{"id":1941,"date":"2022-01-04T10:00:00","date_gmt":"2022-01-04T15:00:00","guid":{"rendered":"https:\/\/www.deeds.com\/articles\/?p=1941"},"modified":"2024-04-25T23:19:22","modified_gmt":"2024-04-26T03:19:22","slug":"why-blockchain-real-estate-could-reach-an-inflection-point-in-2022","status":"publish","type":"post","link":"https:\/\/www.deeds.com\/articles\/why-blockchain-real-estate-could-reach-an-inflection-point-in-2022\/","title":{"rendered":"Why Blockchain Real Estate Could Reach an Inflection Point in 2022"},"content":{"rendered":"\n<div class=\"wp-block-image\"><figure class=\"alignright size-full\"><img loading=\"lazy\" decoding=\"async\" width=\"374\" height=\"489\" src=\"https:\/\/www.deeds.com\/articles\/wp-content\/uploads\/2022\/01\/blockchain-real-estate-2022.jpg\" alt=\"Image of the outside of a house with blue skies in the background and a light snow in the foreground\" class=\"wp-image-1942\" srcset=\"https:\/\/www.deeds.com\/articles\/wp-content\/uploads\/2022\/01\/blockchain-real-estate-2022.jpg 374w, https:\/\/www.deeds.com\/articles\/wp-content\/uploads\/2022\/01\/blockchain-real-estate-2022-229x300.jpg 229w\" sizes=\"auto, (max-width: 374px) 100vw, 374px\" \/><\/figure><\/div>\n\n\n\n<p><strong><em>A Hint at Regulation to Come<\/em><\/strong><\/p>\n\n\n\n<p>No pain, no gain. The adage rings true at the gym, and it\u2019s also an apt description for real estate transactions. Is any legal milestone loaded with more bureaucracy, more back-and-forth questions, more legions of intermediaries\u2014all racking up fees for the documents they produce every step of the way?<\/p>\n\n\n\n<p>There can be 500 people playing roles in a single property deal. In the digital era, does this make sense? Probably not for much longer.<\/p>\n\n\n\n<p>Decentralized Finance, or DeFi, is a grand project to replace and improve upon traditional finance systems through the use of blockchain-based smart contracts, often supported by the Ethereum blockchain. Blockchain-based smart (self-executing) contracts could create far more efficient real estate transactions. For example, escrow accounts may be redundant if funds are released automatically as soon as the corresponding obligation is met.<\/p>\n\n\n\n<!--more-->\n\n\n\n<h2 class=\"wp-block-heading\"><strong>What Is Tokenization and Why Use It in Real Estate?<\/strong><\/h2>\n\n\n\n<p>Through tokenization, we can achieve the complete digitization of the title history on any given piece of real property. And we can eliminate a great deal of inefficiency in time, energy, and fees.<\/p>\n\n\n\n<p>But wait, you say\u2026 What\u2019s tokenization? This simply means a piece of property, or a business entity that owns it, becomes represented in a digital form on a blockchain. This allows selling, buying, financing, renting, or anything else of legal significance to happen on the digital ledger.<\/p>\n\n\n\n<p>With the tokenization of assets, each interaction is etched on the blockchain for good. So, just as a sheet of paper has always done, a token can represent a legal instrument, such as the property deed.<\/p>\n\n\n\n<p><a href=\"https:\/\/www.deeds.com\/articles\/the-real-estate-deal-decluttered-blockchain-and-deed-recording\/\">Blockchain technology can improve&nbsp;title accuracy<\/a>. With the blockchain, all rights, debts, agreements and obligations can be recorded precisely and immediately. From that point on, they will always be available, in one place, for all interested parties to review. Homeowners\u2019 association documents, appraisals, surveys, floor plans, construction permits, and liens will stay on the chain and always be accurate, up to the minute.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>How Will This Impact the Title Insurance Industry?<\/strong><\/h2>\n\n\n\n<p>As <em>Deeds.<\/em>com readers know, title searches are needed for financed U.S. real property purchases. The goal of the search is to lay bare all meaningful aspects of the parcel\u2019s ownership history and other peoples\u2019 possible claims on the property\u2019s use or value.<\/p>\n\n\n\n<p>Because there are multiple sources of information, and because different counties do things in different ways, the title search takes a lot of time and attention. The results are not always crystal clear. But if the title comes back apparently clean, the buyer and the lender may obtain title insurance to prevent losses from potential third-party claims down the road.<\/p>\n\n\n\n<p>Many home buyers opt for owner\u2019s title insurance. The federal Consumer Financial Protection Bureau&nbsp;<a href=\"https:\/\/www.consumerfinance.gov\/ask-cfpb\/what-is-owners-title-insurance-en-164\/\" target=\"_blank\" rel=\"noreferrer noopener\">encourages<\/a>&nbsp;everyone to do so, to prevent the financial pain of clouds that title searches can miss, and even <a href=\"https:\/\/www.deeds.com\/articles\/category\/deed-fraud\/\">deed fraud<\/a> in titles. &nbsp;<\/p>\n\n\n\n<p>The customary use of title insurance dates back more than a century. \u201cRipe for disruption\u201d is more than a clich\u00e9 here. The emergence of blockchain technology brings us a straightforward way to trace chains of title, and to prevent surprises or conflicting claims. But here\u2019s the rub. Decentralized purchases and financing bypass the intermediaries that have traditionally screened potential investments for legitimacy and value. Can the blockchain be used safely without those gatekeepers?