Automation and Efficiency in Real-Estate Settlement with Smart Contracts

Automation and Efficiency in Real-Estate Settlement via Smart Contracts

Posted by : Mudit Kumar | 24-Aug-2020

  • Blockchain Based Real E-state Solutions

    The settlement or closing process in traditional real estate is a dynamic operation involving a great deal of time, energy, and attention. The land transfer process stayed the same for decades. However, smart contracts Development with Blockchain for real-estate offers real change and an efficient alternative to the settlement process.

    Real Estate Settlement 

    The closing of real estate is the transition of a real-estate title from a seller to a buyer according to the selling contract. In the process, the buyer gets the property title and the seller gets the money. There are, however, various settlement prerequisites and expenses that make it more complicated than purchasing something at a supermarket. The sales contract itself accounts for both requirements and costs. Many real estate closings use an escrow agent’s services, which acts as a third party that both the buyer and the seller must trust. An escrow manages the activities between a buyer and a seller through an agreement of sale and purchase. However, in typical contexts, this trust is always constrained and can be compromised. The cost of closing the mortgage varies from 3 percent to 6 percent.

    Real Estate Settlement | What are the Challenges

    Trustless automation with protection has tremendous potential to offer benefits like increased production, improved resource efficiency, and enhanced product and service offering. Most sectors have already reaped the benefits of automation, from e-commerce to electronics manufacturing. Yet the real estate industry has been an exception. Besides, a process of purchasing property is based on three factors, including paperwork (document signing), transfer of payment, and transfer of ownership.

    Too many parties currently have to be involved in the property closing process and each of these parties uses their software.

    Also, escrow companies help to build trust between traditional real estate transactions, but with a price. Also, they remain vulnerable to human actions (such as error and greed).

    To simplify real-estate settlement without using an escrow, one single place is required where a buyer, a seller, agents, and a title company can meet. Therefore, in a transaction, it needs a buyer and a seller to create and guarantee trust.

    Also, read | Blockchain Smart Contracts in Real Estate: A Long-Awaited Breakthrough

    Can Smart Contracts substitute Escrow from Real-Estate Settlement

    Smart blockchain contracts have emerged as a challenge to the Escrow agencies’ life. These are documents that are stored on the blockchain and translated into computer code.  Smart contracts immediately execute a contract upon fulfillment of pre-defined terms, without having a middleman, leading to a quick settlement and closing. Once all parties sign the agreement digitally when carrying out their duties, a smart contract immediately releases the deed to the buyer and the money to the seller. Therefore, the escrow fees are practically removed.

    It is not just a philosophical theory, though. The cycle of substituting Escrow businesses for smart contracts is well underway. The automation of acquisitions of property by settlement procedures is a fact backed by successful cases.

    How it works – An Imaginary Scenario

    On the blockchain, we’ll record and execute a real estate purchase. For example, Bob buys an apartment in his American home in Manchester, England, while he lives overseas. The property payment may be completed with Ethereum’s Ether ( ETH) and payable to a smart contract.

    Bob signs a purchasing agreement, sends ETH to a particular address and awaits the seller to submit the final signed document with a notary. Then, the smart contract executes the rest of the transaction by giving the respective parties both the ETH and the deed. All this while blockchain records all aspects of the contract permanently. In the future, if any of the contracting parties make a claim, the data on the blockchain would be publicly available which can be used as proper evidence.

    There was no escrow used for the transaction in this case. Surely, finding a seller to agree to accept payment in crypto and process the transaction through a smart contract program can be very challenging. Nonetheless, this hypothetical use case shows to some degree that smart contracts are entirely capable of handling the intermediary position that Escrow companies undertake.

     Also, read | Applications of Smart Contracts in Today’s Businesses

    Can Smart Contracts go Mainstream

    Although using cryptocurrency has occurred to this use case of property transactions, there are more secure alternatives that might attract more traditional real estate agencies.

    The primary issue with executing any cryptocurrency transaction is the volatility issue.

    Since Bitcoin, Ethereum, and other top coins can easily change 15 percent in a single day, many are uncomfortable taking chances on big transactions like real estate purchases. Smart contracts using fiat money are entirely feasible and gain popularity due (at least for now) to the relative stability of fiat.

    What’s next

    Envision a society in which real estate can be purchased digitally instantly, conveniently, and securely. Through replacing tedious and repetitive labor with computer protocols, real estate practitioners will free up their resources to take on more specialized job opportunities.

    Automation is no longer impossible in the real estate transaction phase. It is a working concept in which companies like Oodles are working and constantly improving. We understand the technology’s potential and therefore, create settlement protocols that are backed by smart contracts that can eventually achieve broad acceptance.


Leave a Comment

Name is required

Comment is required

Recaptcha is required.

No Comments Yet.

About Author

Mudit Kumar (Writer)

Mudit has been working with Oodles since 2017. He writes about technologies that not only disrupt the digital space but also influence the physical world. Initially, he explored revolutionary technologies like ERP (Enterprise Resource Planning) and AI (Artificial Intelligence). Now, he focuses on unfolding the elements of blockchain technology, given its potential and edge over others.

More From Oodles

Request For Proposal

Cookies are important to the proper functioning of a site. To improve your experience, we use cookies to remember log-in details and provide secure log-in, collect statistics to optimize site functionality, and deliver content tailored to your interests. Click Agree and Proceed to accept cookies and go directly to the site or click on View Cookie Settings to see detailed descriptions of the types of cookies and choose whether to accept certain cookies while on the site.

We would love to hear from you!

Oodles | Blockchain Development Company

Please enter a valid Phone Number

Please remove URL from text

Recaptcha is required.