As the blockchain and cryptocurrency space shifts away from failed ICOs (initial coin offerings) and over-hyped use cases, the companies that continue to flourish in 2019 will begin to demonstrate real-world applications of blockchain technology.
A number of leading organizations are already proving the capabilities of operating across decentralized, peer-to-peer networks. For example, Walmart and Dole are partnering with IBM to use blockchain technology to trace food supply chains. Google is also showing signs of interest in blockchain.
Adding to the list of impressive use cases is Propy, a global real estate platform that utilizes blockchain technology to conduct residential property transactions. Announced today, Propy has completed its second blockchain-recorded property deal in California. The home, located in Daly City, sold for approximately $917,000. And although the property was purchased in U.S. Dollars, each step of the transference was executed via Ethereum smart contracts, making this the first residential transaction to be fully executed end-to-end on a blockchain platform.
Over the past two decades, Silicon Valley has become one of the world’s hottest property markets, denoting the perfect example for a market where high levels of trust and transparency throughout the transaction process are paramount. While still considered a nascent technology, the utilization of blockchain is the optimal trustworthy way of streamlining the lengthy and non-transparent process of buying a home. We look forward to facilitating hundreds more of these transactions in the near future, easing the process of buying a home for all parties involved,” said Natalia Karayaneva, CEO of Propy.
Propy’s first property transaction was for 10 acres of land in Southern California, which was purchased entirely with bitcoin. While this was revolutionary, it also portrayed the image that the company was strictly focused on real estate transactions using cryptocurrency.
“Propy’s mission is to automate the entire real-estate purchasing process no matter what payments are involved. We have since integrated several money transmitters onto our platform, allowing us to accept both cryptocurrency and fiat payments,” Karayaneva told me.
Over the last few months, a number of deeds have been recorded by Propy on the Ethereum blockchain. This recent transaction, however, is the first to utilize blockchain for the offer submission. The transaction was anchored and verifiable on distributed ledger technology, allowing all parties to have an entirely holistic view of the complicated process at all stages.
Overall, the buyer and the seller spent about 45 minutes on our platform to execute the work they have otherwise would have done in person or through multiple emails and calls. Currently, title agents are sharing payment instructions via email, with Propy this information is available on the platform only to eliminate the wire fraud. One main advantage of using our platform is that the buyer is able to see what they need to sign or complete in real-time, while having full transparency for all participants involved,” explained Karayaneva.
Furthermore, according to Karayaneva, using blockchain technology is very similar to the traditional process of purchasing a home.
Typically, real estate purchase agreements involve three main things – signing the purchase agreement, making the payment and getting the title deed. The Ethereum smart contracts execute all steps following these basic rules. If a buyer has signed the agreement, then they proceed to the payment, then to the title recording and proof of ownership. Blockchain technology also serves as an additional layer of security, so that if something happens in the future with the transaction, then the agents, buyer and seller have access to the transaction documents, which is entirely transparent to all parties.”
In terms of transaction time, the sale took about the same time as a traditional real estate purchase, which is about 30 days. According to Karayaneva, recording in the U.S. took 10 days, but this could have been expedited if the county where the sale was conducted were to integrate Propy’s software.
The closing process took place online through Propy’s transaction platform with the agent, the seller, the buyer and the escrow officer. Paperwork was completed online, and the property deed was recorded on the Propy Blockchain Title Registry.
It’s also important to point out that a blockchain solution, such as Propy’s, enables all processes and communication around a property sale to take place on one platform. Traditionally, this communication takes place in siloed systems, resulting in widespread fraud that is approximated to cost the real estate industry $1 billion per year.
“This transaction marks a significant advancement not only for the future of property transactions, but also for the adoption of blockchain use cases. From wire fraud, to requiring the use of multiple siloed systems, the number of elements that can go wrong during the out-of-date real estate process are vast,” said Kate Fomina, Propy’s Vice President and Real Estate Broker.
The Challenges Ahead
While using blockchain technology to conduct real estate purchases is indeed revolutionary, many challenges remain.
According to Karayaneva, there is a misconception that one must use cryptocurrency in order to complete real estate transactions across a blockchain network.
You don’t need to purchase a house with cryptocurrency in order to use blockchain technology. We are educating agents on how buyers can make purchases with a blockchain powered technology. We’ve launched a crypto certified agent program, which allows those agents who are inspired by the blockchain and crypto space to receive a crypto certified badge from Propy once they complete their transaction through our platform.”
Legal issues also need to be taken into consideration. Currently, Propy is focused on residential property transactions in California. The first deeds recorded by Propy on the blockchain were made in May and June of 2018 and the San Francisco Recording office holds a deed containing this information. California is quickly becoming an early adopter in the next generation of real estate transactions, with this sale adding to recent blockchain transaction recordings from sales in Santa Clara County, Alameda County, and Mateo County.
Karayaneva noted that every county in the bay area has Propy’s title deed with the blockchain address recorded.
“It’s legal to make a note of the blockchain address on the title deed, as well to proceed with the deal on a fully-automated transaction platform. And because all of the paper work involved can be signed electronically, all the work done on Propy is in full compliance with state laws.”