<\/p>\n\n\n\n<p>This brings us to the role of the regulators.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Cryptocurrency Is Already Showing Up in Real Estate Deals. Can We Expect Regulations?<\/strong><\/h2>\n\n\n\n<p>In a November 2021 <a href=\"https:\/\/www.sec.gov\/news\/statement\/crenshaw-defi-20211109\" target=\"_blank\" rel=\"noreferrer noopener\">Statement on DeFi Risks, Regulations, and Opportunities<\/a>, SEC Commissioner Caroline Crenshaw said a number of interesting things about decentralized finance. Crenshaw\u2019s current concern is that blockchain-based investments are largely unregulated, and where such transactions occur, \u201cthese markets are riskier than traditional markets where participants generally play by the same set of rules.\u201d Crenshaw recognizes that a number of DeFi projects can create \u201cscalable increased efficiencies\u201d and that they are \u201cevolving incredibly fast with new and interesting potential.\u201d Accordingly, Crenshaw articulates \u201ca true desire to help promote responsible innovation.\u201d<\/p>\n\n\n\n<p>Crenshaw observes that \u201cDeFi has produced impressive alternative methods of composing, recording, and processing transactions\u201d while adding: \u201cMy respect for innovation does not lessen my commitment to help ensure all our financial markets are sustainable and offer average investors a fair chance of success.\u201d<\/p>\n\n\n\n<p>We might say the Crenshaw Statement is indicative of the federal government\u2019s mood. In general, we can anticipate regulatory responses to the challenges that DeFi developers have presented. Projects that ensure transparency are most likely to pass legal muster, including safeguards related to <a href=\"https:\/\/www.deeds.com\/articles\/cash-home-purchases-draw-renewed-federal-scrutiny\/\">anti-money laundering provisions under the Bank Secrecy Act<\/a>.<\/p>\n\n\n\n<p>We\u2019ll watch for regulatory responses before considering blockchain a robust, accessible improvement for the bureaucratic realm of real estate. But the Crenshaw Statement gives us a serious clue: things will be moving in 2022.<\/p>\n\n\n\n<p><strong>Supporting References<\/strong><\/p>\n\n\n\n<p class=\"has-small-font-size\">Security and Exchange Commission News: <a href=\"https:\/\/www.sec.gov\/news\/statement\/crenshaw-defi-20211109\" target=\"_blank\" rel=\"noreferrer noopener\">Statement on DeFi Risks, Regulations, and Opportunities<\/a> by SEC Commissioner Caroline A. Crenshaw (Nov. 9, 2021; originally published in <em>The International Journal of Blockchain Law<\/em>, Nov. 2021).<\/p>\n\n\n\n<p class=\"has-small-font-size\">Tal Elyashiv for <em>TheStreet.com<\/em>: <a href=\"https:\/\/www.thestreet.com\/defi\/digital-finance-investing\/can-nfts-take-the-headache-out-of-real-estate\" target=\"_blank\" rel=\"noreferrer noopener\">Tal\u2019s NFT Take: Can NFTs Take the Headache Out of Real Estate Transactions<\/a>? (Dec. 7, 2021).\u00a0<\/p>\n\n\n\n<p class=\"has-small-font-size\">Rachel Warren <em>et al<\/em>. for <em>The Motley Fool<\/em>: <a href=\"https:\/\/www.fool.com\/investing\/2021\/12\/13\/could-you-buy-your-next-house-with-crypto\/\" target=\"_blank\" rel=\"noreferrer noopener\">Could You Buy Your Next House With Crypto?<\/a> (Dec. 13, 2021).<\/p>\n\n\n\n<p class=\"has-small-font-size\">Photo credit: <a href=\"https:\/\/www.pexels.com\/photo\/contemporary-country-house-facade-in-winter-7031406\/\">Max <\/a><a href=\"https:\/\/www.pexels.com\/photo\/contemporary-country-house-facade-in-winter-7031406\/\" target=\"_blank\" rel=\"noreferrer noopener\">Vakhtbovych<\/a>, via Pexels.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>A Hint at Regulation to Come No pain, no gain. The adage rings true at the gym, and it\u2019s also an apt description for real estate transactions. Is any legal milestone loaded with more bureaucracy, more back-and-forth questions, more legions of intermediaries\u2014all racking up fees for the documents they produce every step of the way? [&hellip;]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[85],"tags":[],"class_list":["post-1941","post","type-post","status-publish","format-standard","hentry","category-blockchain"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.4 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Why Blockchain Real Estate Could Reach an Inflection Point in 2022 - Deeds.com<\/title>\n<meta name=\"description\" content=\"real estate transactions. 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