The Newest Real Estate Technologies—Blockchain Combats Wire Fraud

19 Oct, 2018

The real estate business has changed more in the past decade than any other time since properties first changed ownership for some consideration—be it land, family members, livestock, or money. People have been swapping dirt for thousands of years. Even ten or twenty years back, there was no MLS—realtors got the "book" every couple of weeks, and buyers poured over the real estate section of the Saturday classifieds to find houses.

Fast forward to now—with a few exceptions, the entire industry does business online. The “book” has given way to Zillow, Realtor.com, and Redfin. Everybody with an Internet connection can search for homes anywhere in the world. Contracts and loan documents are e-signed, scanned, and emailed for streamlined paperless processing. And the best title companies in Maryland, like Velocity Title, accept any hard form of currency except for earnest money deposits—they require wire transfers for everything else.

Technology makes all aspects of the real estate business easier to manage, and sometimes it's hard to keep up with all the latest and greatest innovations. They come so fast that last year's document management software is out of date before you figure out how to use it. Well, hang on tight—cutting edge blockchain applications are going to change the industry yet again, making all the components of a real estate transactions digital and transparent.

What Is Blockchain?

Blockchain is one of the new high-tech buzzwords, and no doubt you've seen or heard it. Originally developed as a management tool for cryptocurrency, it's in the data management mainstream now. Without going into too much technical detail, blockchain is individual blocks of data that build on each other, and each block is time stamped so it can't be backdated or tampered with—in other words, it's hacker resistant.

The Electronic Journal defined a blockchain this way: "...a decentralized, distributed and public digital ledger that is used to record transactions across many computers so that the record cannot be altered retroactively without the alteration of all subsequent blocks and the consensus of the network.[1][23] This allows the participants to verify and audit transactions inexpensively."

In most applications, a digital ledger can only be edited by one party at a time. The other is locked out while an activity—like moving money out of an account—is happening. Once the transaction is completed, access is reactivated. Blockchain works more like a Google Doc or Sheets in that two parties can see and edit simultaneously. However, a blockchain document can be shared with unlimited parties—and each party has the current document in real time.

Blockchain and Title Companies

There are a couple of parts in real estate that remain charmingly retro, and both involve the title companies. Many real estate attorneys, and some of the best title companies, still require a personal check for an earnest money deposit or due diligence fee.

The other aspect is the title search. In most rural, and some suburban counties, courthouse records are still retained at the courthouse—and only the courthouse. Deeds are on microfiche and may be in an internal database, but it's all offline. This decentralized and restricted access to records is the last bastion of technology resistance. However, blockchain's security structure means transferring the property records to a national database is finally feasible!

Cook County in Illinois, the second-largest public records office in the US, was the first deeds office to experiment with using blockchain to transferring and recording deeds. Buyers still get a hard copy of their deed, but they also received a digital token confirming the transaction—a land coin, if you will. The idea is that eventually all property records would be digitally stored in a blockchain for easy access and transparency; real estate fraud gets a lot harder when the data is hack-proof.

Blockchain and Wire Fraud

Wire fraud is the thing that keeps realtors and closing agents up at night—the thieves always appear to be one step ahead, figuring out ways to tamper with wiring instructions that are almost impossible to detect. It seems like every time a new layer of security and proof of identity comes out, it's only a few weeks later that you hear about a scam that took hundreds of thousands of dollars away from a buyer, an escrow account, or a bank.

Blockchain eliminates the possibility of wire fraud since the data in the chain can't be changed without the consent of all parties involved in the chain. This isn't to say that you personally have to approve it, rather the computers involved in the chain recognize the others’ IP addresses and won't allow a new one in unless it is authorized by all the others.

Blockchain Transactions

Since blockchain is built on absolute security, a comprehensive blockchain document management ecosystem streamlines the contract to close period. All parties—realtor, buyer, lender, title companies and lawyers—have access to the documents. There is no need for the buyer to worry about the safety of the personal information they share. Real estate offices and closing attorneys can dispense with encryption software since the blockchain has it built in.

This is how a blockchain settlement would transpire, in a not-so-distant future. All the parties have access to secure documents in real time, so everybody knows what their particular tasks are. The seller can sign the deed at their leisure, and the buyer can get their keys at the settlement table. Documents are signed in the chain, that triggers the deed to record digitally. Monies are disbursed—and the buyer walks away to the moving truck.

And, incidentally, the realtor gets paid right away!

Get Technologically Fit

Blockchain is just one of the new technologies that's changing the way the real estate industry does business. It's Jetsons-esque capabilities are the way of the future, but there are many other digital solutions to expedite your business in the meantime—virtual reality to enhance your listings, the Cloud for processing, streamlined title services like Velo-Ordering and Velo-Quote Calculator, and AI for marketing and home valuations. All of these technologies give you an edge in the market. To learn more about the latest technology advancements in real estate, subscribe to our blog below, or contact us at 301.805.2900. 

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Velocity Title supports the real estate industry with a comprehensive line of title services including purchases, refinances, commercial, title insurance, attorney consulting, 1031 exchange, and short sales. With a focus on the best CUSTOMER EXPERIENCE, Velocity Title incorporates leading title TECHNOLOGY and EXPERTISE into every transaction—enabling the final step in the home buying process to be EASY, EFFICIENT and INFORMATIVE. To learn more, contact us today!

 

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