How to be a paperless real estate agent in the near future.
The Problem with Paper
In spite of real estate industry technology transforming online listings, searches, and virtual tours, most transactions rely on paper and manual based escrows.
While efficiency and speed abound the industry, too many written agreements slow down transactions. Agents find this frustrating and out of touch with new technologies.
Most transactions require exchanging agency agreements and written contracts creating unnecessary stress. Finalizing written contracts with pressure from essential parties demanding fast transactions increases pressure on all parties.
Future Paperless Real Estate Agents Transactions
New real estate technology increases productivity and streamlines processes allowing agents to spend more time providing personal services to clients. Today’s real estate industry must embrace these technologies to manage documents with better efficiency.
Brad Newton, a Vice-President of DocuSign claims, “The real estate industry is waking up to digitization, with agents in a number of states moving to digital systems to manage agency agreements. However, for many, agreements remain paper-based and overly reliant on manual processes.” Source
In essence, “real estate agents save time by ditching paper-based agreements.” Source
Can Smart Contracts Revolutionize the Real Estate Industry?
Investopedia defines Smart Contracts as, “Self-executing contracts with the terms of the agreement between buyer and seller being directly written into lines of code. The code and the agreements contained therein exist across a distributed, decentralized Blockchain network. They render transactions traceable, transparent, and irreversible”. Source
In 1994, Nick Szabo, a computer scientist, proposed Smart Contracts. In 1998, he invented the first virtual currency called “Bit Gold”. His version of a Smart Contract involved computerized transaction protocols executing contract terms. This enables Points of Sale (POS) to become fully electronic transaction methods online. His original proposal called for using synthetic assets like bonds (or other securities) and corporate derivatives (futures and options). Computers would value these assets at the time of sale to instantly complete a sale.
In 2019, Smart Contracts now supported to shake up the real estate industry. Currently, a buyer obtains a pre-approved mortgage, hires a real estate agent, shops around online, use the agent to make an offer, gets an inspection, and closes the deal using an escrow process. All these changes with Smart Contracts.
Future Paperless Real Estate Agents Benefits
The future for real estate purchases involves:
- Improved property searches;
- Accelerated pre-release due diligence; and
- Smart decision-making.
Imagine a property seller transferring a title on the internet to another user guaranteed, secure, and safe. A transparent title transfer withstanding any legal challenge. Funds transferred online via SWIFT bank wire or a digital Blockchain process.
In essence, the future for real estate transactions involve:
- 100% electronic secure real estate purchase eliminating fraudulent deeds;
- Creates secure digital records for each party; and
- Automatically recording title with appropriate government agencies.
This involves using Blockchain technology for real estate transactions. Back in 2017, the accounting firm, Deloitte for Financial Services advocated using Blockchain technology for commercial real estate transactions with this report.
Their report claims that a survey conducted by the World Economic Forum of over 800 information and communications technology experts showed that nearly 58% believed by 2025, 10% of all global GDP data stored on Blockchain technology.
Deloitte admits that Blockchain is better known for cryptocurrencies like Bitcoin. However, its technology allows for Blockchain Smart Contracts to revolutionize future real estate transactions.
The beauty of Smart Contracts guarantees all agreements and transactions concluding without any human interventions through safe computer protocols. Once established standards and contractual requirements complete, the Smart Contracts automatically fulfill themselves. New technologies like IoT (Internet of Things) provide safer and more reliable options for real property purchases online.
Smart Contracts and Rental Properties
In 2016 Deloitte launched a pilot project in Holland in conjunction with the City of Rotterdam and the Cambridge Innovation Center to register rental transactions using Blockchain technology. They claim Smart Contracts using Blockchain technology speeds the process for verifying title, searching for homes, and processing change of ownership.
This report concludes that the Commercial Real Estate (CRE) industry maintains too many secrets, such as property prices, comparable lease rental rates, and valuations in order to keep a competitive advantage. Lack of transparency, high incidence of inaccuracies, and inefficiency pose great potential for fraud.
