may even be selling, buying or renting through a cryptocurrency based website in the future. Websites like ATLANT have developed blockchain technology to facilitate real estate and rental property transactions. By tokenizing the properties, these assets can be digitized and traded much like a stock would be online.
Liquid Real Estate
Homes and real estate have always been considered an illiquid asset since it takes time to sell it. With the rise of tokenized assets, the theory is property can be tokenized and exchanged. A home seller won't have to wait for a buyer who can purchase the entire property and instead can be traded in fractional amounts of the property.
Global real estate is worth trillions, yet it is dominated by the suits. The super wealthy and corporations are able to control the majority of it. With cryptocurrency and its advances in technology it is likely we have more transparent, secure and equitable transactions. Real estate may just become a truly peer to peer transaction with cryptocurrency and blockchain technology platforms doing the grunt work.