To summarize, Deloitte’s report claims the following benefits of Blockchain technology:
- Real-time transactions reducing risks while limiting the ability for chargebacks and canceling transactions.
- Eliminating third parties allowing two parties to directly transact with each other using cryptographic proof.
- Public ledgers where peer-to-peer distributed networks record a public history of transactions. It also shows a secure source proving the transaction occurred.
- Irreversibility as the Blockchain provides verified records of all transactions. This eliminates abuse, fraud, double spending, and manipulations of transactions.
- Eliminates external influencers because the Blockchain model provides incentives for the parties to continue validating blocks. Outsiders prevented from modifying recorded transactions.
However, these new technologies can’t eliminate local government housing regulations. Thus, every Smart Contract must include different local regulations.
The future for rental property investors allows:
- Digitally listing former homeowners;
- Annual costs for maintaining the home digitalized; and
- The cost for all repairs and additions done to the home digitalized too
The Real Estate Leasing Industry Benefits From Blockchain Technology
In addition, Deloitte claims that Blockchain technology benefits the real estate leasing industry. Their report points out:
- The industry needs a common database. While the MLS contains some rental property information, they rely too much on brokers and agents to supply the data. Thus, a larger shared database become critical for leasing transactions.
- Database modification from multiple entities such as brokers, agents, owners, tenants, service providers, and property managers who access and modify the database with a variety of essential information.
- Developing trust within the industry allowing different participants who otherwise have no pre-existing relationships to create trust.
- Elimination of intermediaries such as notaries because Blockchain technology allows fast independent verification of transactions with automatic reconciliation.
- Easier payment of expenses as leasing and property management transactions become correlated within one database. For example, a net lease model allows the tenant to pay the rent to the landlord while paying maintenance expenses directly to the service provider.
Smart Contracts already used with Warranty Deeds in the U.S.
In 2018, Smart Contract and Blockchain technology allowed a homeowner in Kootenai County, Idaho to “warranty deed his house into an Ethereum Smart Contract”. Copies of the Smart Contract, Warranty Deed and county document details included for viewing. Here
Smart Contracts Prevent Fraud
Advocates for Smart Contracts using Blockchain technology claim that real estate transactions include:
- Protects against Fraud because digital property ownership prevents forged documents, rental scams, and false listings. All documents and contracts link directly to Blockchain technology.
- Full Transparency as all documents accessible online with protection against any alterations.
- Permanent Records online showing property ownership, transactions, and change of title.
- Lower Transaction Costs as digital paperless transactions cost less.
Contract Management Eliminates Paper
The new technology takes the place of lawyers.
One way is with Contract Management systems. Online access to legal agreements become easier with companies using LegalTech (Legal Technology). This refers to using software and technology to provide legal services. Companies like LawBox and LegalZoom provide automation software for legal documents and contracts.
Smart Contract and Blockchain technology enables a new concept called “Smart Legal Contracts”. Now Artificial Intelligence (AI) reads legal contracts allowing for transaction automation.
How to be a paperless real estate agent involves learning the new technologies coming soon.
The future offers Smart Contracts teaming with Blockchain technology to eliminate paper documents. This enables real estate transactions to close faster and safer.
In addition, this new technology enables:
- Faster and efficient property searches using one centralized database instead of the current fragmented databases;
- Eliminates time-consuming, paper-driven due diligence;
- Efficient management of lease agreements;
- Elimination of intermediaries;
- Protection against fraud;
- Better transparency;
- Online permanent records; and
- Lowering transaction costs.
Can’t Wait for Paperless Transactions?
Hire a Transaction Coordinator (TC) for your future transactions.
Contact Us to learn about our professional TC services to save you time while steering all parties towards a successful escrow closing.
Steven Rich, MBA – Guest Blogger
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